One-Pagers: High Yield

January 26, 2012
High Yield
One-Pagers
Credit Research
A reference book for high yield investors

This reference guide contains single-page summaries for many of the companies in the high yield universe and serves as a companion to our Investment Grade One-Pager publication. In addition to credits covered by the Goldman Sachs credit research team, we also include summary pages for some uncovered companies that we view as benchmark high yield names.
We hope you find this book to be a useful tool. Please contact the sector analysts for additional information.
Contributing analysts Erin Blum Gregory Chwatko Kevin Coyne Karen Eltrich Justine Fisher Jason Gilbert Brian Jacoby, CFA Franklin Jarman Jason Kim Raymond M. Leung Amanda R. Lynam, CPA Kristen McDuffy Joshua Pinkerton Joseph Stivaletti Scott Wipperman, CFA
Global Investment Research (212) 902-1000 Erin Blum (212) 855-7718 erin.blum@gs.com Goldman, Sachs & Co. Gregory J. Chwatko (212) 902-0673 gregory.chwatko@gs.com Goldman, Sachs & Co. Kevin Coyne (212) 357-9918 kevin.coyne@gs.com Goldman, Sachs & Co.
Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. This research discusses Rule 144a securities, which generally are available only to Qualified Institutional Buyers.
The Goldman Sachs Group, Inc.
Global Investment Research
January 26, 2012
High Yield
This Page Intentionally Left Blank
Goldman Sachs Credit Research
January 26, 2012
High Yield
Table of contents
Company Accellent (ACCINC) Advanced Micro Systems, Inc (AMD) AES Corporation (AES) Aircastle Ltd. (AYR) Alcatel-Lucent (ALU) Alere Inc. (ALR) American Achievement (AMEACH) American Axle (AXL) Amerigroup Corp. (AGP) Ameristar Casinos Inc. (ASCA) Amkor Technology (AMKR) Apria Healthcare Group Inc. (AHG) Ashland Inc. (ASH) Avis Budget Group (CAR) AWAS Aviation Capital (AWAS) Ball Corporation (BLL) Basic Energy Services (BAS) Bausch + Lomb Inc. (BOL) Beazer Homes USA Inc. (BZH) Berry Petroleum (BRY) Berry Plastics (BERRY) Bombardier Inc. (BBDBCN) Bon-Ton Department Stores (BONT) Boyd Gaming Corp. (BYD) Bristow Group (BRS) Brookstone (BRSTNE) Brunswick Corporation (BC) Burger King Holdings, Inc. (BK) Burlington Coat Factory (BCFACT) Cablevision Systems Corporation (CVC) Caesars Ent. Operating Company (HET) Calpine Corp. (CPN) Cascades Inc. (CASCN) Catalent Pharma Solutions (PTSAC) Catalyst Paper Corporation (CTLCN) CF Industries (CF) Charter Communications Inc. (CCMM) Chesapeake Energy (CHK) Chiquita Brands (CQB) Chrysler Group LLC (CHRYGR) CityCenter Holdings (CCTRH) Clearwire Communications LLC (CLWR) CMS Energy Corporation (CMS) Community Health Systems (CYH) Constellation Brands (STZ) Convatec Healthcare (CONVAT) Cooper Tire (CTBUS) Crown Holdings, Inc. (CCK) DaVita, Inc (DVA) Dean Foods (DF) Page 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Company Del Monte Foods (DLM) Delta Air Lines Inc. (DAL) Denbury Resources (DNR) Dillard's Inc. (DDS) DineEquity, Inc. (DIN) DISH Network Corporation (DISH) Dole Foods (DOL) DR Horton Inc. (DHI) Dynegy Holdings inc. (DYN) Edison Mission Energy (EIX) El Paso Corp. (EP) Elan Corporation (ELN) Emergency Medical Services (EMS) Endo Pharmaceuticals (ENDP) Energy XXI (EXXI) Exopack Holding Corp. (EXOPAC) Felcor Lodging Inc. (FCH) First Data Corp. (FDC) Ford Motor Company (F) Forest Oil (FST) Fortescue Metals Group Ltd (FMGAU) Freescale Semiconductor, Inc. (FSL) Frontier Communications (FTR) Gannett Company Inc. (GCI) Gaylord Entertainment Company (GET) GenOn Energy Corp. (GEN) Goodyear Tire (GT) Graphic Packaging Corporation (GPK) Great Canadian Gaming Corp. (GRTCAN) Greektown Superholdings (GREEK) Gymboree Corp. (GYMB) Hanesbrands Inc. (HBI) HCA, Inc. (HCA) Health Management Associates, Inc. (HMA) HealthSouth (HLS) Hornbeck Offshore Services (HOS) Host Hotels & Resorts Inc. (HST) Huntsman Corp. (HUN) IASIS Healthcare (IAS) IMS Health (RX) Isle of Capri Casinos (ISLE) iStar Financial (SFI) J. Crew Group Inc. (JCG) J.C. Penney Co. Inc. (JCP) Jarden Corp. (JAH) JDA Software Group Inc. (JDAS) JetBlue Airways Corp. (JBLU) KB Home (KBH) Kindred Healthcare (KND) Koppers Inc. (KOP) Page 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104
January 26, 2012
High Yield
Company L-3 Communications (LLL) Las Vegas Sands Corp. (LVS) Leap Wireless International, Inc. (LEAP) Lennar Corp. (LEN) Levi Strauss & Co. (LEVI) Liberty Interactive Corp. (LINTA/QVC) Lifepoint Hospitals Inc. (LPNT) Limited Brands Inc. (LTD) Liz Claiborne (LIZ) Louisiana-Pacific Corp. (LPX) Marina District & Finance Co., Inc. (BORGAT) McClatchy Co., The (MNI) McMoRan Exploration (MMR) MDC Holdings Inc. (MDC) Mediacom Communications Corporation (MCCC) MediMedia USA, Inc. (MEDIME) Meritor (MTOR) MetroPCS Communications, Inc. (PCS) MGM Resorts International (MGM) Michaels Stores (MIK) Millar Western Forest Products (MILLAR) Mohegan Tribal Gaming Authority (TRIBAL) Momentive Performance (MOMENT) Momentive Specialty Chemicals (HXN) MTR Gaming Group, Inc. (MNTG) Mylan Inc. (MYL) Neenah Paper (NP) Neiman Marcus Group, The (NMG) New York Times Co., The (NYT) Newfield Exploration (NFX) Nova Chemicals (NCX) NRG Energy (NRG) NXP B.V. (NXPBV) Olin Corporation (OLN) Omnicare Inc.(OCR) Owens-Illinois, Inc. (OI) Parker Drilling Company (PKD) Peabody Energy (BTU) Pilgrim's Pride Corp. (PPC) Pinnacle Entertainment (PNK) Pioneer Natural Resources (PXD) Plains Exploration & Production (PXP) Plastipak Holdings, Inc. (PLASPK) PolyOne (POL) PulteGroup Inc. (PHM) PVH Corp. (PVH) Quicksilver Resources (KWK) Quiksilver, Inc. (ZQK) R.R. Donnelley & Sons Co. (RRD) RadioShack Corp. (RSH) Range Resources (RRC) Reynolds Group Holdings Limited Rite Aid Corp. (RAD)
Page 105 108 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157
Company Rock-Tenn Company (RKT) Royal Caribbean Cruises Ltd. (RCL) Ryland Group Inc., The (RYL) Saks Inc (SKS) Sally Holdings LLC (SBH) Sanmina-SCI Corp. (SANM) Scientific Games International, Inc. (SGMS) Seagate Technology (STX) Sealy Mattress Co. (ZZ) Sirius XM Radio Inc. (SIRI) Sitel LLC (SITEL) Smithfield Foods (SFD) Solo Cup (SOLOC) Southwest Airlines Co. (LUV) Southwestern Energy (SWN) Sprint Nextel Corporation (S) Standard Pacific Corp. (SPF) Steel Dynamics (STLD) Stone Energy Corp (SGY) Stream Global Services (SGS) Sunoco Inc. (SUN) Surgical Care Affiliates LLC (SCAFF) Swift Energy Co. (SFY) Telesat Canada (TELSAT) Tenet Healthcare Corporation (THC) Tenneco Inc. (TEN) Tesoro Corp. (TSO) Textron Inc. (TXT) Toll Brothers Inc. (TOL) TPC Group Inc. (TPCG) TRW Automotive (TRW) U.S. Steel (X) Unisys (UIS) United Continental Holdings, Inc. (UAL) United Surgical Partners Intl (USPI) Universal Health Services (UHS) US Airways Group, Inc. (LCC) Valeant Pharmaceuticals (VRX) Vanguard Health (VHS) Venoco Inc. (VQ) Viasystems, Inc. (VIAS) Videotron Ltd (QBRCN) Visant Corp. (VISANT) VWR Funding (VWRINT) W&T Offshore (WTI) Warner Chilcott (WCRX) Whiting Petroleum Corp. (WLL) Windstream Corp. (WIN) Wynn Las Vegas (WYNN) Yankee Candle Co., The (YCC)
Page 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207
Note that the source of all data in this report is Goldman Sachs, Goldman Sachs Credit Research, or company data.
January 26, 2012
High Yield
Accellent (ACCINC)
IN-LINE (on secureds and subs)
Updated 01/25/12
Contact analyst or see latest research for updates to ratings, estimates, and other information.
Erin Blum Cindy Guan
212-855-7718 212-902-9758
We rate both the Accellent secureds and subs In-Line. While the bonds are among the widest in our coverage, we see this as only fair value because: (1) leverage is also among the highest of the group and especially when considered against the low EV/EBITDA multiples of the public competitors; (2) LTM FCF remains weak; and (3) we see ACCINCs business as riskier because the company is a contract manufacturer and therefore has less control over its order flow and pipeline. Bond Summary Size (MM) $400 $315 Coupon (%) 8.375 10.000 Priority Sr. Sec. Sub. Nts Maturity 1-Feb-17 01-Nov-17 Agency Ratings B1/B+ Caa2/CCC+ Next Call Price $106.281 $107.500 Date 2/1/2013 11/1/2013 Bid Price $100.500 $81.500 YTW (%) 8.226% 14.887% STW bp 790 1,409 Investment Strengths: - Sales force and plant expansion. Following ACCINC's sales force realignment, we have seen an upward revision of new business wins. The company is also staffing and equipping its Malaysian facility that will not only facilitate expansion into Asia, but also provide low-cost manufacturing. - Resilient end-market demand. Device end-market growth, while slowed, has remained in the positive low-single-digit territory. - Increased regulatory scrutiny. We think the increased cost of audits and pricing pressure from hospitals could lead OEMs to consolidate vendors in favor of larger manufacturers such as ACCINC in order to reduce cost and time to production. Investment Risks: - High leverage. ACCINC is highly levered at mid 6x, a level that has not improved much since the time of its 2005 LBO. Public comps trade in the 6-8x range. - Strong and concentrated customer group. Risk of insourcing could reduce revenues for ACCINC, as was the case with BSX in 2006 (a revenue hit totaling $40 mn). - Weak historical growth. ACCINC's top line has posted only a 0.9% CAGR since 2005.
Company Description
Accellent is a contract manufacturer in the medical device industry with a focus in cardiology, orthopedics and endoscopy. Cardiology is the companys strongest segment, with orthopedics its weakest segment in terms of performance and company expertise. The company has 14 manufacturing facilities in the United States and 3 in Europe, and it recently completed the addition of a facility in Malaysia. ACCINC expects shipping to begin early 2012 from this facility. ACCINC does business with the major OEMs such as Boston Scientific, Johnson & Johnson, and Medtronic. MDT and JNJ each accounted for more than 10% of sales in 2010. ACCINC also books pass-through sales of platinum at little or no margin (revenue is included in the cardiology segment). ACCINC has been proactive in managing its maturity profile with the $400 mn secured offering in January 2010 to refinance its 2012 term loans and a $315 mn sub offering in October 2010 to refinance its 2013 subordinate notes. Key Dates/Catalysts: - Quarterly earnings. It will be important to see cost discipline at ACCINC to drive EBITDA growth. - Commentary on industry inventory from OEMs and Accellent's competitors (GreatBatch and Symmetry). Recent comments from competitors suggest that the industry inventory picture is weakening. - Shipping from the Malaysia plant to begin in early 2012.
Financial Profile Revenue EBITDA Interest Expense, net Cash Taxes CapEx Free Cash Flow Total Debt Cash & marketable securities Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
2009A $479 109 $57 4 16 39 $687 34 653 6.3x 6.0x 1.9x 22.7%
2010A $507 108 $74 4 26 9 $715 41 674 6.6x 6.2x 1.5x 21.4%
2011E $541 102 $68 6 33 (23) $715 18 697 7.0x 6.8x 1.5x 18.9%
4Q10A $132 28 $19 1 9 6 $715 41 674
3Q11A $133 24 $17 2 8 2 $715 23 692
4Q11E $135 25 $16 2 8 (5) $715 17 698 LTM Comps Accellent (ACCINC) sub Accellent (ACCINC) sec Catalent (PTSAC) Leverage 6.8x 3.7x 6.7x 6.4x Coverage 1.5x 1.4x 1.8x 1.6x Agency Ratings Caa2/CCC+ B1/B+ Caa1/B Caa1/CCC+
1.5x 21.2%
1.4x 18.1%
1.5x 18.7%
DJO Global (DJO)
Description ABL Revolver 1/29/2015 8.375% Snr Sec. Nts 2/1/2017 Total Sr Sec debt 10% Sub Nts 11/1/2017 Total Sub debt Other Total Debt Market Cap Enterprise Value Maturities: 800 700 600 500 400 300 200 100 0 2012 2013
Amount $0 $400 400 $315 315 $0 $715 NA NA
Debt to LTM EBITDA
Debt to 2011E EBITDA
Liquidity ABL Revolver Size Borrowing Base $75 $49 11 0 39 $23 $61
3.8x
3.7x
Letters of Credit Borrowings Revolver Availability
6.8x
7.0x Cash & marketable securities Total Liquidity
6.8x
7.0x
2014
2015+
January 26, 2012
High Yield
Advanced Micro Devices, Inc. (AMD)

OUTPERFORM
Bond Summary Size (MM) $500 Coupon (%) 8.125 Priority Senior Maturity 15-Dec-17 Agency Ratings Ba3/B+
Updated 1/26/2012
Franklin Jarman Karl Blunden
212-902-7537 212-357-2769
Next Call Price 104.06 Date 12/15/2013
Bid Price 107.88
YTW (%) 5.7%
STW bp 542 Investment Strengths: - Low capital intensity enhances cash flow profile: The Asset Lite plan completed in 2009 divested AMDs foundry business to production partner Abu Dhabi. The deal significantly reduced AMD's capital intensity and raised just over $700 million of cash. - Solid liquidity position provides capital structure improvement opportunities: AMD ended 2Q2011 with over $1.8 billion of cash on hand, but needs significantly less to operate effectively. AMD has navigated through a challenging 2011 product launch year; in the event the macroeconomic volatility that surfaced in 2H2011 subsides, we believe it may consider deploying excess cash to reduce gross leverage. Investment Risks: - Tablet growth could consume future PC demand: We estimate the lost opportunity could reach $50-100 million in annual EBITDA over 2011/2012, which is still manageable in our view. - Weak competitive position: Intel dominates the MPU market, with approximately an 83% market share. - New leadership: After its CEO resigned in 2010, AMD was only able to hire a new CEO in August 2011. AMD's Products Group General Manager left the firm in September 2011, at which point the new CEO assumed the role of Interim General Manager of the Products Group, a large responsibility given his recent move to AMD. - Manufacturing issues: AMD has experienced continuing manufacturing issues on new chip launches, most recently related to lower-than-expected yield from its foundry partner, GlobalFoundries, which was partly responsible for the company's 3Q2011 miss relative to initial guidance.
Company Description
AMD is a global manufacturer of complex semiconductors including microprocessors (MPUs) found in desktops, notebooks, and servers as well as graphics chipsets. The MPU market is essentially a duopoly, composed of two leading vendors: Intel Corp. and AMD. Intel is the dominant player and controls approximately 83% share, while AMD is a distant second at 10% share. In order to improve its product offering and competitive positioning, AMD acquired ATI Technologies, a supplier of graphics processing chips, for $5.4 billion in 2006. In 2011, the company began to leverage its core MPU/GPU capabilities by selling a new chip family named the Fusion, which combines the MPU and GPU on to a single die. Separately, the company has benefited from its relationship with the state of Abu-Dhabi, which currently owns 15% of the AMD's equity and recently purchased AMD's foundry business as well. Abu-Dhabi-owned GlobalFoundries is currently AMD's most important foundry partner. Key Dates/Catalysts: - AMD's annual analyst day is scheduled for February 2
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin FY11E Capitalization Description 5.75% Sr. Conv. due 2012 8.125% Sr. Notes due 2017 6.00% Sr. Conv. due 2015 7.75% Sr. Notes due 2020 Other Total Debt - Product Co. Market Cap Enterprise Value
FY08 5,792 582 (366) (11) (622) (1,085) 5,074 1,096 3,978 8.7 x 6.8 x 1.6 x 10.0%
FY09 5,403 492 (438) (11) (466) (1,046) 4,560 2,676 1,884 9.3 x 3.8 x 1.1 x 9.1%
FY10 6,494 963 (199) (12) (148) (560) 2,421 1,789 632 2.5 x 0.7 x 4.8 x 14.8%
LTM-3Q11 6,526 880 (176) (12) (185) (203) 2,060 1,807 253 2.3 x 0.3 x 5.0 x 13.5%
FY11E 6,602 866 (179) (12) (212) 133 2,060 1,892 168 2.4 x 0.2 x 4.8 x 13.1%
FY12E 6,993 848 (148) (12) (250) 178 1,575 1,585 (10) 1.9 x 0.0 x
Comps ALU
Leverage 3.2x 2.3x 5.8x 3.3x 3.6x
Coverage 4.5x 6.6x 2.0x 3.7x 3.6x
Sr. Unsec Ratings WR/B Ba3/BB Caa1/CCC+ Caa1/B B1/B
5.7 x 12.1%
AMKR FSL NXP SANM
Size 485 500 630 500 (55) 2,060 4,781 5,034
Debt to EBITDA 2.3 x 2.3 x 2.3 x 2.3 x 2.3 x 2.3 x 5.7 x
Liquidity Revolver Size Borrow Base - Amt Drawn - LC's Amt Unutilized Cash Liquidity 0 0 0 0 0 1,807 1,807
Maturities: 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020
January 26, 2012
High Yield
AES Corporation (AES)

IN-LINE
Bond Summary Size (MM) $1,000 Coupon (%) 7.375 Priority Sr Unsec'd Maturity 1-Jul-21 Agency Ratings Ba3/BB-
Updated 1/25/2012
Raymond M. Leung Abayomi A. Adigun
212-357-5764 212-902-9355
Next Call Price MW+50 Date --
Bid Price 108.750
YTW (%) 6.14
STW bp 414 Investment Strengths: - Consistent and diverse subsidiary distributions, with distributions budgeted at $1.2-1.3 billion for 2011. Distributions have been above $1 billion annually over the past three years, with the top 10 accounting for about 70%, with between 75% and 80% from regulated or contracted assets. - Fairly robust development pipeline of projects that could provide incremental up-streamed distributions beginning 2014/2015. - Diverse infrastructure investments, with North America accounting for 26% of distributions in 2010. - Management has been proactive in extending debt maturities and reducing debt, resulting in a manageable debt maturity profile and favorable leverage position. - As of 9/30/2011, parent liquidity remains strong given the pre-funding of the DPL acquisition at $2.9 bn, which includes $2.1 bn of cash. Investment Risks: - A challenging global economic outlook, with exposure to emerging markets. - Regulatory and legal regimes in many of the countries in which AES operates are not fully developed, subjecting the company to a relatively high degree of regulatory uncertainty. - Potential defaults at projects could affect distributions to the parent. - Future development program might accelerate the need for capital funding and might push leverage higher. - Lack of transparency owing to the complex capital structure. - AES plans to initiate a dividend in 2012, and continued share repurchases highlight a shift to return capital to shareholders that should prove to be negative for spreads.
Company Description
AES is a global power holding company with subsidiaries and investments located in North America, Latin America, Europe, Africa, and Asia (including the Middle East). Latin America was the largest contributor of 2010 subsidiary distributions at 37%. North America accounted for 26% of 2010 distributions, while Europe (17%) and Asia (8%) and other made up the balance. AES is engaged in both regulated electric utility and unregulated generation. AES has generation interests in nearly 30 countries, with about 40GW of generation capacity and distribution networks that serve over 11 million people. China Investment Corp. has a 15% equity stake in the company. In November 2011, AES completed the acquisition of DPL Inc., which will be a wholly owned subsidiary of AES and is expected to contribute $200-300 million in annual distributions. Key Dates/Catalysts: - Late-February, AES is expected to report 4Q2011 earnings. AES expects 2011 subsidiary distributions to parent of $1.2-1.3 bn. For 2012, AES previously indicated $1.4-$1.5 bn of distributions. We expect an update on the status of the company's $500 million share repurchase plan ($378 mn to date) and its targeted $100 mn cost savings. - 3Q2012, AES's plan to initiate an annual common dividend of $120 mn. -We also expect management to provide a general business update including the closing of its acquisition of DPL, any pending asset sales and capital allocation plans given its aforementioned dividend plans. - Potential rationalization of non-core assets and investment in new development projects. AES Financial Profile* Revenue* EBITDA* Subsidiary Distributions Interest Expense - Parent Cash Taxes Investment in Subs (Net) / Capex Free Cash Flow Total Debt - Parent Cash - Parent level Net Debt Key Credit Statistics Total Debt/Sub Dist Net Debt/Sub Dist Total debt to EBITDA EBITDA Interest coverage Sub Dist/Interest EBITDA margin 4.4 3.9 2.7 NA 5.0 4.7 3.0 NA 4.1 3.9 3.2 NA 4.8 3.2 3.6 NA 1.8 8.9 NA 34% 4.5 3.5 NA 28% FY10 1,022 804 1,255 (464) 0 (519) (274) 5,515 677 4,838 AES FY11E NA NA 1,250 (417) (2,980) (2,597) 6,192 285 5,907 AES FY12E NA NA 1,500 (468) (400) 232 6,181 326 5,855 AES LTM3Q11 NA NA 1,298 (363) (928) NA 6,192 2,089 4,103 DPL FY2010 1,883 644 (72) (143) (153) 49 1,182 124 1,058 DPL** LTM3Q11 1,921 544 (156) (105) (180) (72) 2,453 68 2,385
Comps AES Corp* Calpine Corp Dynegy Edison Mission GenOn CMS NRG
Leverage 4.1x 6.7x 10.2x 8.5x 7.8x 4.7x 4.7x
Coverage 3.6x 2.0x 1.1x 1.4x 1.1x 3.7x 2.4x
Agency Ratings Ba3/BBB1/BB/D Caa1/BB3/B Ba1/BB+ B1/BB-
*condensed financial information - includes parent revenues, equity in earnings, interest income ** Debt proforma for $1.25bn of notes of Dolphin Subsidiary II notes and $87.25 mm of annualized interest. Capitalization - Proforma for recent debt issuance Description AES Corp Secured Revolver AES Corp Term Loan Total Secured and 2nd Lien Debt AES Corp 8.875% due 2011 AES Corp 8.375% due 2011 () AES Corp 7.75% due 2014 AES Corp 7.75% due 2015 AES Corp 9.75% due 2016 AES Corp 8% due 2017 AES Corp 8% due 2020 AES Corp 7.375% due 2021 Other debt Total Secured and Unsecured Debt AES Corp Trust Preferred III Total Recourse Debt Non-Recourse Subsidiary Debt Total Consolidated Debt Minority Interest Market Cap EV ex minority interest and non-recourse debt Parent Maturities Maturities - Parent level only, including trust preferreds 600 500 400 300 200 100 2012 2013 2014 2015 Size 1,050 1,050 500 500 535 1,500 625 1,000 (34) 5,676 516 6,192 14,686 20,878 3,926 10,063 16,255 10.8x 4.1x 3.8x 0.7x Debt to SubDist
*AESreflectssubdistributionstoparentobligations;LTM4Q2011
Liquidity Parent Level Liquidity Revolver Size (Sec'd) Letters of Credit drawn Borrowings Revolver Availability Parent cash Total Liquidity 800 (12) 788 2,089 2,877
January 26, 2012
High Yield
Aircastle Ltd. (AYR)

IN-LINE
Bond Summary Size (MM) $300 Coupon (%) 9.750 Priority Sr. Notes Maturity 1-Aug-18 Agency Ratings Ba3/BB+
Updated 1/24/2012
Joshua Pinkerton Justine Fisher
212-357-9774 212-357-6711
Next Call Price 104.88 Date 1-Aug-14
Bid Price 110.63
YTW (%) 6.88%
STW bp 657
Company Description
Aircastle is a top-10 aircraft leasing company, with approximately 129 aircraft with a book value exceeding $3.7 billion. Aircastle is one of the few public stand-alone leasing companies, and it is the only one with unsecured bonds. Fortress Investment Group founded Aircastle in 2004 and is now a significant minority owner of its equity. Aircastle has developed a niche as a leading lessor in the freighter aircraft market. Freight aircraft generally have longer lives, allowing Aircastle to operate with a somewhat higher average fleet age than its peers. Key Dates/Catalysts: Aircastle is expected to report earnings on or around March 9.
Investment Strengths: - Strength in freighter market: Aircastle is a leader in the niche market for freighter aircraft. Its fleet is approximately 29% freighters. - Orderbook: Aircastle's orderbook of A330s is fully financed and leased. The addition of these aircraft should provide predictable growth over the next year. - Manageable near-term maturities: Aircastle's near term maturities are primarily amortization payments on secured debt, which it should be able to meet with cash on hand and cash from operations. Investment Risks: - Relatively small size: Aircastle has a book value of $3.7 billion, about one-tenth the size of the market leaders.. - Securitizations: Aircastle has three low-cost securitizations that will go into "turbo mode" and redirect all cash flows to debt repayment beginning in 2011-2013. This could reduce cash flow to the company or force Aircastle to refinance at a higher rate.
(Thousands of dollars) Financial Profile Revenue EBITDA Interest Expense Income Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics EBITDA/Interest EBITDA margin 2.7 x 91.3% 2.5 x 92.2% 2.6 x 91.4% 2.6 x 91.9% 2.7 x 91.9% 2.6 x 91.8% FY10 527,710 481,936 178,262 6,596 (609,672) (228,606) 2,782,958 239,957 2,543,001 2Q11 148,838 137,260 55,893 1,535 (125,989) (30,482) 2,797,632 184,017 2,613,615 3Q11 141,507 129,307 48,872 1,237 (233,331) (148,425) 2,782,958 239,957 2,543,001 4Q11E 148,904 136,904 52,231 1,555 (260,000) (159,575) 3,060,229 275,043 2,785,186 FY11E 597,163 548,854 202,615 7,596 (766,360) (421,318) 3,060,229 275,043 2,785,186 FY12E 587,543 539,234 204,627 7,596 (60,345) 315,566 2,924,680 411,705 2,512,975
Comps AYR AWAS
Leverage 5.6x 6.4x
Coverage 2.7x 2.5x
Ratings Ba3/BB+ Ba3/BB
Capitalization Description ACST 2006 ACST 2007 Term Financing No. 1 ECA Term Financings A330 PDP Facility Unsecured notes Total debt Market Cap Enterprise Value Size 396,000.0 917,000.0 607,000.0 545,729.0 17,000.0 297,000.0 2,782,958.0 1,005,115.4 3,548,116.4 6.5 x Cash Total Liquidity 239,957 289,957 5.1 x Debt to EBITDAR Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 50,000 0 0 50,000
Maturities: 1,000 900 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 Thereafter
January 26, 2012
High Yield
Alcatel-Lucent (ALUFP)
Updated 1/26/2012
212-902-7537 212-357-2769
OUTPERFORM / IN-LINE
Bond Summary Size (MM) 500 $1,360 Coupon (%) 8.500 6.450 Priority Senior Senior Maturity 15-Jan-16 15-Mar-29 Agency Ratings B2/B WR/B Price NC NC Next Call Date NC NC Bid Price 91.62 77.75 YTW (%) 11.5% 9.0% STW bp 1,112 709
Company Description
Alcatel-Lucent is a manufacturer of telecommunications equipment and a provider of telecommunication services. It provides products and services that enable voice, data, and video communications. Areas of focus include fixed, mobile, and converged broadband networking and IP technology. The company categorizes its business into three main segments: Networks (IP, Optics, Wireless and Wireline), Applications (Network Applications, Enterprise Applications), and Services. ALU's top 10 customers accounted for 43% of revenues in 2010, with AT&T and Verizon each accounting for 11%. The company competes with a broad number of competitors including Cisco, Ericsson, Huawei, ZTE, and Nokia Siemens Networks. The company was formed through the merger of Alcatel S.A. and Lucent Technologies in 2006. Key Dates/Catalysts: - Alcatel-Lucent is expected to report 4Q2011 earnings on February 10.
Investment Strengths: - Adequate liquidity totaling over 5.1 billion, including 3.7 billion of cash on hand and 1.4 billion of revolver availability. The announced sale of the Genesys business could add about 1bn more. - Improving free cash flow (but still negative): ALU is guiding to flat full year 2011 free cash flow after 600800 million annual outflows in 2008-2010. We think ALU could fall short of this target but that FCF will still improve significantly from previous years. - Well positioned for the 4G rollout: ALU has signed several major 4G network contracts (including AT&T and Verizon) which could represent approximately 30% of this new market opportunity. - Leading provider of IP-based network infrastructure solutions: Voice/data networks will continue to migrate toward an all-IP network infrastructure to manage accelerating traffic growth. Investment Risks: - Pension: While its US pension plan is over-funded by 2.7 billion, the projected benefit obligation (PBO) ended 2010 at 21 billion. We expect the funded status to deteriorate to reflect lower interest rates and challenging asset returns in 2011. - Alcatel generates 10% of revenues from legacy wireline network products. Carriers are reducing spending on wireline networks, as wireless applications continue to gain market share. - Legacy CDMA and GSM infrastructure solutions still account for a sizable portion of wireless revenues. While AT&T and Verizon increased legacy network spending over the past 12 months to better manage smartphone traffic, we expect 2012 to bring more traditional headwinds. - Volatile free cash flow: Alcatel-Lucent typically generates negative free cash flow during the first three quarters of the year, reflecting seasonal working capital needs.
Financial Profile (EUR) Revenue YoY Change Adj. EBITDA Cash Interest Cash Taxes Working Capital Other (Pension/Restructuring Operating Cash Flow CapEx FCF (excl. Dividends) Total Debt Cash Net Debt Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin LTM Capitalization (EUR) Description
FY08A 16,984 -4.5% 1,320 (349) (123) (131) (510) 207 (901) (694) 5,095 4,593 502 3.9 x 0.4 x 3.8 x 7.8%
2009A 15,157 -10.8% 684 (244) (89) 471 (827) (5) (691) (696) 4,755 5,570 (815) 7.0 x -1.2 x 2.8 x 4.5%
2010A 15,996 5.5% 1,040 (305) (117) 10 (754) (126) (692) (818) 5,378 5,689 (311) 5.2 x -0.3 x 3.4 x 6.5%
LTM-3Q2011 16,302 -1,398 (312) (53) (459) (617) (43) (637) (680) 4,498 3,757 741 3.2 x 0.5 x 4.5 x 8.6%
2011E 16,149 1.0% 1,378 (352) (80) (584) (599) (236) (628) (865) 4,498 4,891 (393) 3.3 x -0.3 x 3.9 x 8.5%
2012E 16,026 -0.8% 1,366 (376) (105) 81 (490) 476 (721) (245) 4,498 4,646 (148) 3.3 x -0.1 x 3.6 x 8.5%
Size 0 462 1,000 500 150 72 680 200 906 3,970 716 4,686 (500) 312 4,498 3,757 741 3,256 3,997
Multiple 2.8 x 2.8 x 2.8 x 2.8 x 2.8 x 2.8 x 2.8 x 2.8 x 2.8 x 2.8 x 3.4 x 3.4 x --3.2 x -0.5 x -2.9 x
Revenues by Region North America Europe Asia Pacific ROW
FY2010 36% 32% 18% 14%
Liquidity Summary Revolver Size Borrow Base - Amt Drawn - Unavailable Amt Unutilized Cash Liquidity
3Q2011 1,400 1,400 0 0 1,400 3,757 5,157
EUR 1.4 bn Revolving Credit Facility due 2012/2013 Alcatel-Lucent 6.375% notes due 2014* Alcatel-Lucent 5.0% converts due 2015 Alcatel-Lucent 8.5% senior notes due 2016 Alcatel-Lucent FRNs due 2012-2016 Alcatel-Lucent USA 2.875% converts due 2023 Alcatel-Lucent USA 2.875% converts due 2025 Alcatel-Lucent USA 6.5% notes due 2028 Alcatel-Lucent USA 6.45% notes due 2029 Total senior debt outstanding Alcatel-Lucent USA 7.75% sub. prefs due 2017 Total debt outstanding (Face) Equity component of converts Other financial debt Reported Gross Debt Cash & Equivalents Net Debt Market cap Enterprise value
Segment Revenues Networks - IP - Optics - Wireless - Wireline Software/Svcs/Solutio Enterprise Other FY2010 62.1% 10.0% 16.5% 26.8% 9.0% 27.4% 7.3% 3.2%
Pension Funding Region FV of Assets PBO Funded Status OPEB Funding Region FV of Assets PBO Funded Status US 536 (3,334) (2,798) YE2010 Euro ---US 23,721 (21,008) 2,713 YE2010 Euro 3,281 (3,712) (431)
Maturities: 2,000 1,500 1,000 500 2012 2013 2014 2015 2016 2017 Thereafter
ALU (USD) 5 Yr CDS Performance:

1,600 1,400 1,200 1,000 800 600 400 200 0 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
January 26, 2012
High Yield
Alere Inc. (ALR)

UNDERPERFORM on the seniors and the subs
Updated 01/25/12
212-855-7718 212-902-9758
We rate both the ALR seniors and subs Underperform. We see the terms of the June 2011 credit agreement as signaling a deteriorating credit profile going forward, which we think is not reflected in current spreads. The term loan has no total leverage limit and a 4.5x secured limit. We also see weak near-term new product pipeline ($50 mn for 2011 and $150 mn for 2012 of revenue according to management). Bond Summary Size (MM) $250 $400 Coupon (%) 7.875 8.625 Priority Sr Nts Sr Sub Nts Maturity 01-Feb-16 01-Oct-18 Agency Ratings B2/BB3/BNext Call Price $103.938 $104.313 Date 2/1/2013 10/1/2014 Bid Price $103.250 $102.750 YTW (%) 6.663% 7.904% STW bp 634 711 Investment Strengths: - Strong LT market growth characteristics: Professional diagnostics market growth rate is around 8%. - Strong technology platform that is a barrier to entry: ALR has a large installed base (e.g., 63% for Triage in ERs), which is important for building physicians' confidence in ALR's products. - Significant free cash flow: 5% LTM.
Company Description
Alere Inc. (ALR) develops near-patient diagnosis and monitoring tools, and operates a health management business. ALR's products and services focus on cardiology, women's health, infectious disease, oncology, and drugs of abuse. ALR's business can be divided into three segments: professional diagnostics (67% of revenues), health management (28%), consumer diagnostics (4%). Alere has grown its businesses by leveraging a strong intellectual property portfolio (by acquiring distribution networks to expand its geographic reach) and making product acquisitions. Formerly known as Inverness Medical Innovations, the company announced on July 15, 2010, that it had changed its name to Alere Inc. In June 2011, ALR amended its bond indentures to allow $200 mn of share repurchase and paid up to a maximum of 2.625% consent fee. ALR also refinanced its credit agreement to finance the repurchase, increased the revolver by $100 mn. In July 2011, ALR announced it had approached Axis Shield (ASD) with a take-over offering. ASD initially rejected the offer. ALR eventually closed the ASD acquisition on November 1, 2011 for approximately $364 mn and used a $200 mn DD term loan as well as revolver borrowing to finance it. In December 2011, ALR issued a $250 mn add-on to its term loan. The proceeds were used to fund the acquisition of a US-based pain management business and Arriva. Key Dates/Catalysts: - Quarterly results: Organic growth has recently lagged expectations and the health management business has been hurt in recent quarters by reduced employer spending on benefits. - Uptake of new product launches CD4 and Heart Check. - Uptake of a new drug to replace Warfarin (Boehringer Ingelheim's Dabigatran). ALR's blood test used to monitor Warfarin dosing contributes about 6% of sales. - Potential acquisitions, which could increase leverage. Financial Profile Revenue EBITDA Interest paid Taxes paid Capex Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Debt to PF LTM EBITDA** Debt to 2011E EBITDA** 4.1x 3.2x 5.0x 26.4% 4.2x 3.5x 4.7x 26.2% 5.9x 5.3x 3.6x 24.1% 4.9x 25.5% 3.9x 25.1% 3.2x 24.2% 2009A $1,986 525 $105 15 101 187 $2,147 493 1,655 2010A $2,155 565 $120 (30) 96 179 $2,395 401 1,994 2011E $2,346 566 $156 64 120 171 $3,337 344 2,993 4Q10A $578 147 $30 (29) 28 18 $2,395 401 1,994 3Q11A $586 147 $38 43 27 37 $3,064 277 2,787 4Q11E $610 148 $46 2 25 43 $3,337 344 2,993
Investment Risks: - Acquisitive in an "expensive" sector: Growth opportunities are in buying specialized point-of-care companies that are typically privately owned. - Ability to add debt: The June 2011 credit agreement offers the company substantial room to increase leverage. The company only has a 4.5x secured leverage limit and no total leverage limit.
Comps Alere (ALR) Snr Alere (ALR) Sub Valeant Pharma (VRX) Warner Chilcott (WCRX)
Leverage 3.8x 5.0x 4.3x 2.7x
Coverage NA 3.4x 4.6x 5.8x
Agency Ratings B2/BB3/BB1/BBB3/B+
Description Revolving Credit Facility TLA due 6/15/2016 TLB due 6/15/2017* DD TL due 6/30/2016 (incremental A) Total bank debt 7.875% senior notes due Feb 2016 Total sr bonds 9% Subordinated Notes due May 2016 8.625% subordinated notes due 2018 Total sub bonds Other 3% Sr Sub Convert Notes due 2016 (not gty) Total Debt Market Cap Enterprise Value **LTM is PF for recent acquisitions, 2011E is not. Maturities: 3500 3000 2500 2000 1500 1000 500 0 2012 2013
Size $25 $625 $1,173 $300 2,122.7 $245 $245 $391 $400 $791 $28 $150 $3,337 2,022 $5,082
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 250 4 25 221 0 0 0 $277 497
3.4x
3.8x A/R facility Borrowings
3.8x
4.2x
Availability Cash Total Liquidity
5.0x
5.6x
5.3x 8.1x
5.9x 9.0x
*Includes a $250mn add-on that was put in post quarter end.
2014
2015+
10
January 26, 2012
High Yield
American Achievement (AMEACH)
Updated: 1/23/12
Kevin Coyne Celeste Everett
212-357-9918 212-902-4751
Contact analyst or see latest research for updates to ratings, estimates, and other information. OUTPERFORM: On a relative basis, we think the AMEACH senior secured notes are cheap relative to Visant Corp. seniors owing to the low dollar price, additional security, tighter covenant package for one turn of additional leverage, and better ratings. Bond Summary Size Coupon Agency Bid YTW STW Z-Spd Next Call (MM) (%) Priority Maturity Ratings Price Date Price (%) bp bp 365 10.875 Sr Sec Nts 15-Apr-16 B3/B 105.438 15-Oct-13 74.500 20.12 1,944 1,931
Company Description
American Achievement Corporation (AMEACH) is a school affinity products company with operations in three segments: Yearbooks (37% of FY2010 revenue), Class Rings (38% FY2010 revenue), and Graduation (14% of FY2010 revenue) & Other Products. The Yearbooks segment includes memory books, calendars, and automated yearbook design software; Class Rings includes both high school and college markets; and Graduation & Other includes diplomas, letter jackets, and a non-scholastic jewelry business selling commemorative, military, and other customized jewelry. AMEACH was formed in 2000 as a holding company that combined the operations of Balfour (brand for all its on-campus product lines), and ArtCarved. A sale of the company to competitor Herff Jones was announced in May 2008 but was ultimately terminated by mutual agreement in December of that year due to resistance from the FTC on anticompetitive grounds. Key Dates/Catalysts: - August 2011: Steve Parr assumed the position of President and CEO, while former CEO Alyce Alston departed to pursue other opportunities. - FY2012 guidance: EBITDA expected to be flat to slightly higher, and FCF expected to be $1-3 mn. Ring segment revenue expected to be down (on % basis) "in the high single digits" year-overyear. Fiscal year ended August 31 Financial Profile 3QFY11A Revenue 144.2 EBITDA 50.6 Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due Oct 2015 ($55 mn) Total Secured Debt 10.875% sr secured nts due Apr 16 Total Debt 1QFY12A 35.0 35.0 365.0 400.0 Debt to EBITDA 0.6x 6.9x Liquidity Revolver Size (a) Letters of Credit Borrowings Revolver Availability 10.9 11.5 2.5 25.8 386.3 1.2 6.6x 6.6x 4.7x 35.1%
4QFY11A 45.8 1.6 10.9 (10.8) 2.1 (0.5) 387.0 4.8 6.7x 6.6x 0.1x 3.5%
FY11A 1QFY12A 2QFY12E 284.2 42.9 47.2 57.6 1.8 3.1 38.8 (9.3) 9.4 18.6 387.0 4.8 6.7x 6.6x 1.5x 20.3% 11.0 (4.8) 2.1 (6.5) 400.0 7.1 6.9x 6.8x 0.2x 4.2% 10.2 (4.7) 2.5 (5.0) 390.0 2.6 6.8x 6.8x 0.3x 6.7%
FY12E 271.6 57.2 41.7 (3.4) 9.6 9.3 390.0 3.1 6.8x 6.8x 1.4x 21.1%
Investment Strengths: - #1 provider of college class rings (55% market share) and #2 in high school class rings (30% market share of on-campus and retail). - One of the largest yearbook providers (10% market share). - Strong brand recognition post the consolidation under Balfour, a brand that dates back to 1914. - Diversified distribution channels with retail presence in Wal-Mart, K-Mart, JC Penny, and Zales. - Developing innovative products to complement its product offerings and drive sales: personalized pages created via internet, Bal4.tv that uses customized media through a secure video delivery service and QR codes printed in yearbooks. -Gross margins have improved 170 bp to 56.2% in FY2010 through rationalization of excess production capacity, investments in improved technology, and outsourcing. - Strong covenant package: RP basket subject to 2.0x fixed coverage ratio, with a carveout for a small general basket of $5 mn - No near-term maturities. - Secured by substantially all the assets. Investment Risks: - According to AMEACH, each 10% increase in gold prices results in $2.5 mn of increase in cost of goods sold. The company does not hedge gold and relies on passing along the costs through higher prices. - Operational weakness in FY2010 partially attributed to canceled sale to Herff Jones. - Minimal free cash flow. - Uncertain exit strategy: does not lend itself to an IPO in our view due to small scale of the business; anti-trust obstacles to a strategic acquisition (Herff Jones). Comps AMEACH VISANT MGM (srs) Leverage Coverage 6.9x 1.5x 6.2x 2.8x 9.2x 1.7x Ratings B3/B Caa1/BB3/B-
1QFY12A 54.8 1.7 35.0 18.1
A/R facility Borrowings A/R Availability Maturities: 500 400 300 200 100 0 2012 2013 2014 2015 2016+ Cash Total Liquidity
NA NA NA
7.1 25.1
(a) Bond indenture permits revolver to increase to $75 mn.
11
January 26, 2012
High Yield
American Axle (AXL)

IN-LINE
Bond Summary Size (MM) $300 Coupon (%) 7.875% Priority Sr. Nts Maturity 1-Mar-17 Agency Ratings B2/B
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 104.00
YTW (%) 636.6%
STW bp 626
Company Description
American Axle & Manufacturing Holdings, Inc., designs, engineers, and manufactures driveline systems for light trucks and sport-utility vehicles. The company produces axles, propeller shafts, chassis components, and forged products. American Axle also manufactures various driveline components for light trucks and sport utility vehicles manufactured in North America. About 80% of the company's top line is derived from the light truck platform. Key Dates/Catalysts: - American Axle will report 3Q2011 earnings on February 3
Investment Strengths: - Favorable production trends: D3 production has rebounded from the trough in 2009 and has remained at relatively stable levels in 2011 and early 2012. - Improved margins: Driven by the companys cost-cutting actions, AXL's 3Q2011 LTM EBITDA margin was 14.9%, versus a 6.6% margin in 2009. - Global expansion: AXL aims to expand globally and increase its presence primarily in Brazil and China. - Adequate near-term liquidity: AXL ended 3Q2011 with $114 million of cash on hand and $389 million of gross liquidity. Investment Risks: - Rising oil and gas prices: AXL is at risk of a consumer shift away from light trucks and SUVs (i.e., GMT900) to smaller, more environmentally friendly cars. - High reliance on D3 truck production: AXL derives about 84% of its revenues from the D3. While AXL has been focusing on diversifying revenues away from the D3 and North America, we estimate that 80% of the top line will still come from North America in 2013.
Financial Profile Revenue EBITDA Cash interest Cash Taxes W/C, Divs, Other CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization - FY11E Description Revolving Credit Facility 9.25% Sr. Secured Notes due 2017 Foreign Credit Facilities Capital Lease Obligations 5.25% Sr. Notes due 2014 7.875% Sr. Notes due 2017 7.75% Sr. Notes due 2019* Total Debt Less cash & equivalents Net Debt Market Cap Enterprise Value
FY08 2,109.2 76.4 (73.6) (13.1) (171.1) (140.2) (321.6) 1,139.9 198.8 941.1 14.9x 12.3x 1.3x 3.6%
FY09 1,521.6 100.2 (80.0) (3.8) (78.7) (141.5) (203.8) 1,071.4 178.1 893.3 10.7x 8.9x 1.2x 6.6%
FY10 2,283.0 340.3 (61.6) 43.1 (81.5) (108.3) 132.0 1,010.0 244.6 765.4 3.0x 2.2x 4.0x 14.9%
LTM-3Q11 2,562.7 381.6 (73.3) 2.6 (329.5) (149.8) (168.4) 1,050.6 114.4 936.2 2.8x 2.5x 4.8x 14.9%
FY11E 2,590.2 370.6 (71.8) 1.5 (294.8) (150.7) (145.2) 1,170.0 265.0 905.0 3.2x 2.4x 4.5x 14.3%
FY12E 2,848.2 384.7 (80.3) 1.5 8.3 (185.0) 129.1 1,127.5 351.7 775.8 2.9x 2.0x 4.4x 13.5%
Comps AXL CTBUS GT MTOR TEN TRW
Leverage 2.8x 1.3x 3.0x 3.0x 2.2x 0.9x
Coverage 4.8x 8.4x 6.5x 3.6x 4.5x 13.6x
Ratings B1/BBB1/BBBa3/BBB2/B Ba3/BB Ba2/BB+
Size 0.0 378.8 35.0 6.3 249.9 300.0 200.0 1170.0 265.0 905.0 926.3 1831.3
Debt to EBITDA 1.1x 1.1x 1.1x 1.1x 3.2x 3.2x 3.2x 3.2x 2.4x 4.9x
Liquidity LTM Revolver Size - Amt Drawn - LCs Amt Unutilized Cash & equivalents Liquidity 375.0 70.0 30.0 275.0 114.4 389.4
* Bonds benefit from guarantees from domestic operating subsidiaries
Maturities (FY11E): 1,000 900 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 After
12
January 26, 2012
High Yield
Amerigroup
OUTPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate AGP Outperform as we think it trades cheap relative to competitor Centene and we view both companies as credible acquisition candidates. We like AGP fundamentally because of (1) its robust industry growth opportunities, (2) its risk-reducing characteristics of managed Medicaid contracting, and (3) its conservative capitalization in terms of both leverage and statutory capital surplus. Bond Summary Size (MM) $475 Coupon (%) 7.5 Priority Sr Maturity 15-Nov-19 Agency Ratings Ba3/BB+ Next Call Price $103.750 Date 15-Nov-15 Bid Price $105.625 YTW (%) 6.322% STW bp 552
Amerigroup is the largest pure-play managed Medicaid company and has roughly 8% market share, ranking second behind UnitedHealthcare in terms of number of Medicaid members. The company was founded in 1994 and has been public since 2001. AGP will serve over 2.7 million members in 14 states with the recent expansions in Texas and Louisiana and the acquisition in New York. In January 2012, AGP was also declared one of five winners of the Washington reprocurement and expansion, which would be another new state for AGP. Final details will be set in February 2012. Medicaid programs that the company manages includes long-term care (LTC), aged, blind and disabled (ABD), temporary assistance for needy families (TANF), and FamilyCare. The company also has a small part in Managed Medicare (1% of total members). In November 2011, AGP raised $400 mn in unsecured bonds in order to repay its $260 mn of convertible notes that are in the money and to fund cash to balance sheet. The company does not have a revolver but maintains sufficient parent cash (also known as unregulated cash). In January 2012, AGP issued a $75 mn add-on to the 2019 notes; we believe part of the proceeds will be used to fund statutory capital for the Washington win. Key Dates/Catalysts: - 4Q earnings and 2012 guidance expected February. - Results of contract reprocurement through 2012. - State rate updates for 2012. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We see plenty of growth opportunity outside of Medicaid expansion but headline reaction could be negative if the law is deemed unconstitutional.
Company Description
Investment Strengths: - Robust industry growth opportunities. We see three avenues for industry growth: (1) budget-crunched states are increasing their use of managed care to reduce costs (MCOs reduces costs by 3-15%), (2) the Medicare/ Medicaid dual eligibelivble population may be migrated to managed care, and (3) Medicaid enrollment is set to expand by 16 mn people in 2014 due to the Affordable Care Act. - Credible acquisition candidate. The large market growth opportunity makes managed Medicaid attractive for core managed care. We view managed Medicaid as requiring different core skills than commercial, and so greenfield entry may be challenging. - Conservative capitalization. Leverage is low at 25% of capitalization. AGP's statutory capital levels are also 2.5x higher than the minimum regulatory requirements. Investment Risks: - Underwriting risk. AGP assumes the risk of the cost of medical care so EBITDA could be volatile during the underwriting cycle. In addition, AGP is entering a few new regions in 2012, which could be risky as AGP is less familiar with the new population being managed. - Potential rate cuts or loss of contracts. States could cut rates next year, but this is largely due to the low utilization experienced through 2010 and 1H2011. Rates must still be actuarially sound. There are a number of contracts up for rebid in 2012 but AGP is diversified by state and by county within the state. - Regulatory/legal risk. Strict Medicaid fraud laws could result in monetary penalties. However, there are currently no cases against the company and settlements tend to be small.
Financial Profile Premium Revenue Total Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Parent Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
2009A 5,159 5,188 252 $16 52 30 117 $260 232 28
2010A 5,783 5,806 488 $16 164 29 372 $260 249 11
2011E 6,275 6,291 363 $20 113 42 261 $660 715 (55)
4Q10A 1,498 1,502 139 $4 47 10 189 $260 249 11
3Q11A 1,601 1,605 90 $4 28 11 117 $260 298 (38)
4Q11E 1,615 1,619 64 $8 17 10 50 $660 715 (55)
Agency 1.0x 0.1x 15.5x 4.9% 0.5x 0.0x 30.5x 8.4% 1.8x (0.2x) 18.0x 5.8% 34.7x 9.3% 21.5x 5.6% 8.4x 3.9% *AGP leverage is based on 3Q annualized EBITDA. Debt to Debt/3Q Debt/PF 3Q LTM annualized annualized EBITDA EBITDA EBITDA NA NA 475 475 3,210 2,873 *Unregulated cash 1.1x 1.7x 1.3x 1.3x Comps AGP* HNT CNC Leverage 1.7x 1.2x 1.0x Coverage 14.6x 11.7x 16.3x Ratings Ba3/BB+ Ba2/BB Ba3/BB+
Description AGP has no revolver Total Sr Sec debt 7.5% senior notes due 11/15/2019* Total Debt Market Cap Enterprise Value
*PF for the $75mn add-on in January 2012.
Size
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Balance sheet cash as of 3Q Parent Cash as of 3Q* NA NA NA NA $812 $298
Maturities: 500 450 400 350 300 250 200 150 100 50 0 2012 2013 2014 2015+
13
January 26, 2012
High Yield
Ameristar Casinos Inc. (ASCA)

Contact analyst for updates and other information.
Updated 1/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size Coupon (MM) (%) $800 Priced at 99.125 7.50
Priority Sr Nts
Maturity 15-Apr-21
Agency Ratings
Next Call Price
Date
Bid Price
YTW (%)
STW bp 483
Z-spread bp 488
B3/B+ 105.625 15-Apr-15 106.500 6.219 (Non-standard call price and date; only 4 yrs but 75% of coupon)
Company Description
Ameristar Casinos Inc. (ASCA) owns and operates eight casinos in seven markets throughout the United States. ASCA properties are located in St. Louis, MO, Kansas City, MO, East Chicago, IN, Council Bluffs, IA, Black Hawk, CO, Vicksburg, MS, and Jackpot, NV. Key Dates/Catalysts: - April 2011: Completed new $1.4 billion senior secured credit facility and new $800 million senior note offering. Proceeds used for repayment of existing bank debt and bonds and the purchase of 26.15 million shares of ASCA stock from the estate of former owner Craig Neilsen for $17.50 per share. - May 2011: Estate of Craig Neilsen sold 4.6 million shares of common stock in a public offering, bringing its ownership percentage to 0.8% from 15%. - September 2011: Announces $75 million share repurchase program, expiring September 30, 2014. - November 2011: Announced agreement to purchase land in Springfield, MA, with the intent to apply for the sole casino license for western Massachusetts. Plans include a casino, hotel, and entertainment facilities.
Company Strengths: - New credit facility includes full covenant package. - Strong EBITDA margins. - High-quality properties compared with some of the HET and ISLE competitors in its footprint. - New facility in Colorado. - No near-term maturities.
Financial Profile Net Revenue EBITDA Interest expense Cash Taxes CapEx & M&A Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description
3Q10A 300 81 28 3 14 36 1,665 87 1,578 5.1x 4.9x 2.9x 27.1%
4Q10A 294 78 25 1 20 32 1,530 71 1,459 4.7x 4.5x 3.1x 26.4%
FY10A 1,189 323 121 (3) 58 147 1,530 71 1,459 4.7x 4.5x 2.7x 27.2%
1Q11A 317 96 25 (2) 11 63 1,485 89 1,397 4.4x 4.2x 3.8x 30.4%
2Q11A 305 94 27 2 16 49 1,999 84 1,916 5.7x 5.5x 3.5x 30.9%
3Q11A 305 90 27 (2) 19 46 1,946 92 1,854 5.4x 5.2x 3.3x 29.6%
Company Risks: - Subject to new competition in certain markets (IL, LA). - Relatively low asset coverage. - No exposure to Las Vegas, which we expect to recover sooner than the Midwest region. - Pays $0.10 quarterly dividend. - Indiana property losing market share due to limited access for cars because a bridge is closed for repairs. - Proposed expansion of gaming in Illinois a negative for its Indiana and St. Louis properties.
Comps PNK GCCN BYD MGM (sr)
Ratings Coverage 2.8x Caa1/B 4.8x B2/BB2.0x Caa1/CCC+ 1.7x B3/B-
3Q11 249 200 697 1,146 800 1 1,946
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver available
Revolver due 2016 ($500mm) Term loan A due 2016 (L+275) Term loan B due 2018 (L+300, floor 1%) Total senior secured debt 7.50% senior notes due 2021 Other debt Total debt
3.2x
3Q11 500 4 249 247
Enterprise Value Shares O/S (mm) Share price Market cap Net debt Enterprise value (EV) EV / LTM EBITDA
32.63 19.70 643 1,854 2,497 7.0x
5.4x Restricted cash Cash Total Liquidity 6 92 345
Maturities: 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016+ Credit facility maintenance covenants Leverage Sr leverage Coverage Current 7.00x 4.50x 2.00x 1Q2012 6.50x 4.00x 2.00x 1Q2013 6.00x 3.50x 2.00x 1Q2014 5.50x 3.50x 2.00x 1Q2015+ 5.25x 3.50x 2.00x
14
January 26, 2012
High Yield
Amkor Technology, Inc. (AMKR)

IN-LINE
Bond Summary Size (MM) $345 Coupon (%) 7.375 Priority Senior Maturity 1-May-18 Agency Ratings Ba3/BB-
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 107.5
YTW (%) 5.4%
STW bp 506
Company Description
Amkor Technology is one of the world's largest outsourced semiconductor packaging and test service providers. It is second in size based on revenues to Advanced Semiconductor Engineering (ASE). Both Amkor and ASE are almost double the size of the next-largest players, STATS ChipPAC and Siliconware Precision Industries, rounding out the four largest global semi packagers in the industry. AMKR provides services across a broad array of end markets for 225 clients, with its largest segments including communications (40% of sales), consumer (26% of sales), and computing (12% of sales). Key Dates/Catalysts: - AMKR is expected to report 4Q2011 earnings in late January/ early February.
Investment Strengths: - Leading SATS provider: AMKR is one of the largest semiconductor packagers in an industry where economies of scale matter - Positive industry fundamentals: We expect long-term growth to continue in the smartphone, consumer, and network infrastructure markets despite near-term volatility associated with a pullback in demand and a moderate inventory correction. - Active capital structure actions: In 2010 AMKR issued $345 million of senior notes due 2018 and used the proceeds to redeem 2011 and 2013 maturities. It also called all of its outstanding 9.25% senior notes in 1Q11 to further extend its debt maturity schedule. Net leverage peaked at 6x in FY2005 but has declined to 2.3x as of 3Q11. Investment Risks: - A volatile industry: A decline in consumer demand for semi products and/or a continued decrease in higher-margin communications revenues would weaken AMKRs top-line and EBITDA growth. - Cash deployment: In August, AMKR announced a $150mn stock repurchase program . Separately, in September, AMKR announced an agreement to purchase Toshiba's Malaysian SATS operations for approximately $81mn (although the acquisition has since been delayed owing to the disruptions caused by the flooding in Thailand). While the company still has a sufficient cash balance and revolver availability, further acquisitions may subject the company to some liquidity pressure should the macroeconomic environment deteriorate materially. - Near-term operating volatility: AMKR results missed expectations in 4Q2010, 1Q2011, 2Q2011, and 3Q2011 reflecting seasonal weakness in gaming, inventory adjustments by some customers, higher raw material costs, volatility associated with the earthquake in Japan, and an inventory correction further down the semiconductor supply chain.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization (PF Adjusted) Description Secured Revolver (L+150-225 bp) Secured Term Loan due 2014 (L+1 Korean Term Loan Shanghai working cap Other secured debt 7.375% Senior Notes due 2018 6.625% Senior Notes due 2021 6.0% Sub Coverts due 2014 Total Debt Less cash Net Debt Equity Market Cap Enterprise Value
FY08 2,659 611 (116) (24) (386) 220 1,493 424 1,069 2.4 x 1.8 x 5.3 x 23.0%
FY09 2,179 538 (113) (12) (173) 88 1,434 395 1,039 2.7 x 1.9 x 4.8 x 24.7%
FY10 2,939 697 (99) (6) (446) 97 1,364 423 942 2.0 x 1.4 x 7.0 x 23.7%
LTM-3Q11 2,843 572 (87) (6) (493) 57 1,326 483 843 2.3 x 1.5 x 6.6 x 20.1%
FY11E 2,772 514 (81) (6) (426) (1) 1,326 432 894 2.6 x 1.7 x 6.4 x 18.6%
FY12E 2,829 520 (75) (5) (453) (56) 1,326 376 950 2.5 x 1.8 x
Comps 6.9 x 18.4% FSL NXP SANM Size 0 150 123 15 40 345 400 0 1,073 475 598 1,011 1,609 Debt to EBITDA 0.6 x 0.6 x 0.6 x 0.6 x 0.6 x 1.9 x 1.9 x -1.9 x -1.0 x -2.8 x Liquidity (LTM) Revolver Size Borrow Base - Amt Drawn - LC's Amt Unutilized Cash Liquidity 100 100 0 0 100 483 583
Leverage 5.8x 3.3x 3.6x
Coverage 2.0x 3.7x 3.6x
Sr. Unsec Ratings Caa1/CCC+ Caa1/B B1/B
* Assumes in-the-money 6.0% sub converts are treated as equity
Maturities: 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 Thereafter
15
January 26, 2012
High Yield
Apria Healthcare (AHG)

OUTPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate AHG Outperform as the 3Q improvement in EBITDA and our outlook for further improvement makes a refinancing more likely given the high coupons on the bonds (callable as of November 2011). We think a refinancing requires a good 4Q and strong market conditions. While the A-1s are likely covered even under a distressed scenario, we prefer the A-2s due to the more attractive upside/downside. Bond Summary Size (MM) $700 $318 Coupon (%) 11.25 12.375 Priority Sr Sec A-1 Sr Sec A-2 Maturity 1-Nov-14 1-Nov-14 Agency Ratings Ba2/BB+ B1/B+ Next Call Price $102.813 $103.094 Date 1-Nov-12 1-Nov-12 Bid Price $104.500 $98.500 YTW (%) 8.417% 13.019% STW bp 832 1279 Investment Strengths: - Business mix is focused away from Medicare: AHG has strategically elected to pursue managed care payers, rather than rely on Medicare business, which is subject to rate cuts. - Growth in home infusion (historically 10%) offsets reduced Medicare oxygen reimbursement. LTM segment EBITDA of $136 million suggests a valuation of close to $1 billion based on a 7x multiple. - Reported cost reduction: AHG had realized $171.2 million of savings as of the end of 3Q2011 and anticipates $10.1 million of additional savings for 2011.
Apria provides home respiratory and home infusion services and equipment rental. The company serves over 2 million patients from 550 service locations. A focus on managed care payers (Medicare oxygen is less than 10% of revenue), the large home infusion segment, and a greater level of centralization differentiate Apria from competitors. Home infusion contributes 49% of revenue and 72% of EBITDA. Round 2 of competitive bidding is scheduled for 2012, with rates taking effect in July 2013, although the program has seen several delays previously. Approximately $144 million of AHG revenue is subject to Round 2. AHG was purchased by Blackstone in October 2008. Blackstone contributed $673 million of equity for total consideration of $1,713 million or 5.6x LTM EBITDA. In March 2011, AHG acquired the home health business of Praxair, which it expects to add $85-95 mn of revenues for 9M2011. In 1Q2011, AHG's EBITDA miss was largely due to higher-than-expected SG&A related to on-shoring expenses and sales force growth. In 3Q2011, AHG announced that hiring related to the on-shoring initiative has been completed. Per management, it takes roughly 6-9 months for new billing and collections teams to become proficient and for SG&A to tick down. Key Dates/Catalysts: - Potential bond refinancing. Bonds are high coupon and callable November 2011. - Quarterly earnings results. (3Q11 continued the positive EBITDA momentum off of a bad 4Q2010. Stabilization of SG&A costs and reduction in addbacks are key) - It is unclear how, if at all, a 2% across-the-board sequestration would be implemented on competitive bidding reimbursement. -Results of competitive bidding round 2 expected in the Fall of 2012. Financial Profile Revenue EBITDA (bf future cost savings) Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Debt to LTM EBITDA $0 700 318 1,018 1 1,018 NA NA 4.2x 3.9x 4.2x 3.9x 2.9x 2.7x
Company Description
Investment Risks: - FCF negative which means AHG will likely begin drawing on its $250 million revolver. Capex is high because of the short lifespan of equipment. - Ongoing contract rationalization has resulted in declining revenue in respiratory. - Under competitive bidding, Medicare rates for oxygen concentrators were cut by 33% on average in select markets. This gives an indication of what competitive bidding might look like in later rounds, which will have more financial impact on AHG. - Process of on-shoring AHG's billing and collection functions could be disruptive, and SG&A might remain elevated.
2009A $2,095 377 $129 (8) 151 19 $1,021 158 863
2010A $2,081 299 $131 (8) 117 (32) $1,019 109 910
2011E $2,293 264 $132 (21) 149 (48) $1,028 42 986
4Q10A $528 48 $33 (11) 32 (42) $1,019 109 910
3Q11A $585 75 $33 (7) 38 36 $1,018 58 960
4Q11E $595 71 $33 0 35 (26) $1,028 42 986
Agency 2.7x 2.3x 2.9x 18.0% 3.4x 3.0x 2.3x 14.4% 3.9x 3.7x 2.0x 11.5% 1.4x 9.0% 2.2x 12.7% 2.2x 11.9% Comps AHG Sr Sec A-2 HLS THC Uns CYH Leverage 4.2x 3.2x 3.9x 4.8x Coverage 1.8x 4.3x 2.0x 2.8x Ratings Ba2/BB+ B2/B+ Caa1/CCC+ B3/B
Description ABL revolver due 2016 Series A-1 11.25% notes due 2014* Series A-2 12.375% notes due 2014* Total Sr Sec debt Other Total Debt Market Cap Enterprise Value
(*) A-1 notes have liquidation priority over A-2 notes.
Size
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $250 21 0 229 $58 $287
Maturities: 1200 1000 800 600 400 200 0 2012 2013 2014 2015+
16
January 26, 2012
High Yield
Ashland (ASH)
IN-LINE
Bond Summary GS Rating IL Size (MM) 650 Coupon (%) 9.125 Priority Sr. Nts Maturity 1-Jun-17
Updated
1/26/2012
Kristen McDuffy Adam Goodwin
212-357-6157 212-902-0459
Agency Ratings Baa3/BB
Next Call Price 104.6 Date 1-Jun-13
Bid Price 111.50
YTW (%) 3.64%
OAS bp 349
Company Description
Ashland is a diversified chemical company consisting of three specialty chemical businesses (Aqualon, Water Technologies, and Performance Materials) and two commodity businesses (Consumer Markets and Ashland Distribution). In November of 2008, Ashland acquired Hercules for $3.4 billion and was subsequently downgraded to high yield from investment grade. In November 2010, the company announced that it had signed an agreement to sell its Distribution business to TPG Capital for $930 million, or a 10.2x multiple of FY2010 EBITDA. In May 2011, Ashland announced that it agreed to acquire ISP for 8.9x LTM EBITDA in a $3.2 billion all-cash transaction, which closed at the end of September 2011). Ashland financed roughly $2.9 billion of the purchase price with new bank debt. Key Dates/Catalysts: 1QFY12 earning release
Investment Strengths: - Ashland's EBITDA is well balanced across its business segments and diversified geographically. - The Aqualon business is high margin and high growth. - Ashland has demonstrated a willingness to sell noncore assets and use cash for debt reduction. - Management plans to use free cash flow to repay debt following the ISP acquisition. Investment Risks: - Ashland could opt to make a leveraging acquisition or distribute additional cash to shareholders, weakening its current efforts to achieve investment grade ratings. - Performance from the Valvoline business could fall more sharply from recent cyclical peaks than we expect. -ISP acquisition has resulted in a significant increase in leverage.
Financial Profile ($, mn)* Net Sales EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Equivalents Key Credit Statistics PF Debt/EBITDA (3) PF Net Debt/EBITDA (3) PF EBITDA/Interest Expense ( PF LTM EBITDA Margin (3)
FY:10 5,741 529 (131) 31 (206) 303 1,400 417 1.7x 1.2x 6.2x 14%
FY:11 6,502 429 (109) 54 (201) 77 4,003 737 3.5x 2.8x 5.7x 14%
FY:12E 8,232 1,257 (205) (179) (260) 307 3,833 874 3.1x 2.4x 6.1x 15%
1Q:11 1,433 165 (27) (27) (22) (85) 1,407 374 1.9x 1.4x 6.4x 13%
4Q:11 1,846 (286) (33) 143 (105) 96 4,003 737 3.5x 2.8x 5.7x 14%
1Q:12E 1,980 281 (51) (39) (65) (38)
Comps 3,961 656 3.5x 2.9x 5.5x 14% Ashland Koppers Olin
Ratings Ba1/BB B1/B+ Ba1/BB
Capitalization ($, mn) Description Revolver AR securitization ($200 mn) New Term Loan 6.6% notes (legacy Hercules) Total Secured Debt 9.125% senior notes MTN 8.8% debentures Hercules Tianpu term notes International revolver agreements Other Total Senior Debt 6.5% junior subordinated ($282 mn) Total Debt Share Price Market Capitalization Enterprise Value Maturities: 180 160 140 120 100 80 60 40 20 0 FY2012 FY2013 FY2014 FY2015 Size 1,500 1,400 650 3,550 21 12 20 35 81 2 3,721 282 4,003 61.6 4,806 8,072 7.0x 3.5x 3.2x Cash Liquidity A/R Securitization Borrowing base Borrowings A/R Availability 737 1,651 3.1x Debt to EBITDA Liquidity Revolver Size Borrowings Letters of Credit Revolver Availability 1,000 86 914
17
January 26, 2012
High Yield
Avis Budget Group (CAR)

UNDERPERFORM
Bond Summary Size (MM) $375 Coupon (%) 7.750% Priority Sr. Nts Maturity 15-May-16 Agency Ratings B2/B
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 103.50
YTW (%) 435.2%
STW bp 431 Investment Strengths: - Dual brand names allow company to target two distinct markets: higher-end Avis customers and price-conscious Budget customers. - Broad distribution network: No. 1 in on-airport car rental, with 32% market share across both brands. - Successful capital structure actions: In March 2010, CAR extended the maturity of $1.275 billion of bank debt by two years and issued $450 million of senior notes due 2018. More recently, CAR issued $600 million of 8.25% senior notes due 2019. - Fleet reductions could generate additional cash flow for Avis's corporate balance sheet. - Global brand: recent acquisition of Avis Europe provides the company with a more geographically diversified revenue base and the opportunity to grow relationships with global customers. Investment Risks: - Exposure to Europe: After Avis Budget's acquisition of Avis Europe, we estimate Europe will represent over 30% of the companys pro forma revenues. We believe weaker-than-expected economic growth in that region could make it difficult for the company to achieve its targeted acquisition synergies - Vehicle residual values: Fleet depreciation has declined over 25% from $1.7 billion in 2008 to $1.2 billion in 2011 thanks to higher residual values. Looking forward, we believe there is downside risk to the residual value growth opportunity, which is currently trending at record high levels. - Macro risk: With its heavy reliance on the on-airport car rental, Avis Budget's revenue is tied to enplanements volume, which is sensitive to a macroeconomic slowdown. Comps HTZ CAR Leverage 3.7x 4.2x Coverage 2.9x 3.2x Ratings B1/B+ B1/B+
Company Description
Avis Budget Group (CAR) is a leading provider of vehicle rental services, including cars and trucks. The company has locations in more than 70 countries and employs over 30,000 people. The Avis brand operates approximately 2,100 locations, with 60% of the revenues generated from commercial customers. Aviss primary competitor is the Hertz brand, which derives a significant portion of its revenues from corporate accounts. On the leisure side, Budget has about 1,900 locations, with 72% of its revenue generated from leisure accounts. Together, Avis Budget controls 20% of the car rental market. On October 3, 2011, Avis Budget announced the completion of its acquisition of Avis Europe PLC for an equity purchase price of approximately $1.0 billion. Key Dates/Catalysts: - Avis is expected to report 4Q2011 earnings in late February. We will be focused on any commentary regarding the integration of Avis Europe.
Financial Profile Revenue EBITDA Cash Interest Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due 2011/2013 (L+400 bp) Term loan due Apr 2014 (L+425 bp)
FY08 5,984.0 181.0 (133.2) (15.0) (88.0) (23.0) 1,789.0 258.0 1,531.0 9.9x 8.5x 1.4x 3.0%
FY09 5,132.8 218.8 (135.3) (20.0) (39.0) 166.8 2,131.0 482.0 1,649.0 9.7x 7.5x 1.4x 4.3%
FY10 5,184.9 409.9 (100.7) (142.0) (61.0) 301.9 2,502.0 911.0 1,591.0 6.1x 3.9x 2.4x 7.9%
LTM-3Q11 5,496.1 600.1 (175.1) (142.0) (52.0) 192.1 2,498.0 1,002.0 1,496.0 4.2x 2.5x 3.2x 10.9%
FY11E 5,560.1 660.2 (196.4) (35.0) (40.0) 142.4 3,498.0 1,091.4 2,406.6 5.3x 3.6x 3.2x 11.9%
FY12E 6,963.3 710.3 (249.0) (50.0) (50.0) 114.6 3,498.0 506.9 2,991.1 4.9x 4.2x 2.8x 10.2%
Size 0.0 268.0 250.0 200.0 375.0 445.0 602.0 345.0 13.0 2498.0 1002.0 1496.0 1492.7 2988.7
Debt to EBITDA 0.4x 0.4x 4.2x 4.2x 4.2x 4.2x 4.2x 4.2x 4.2x 4.2x 2.5x 5.0x
Liquidity LTM Revolver Size - Amt Drawn - LCs Drawn Amt Available Cash on hand Net Liquidity 1200.0 0.0 784.0 416.0 1002.0 1418.0
Senior FRN's due May 2014 (L+250 bp) 7.625% Senior Notes due May 2014 7.75% Senior Notes due May 2016 9.625% Senior Notes due March 2018 8.25% Senior Notes due January 2019 3.50% Convertible Notes due 2014 Other Total Corporate Debt Less cash Net Corporate Debt Market Cap Enterprise Value Corporate maturities: 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 2012 2013 2014
2015
2016
Thereafter
18
January 26, 2012
High Yield
AWAS Aviation Capital (AWAS)

IN-LINE
Bond Summary Size (MM) $542 Coupon (%) 7.000 Priority Sr. Sec Maturity 15-Oct-16 Agency Ratings Ba2/BBBPrice 103.5
Updated 1/24/2012
212-357-9774 212-357-6711
Next Call Date 18-Oct-13
Bid Price #N/A N/A
YTW (%) #VALUE!
STW bp #N/A N/A
Company Description
AWAS is a top 10 leasing company with 205 aircraft that have a book value of $5.5 billion and 113 orders. AWAS was founded in 1985, bought by Morgan Stanley in 2000, and sold to private equity firm Terra Firma in March 2006. In June 2007, AWAS acquired Pegasus Aviation, which owned 82 aircraft and had an order book of 37 aircraft. Today, AWAS is a privately held company owned primarily by Terra Firma and the Canada Pension Plan Investment Board (CPPIB), with its headquarters in Dublin, Ireland. Key Dates/Catalysts: AWAS is expected to report earnings around February 28.
Investment Strengths: - New orders: The main focus of AWASs expansion is on its large new order book. However, it has also participated in some secondary market transactions. - Shareholder support: AWAS is a private company with two primary shareholders. The shareholders have put a total of $2 billion into the company, including $83 million in 1Q2011 and $200 million in 2Q2011. They have not taken interest or dividend payments out of the company. They have also indicated that they will continue to put additional equity capital into the company, primarily to help finance the delivery schedule. Investment Risks: - New orders: The biggest projected cash use for AWAS is its large order book. The company has aircraft purchase commitments of $996 million in 2012, $1.2 billion in 2013, and $948 million in 2014.
(thousands of dollars) Financial Profile Revenue EBITDA Interest Expense Income Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics EBITDA/Interest EBITDA margin 2.5 x 87.6% 86.9% 90.5% 89.2% 2.5 x 88.8% 2.9 x 89.4% FY10 733 642 (258) (19) (468) (35) 3,721 632 3,089 2Q11 193 168 (61) (5) (240) (146) 3,826 849 2,977 3Q11 197 178 (97) (3) (193) (50) 3,932 801 3,132 4Q11E 199 178 (57) (8) (181) (66) 4,354 650 3,704 FY11E 765 679 (268) (23) (751) (268) 4,354 650 3,704 FY12E 815 729 (255) (22) (648) (263) 4,801 516 4,284
- Fully secured capital structure: AWAS does not have unsecured debt outstanding and substantially all of its assets are unencumbered.
Comps AYR AWAS
Leverage 5.6x 6.4x
Coverage 2.7x 2.5x
Ratings Ba3/BB+ Ba3/BB
Capitalization Description Size 571.2 500.0 313.6 287.1 730.0 1,513.5 3,932.5 0.0 3,132.0 4.6 x Cash Total Liquidity 801 801 5.8 x Debt to EBITDAR Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 0 0 0 0
7.0%Sr.Sec.Notesdue2016 L+575Termloandue2016 Recoursefloatingrate Recoursefixedrated Nonrecoursefloatingrate Nonrecoursefixedrate

Total debt Public Market Cap Enterprise Value
Maturities: 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015 Thereafter
19
January 26, 2012
High Yield
Ball Corporation (BLL)

IN-LINE
Bond Summary Size (MM) $500 Coupon (%) 6.750 Priority Sr Nts Maturity 15-Sep-20 Agency Ratings Ba1/BB+
Updated 1/23/12
Joe Stivaletti James Kitchell
(212) 902-3299 (212) 902-9813
Next Call Price 103.375 Date 15-Mar-15
Bid Price 110.250
YTW (%) 4.240
STW bp 382 Investment Strengths: - Efficient assets: Ball operates a global network of modern, efficient beverage can plants located in close proximity to the markets and customers it serves. - Experienced management: Ball is led by a strong management team whose top 10 senior executives average over 20 years of experience in the packaging industry. - Broad geographic footprint: Ball manufactures its products in many regions of the world, including North America, Europe, South America, and Asia. Investment Risks: - Irrational price competition could lead to lower profitability: Although can manufacturers have behaved rationally in recent years, irrational selling price competition remains a possibility. - Future M&A activity might lead to higher leverage: There is the potential for Ball to make a leveraging acquisition in the future, which could drive bond spreads wider.
Company Description
Ball is one of the worlds largest suppliers of metal and plastic packaging to the beverage, food, and household products industries. The companys primary products include aluminum and steel beverage containers, steel food containers, steel aerosol containers, plastic containers for foods and beverages, steel paint cans, and decorative steel tins. Ball also operates a small aerospace business, which produces spacecraft, instruments and sensors, radio frequency and microwave technologies, and a variety of other aerospace products.
Financial Profile Net sales EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Short-term bank facilities Revolving credit facilities Term loan facilities 7.125% senior notes 6.625% senior notes 7.375% senior notes 6.750% senior notes 5.750% senior notes Other Total debt Market value of equity Enterprise value Maturities: 3,200 2,800 2,400 2,000 1,600 1,200 800 400 2012 2013 10/2/2011 Size 415.6 247.2 413.4 375.0 450.0 325.0 500.0 500.0 230.5 3,456.7 6,143.0 9,599.7
12/31/2009 FY:09 6,710.4 883.5 117.2 157.9 2,596.2 210.6 2,385.6
12/31/2010 FY:10 7,630.0 1,019.1 149.4 250.2 2,812.3 152.0 2,660.3
9/26/2010 3Q:10 2,035.0 288.6 36.2 62.0 2,647.3 168.7 2,478.6
7/3/2011 2Q:11 2,309.7 331.1 45.2 118.5 3,474.4 144.8 3,329.6
10/2/2011 3Q:11 2,258.3 306.4 43.0 110.3 3,456.7 190.1 3,266.6
Comps 2.9x 2.7x 7.5x 13.2% 2.8x 2.6x 6.8x 13.4% 2.7x 2.5x 8.0x 14.2% 3.0x 2.9x 7.3x 14.3% 3.0x 2.8x 7.1x 13.6% Plastipak Owens-Illinois Crown Holdings
Ratings B3/B Ba3/BB Ba3/BB
Debt to EBITDA 0.9x 0.9x 0.9x 3.0x 3.0x 3.0x 3.0x 3.0x 3.0x
Liquidity Revolver size Letters of credit Borrowings Revolver availability Cash Total Liquidity
10/2/2011 1,000.0 22.8 247.2 730.0 190.1 920.1
2014
2015+
20
January 26, 2012
High Yield
Basic Energy Services (BAS)

IN-LINE
Bond Summary Size (MM) $475 Coupon (%) 7.750% Priority Sr. Maturity 2/15/2019 Agency Ratings B3/B
Updated:
1/26/12
Jason Gilbert Sarah Yanes
(212) 902-3585 (212) 357-5869
Next Call Price $103.88 Date 2/15/2015
Bid Price $102.25
YTW (%) 7.21%
STW bp 644 Investment Strengths: Above-average exposure to stronger oil macro Low maintenance capex of approximately $25 mn Investment Risks: Significant capacity additions in pressure pumping and well servicing could delay pricing recovery Management has historically been acquisitive Key Dates/Catalysts: Continued bolt-on acquisitions Well servicing rig attrition
Company Description
BAS is the third-largest well-services company in the US, with an approximate 11% share. The company completed its IPO in December 2005. Business segments include well servicing, contract drilling, fluid services, and drilling and remedial services. Geographically, most of BAS's assets are located in West Texas (41% of workover fleet), the Mid-Continent (21%), and the Rockies (16%) regions. To date, Basic has employed an acquisition growth strategy, and we expect the company to continue to expand into new service areas and regions through bolt-on transactions. Basic's corporate history stretches back to 1992, when Sierra Well Services, Inc. was founded as a subsidiary of Southwest Royalties. Sierra employed an acquisition growth strategy, but was unable to weather the downturn of 1997, which led to restructuring and a change in management. Subsequently, the company changed its name to Basic Energy Services in 2000, and altered its geographic and commodity exposure. Basic filed for an IPO in 2000, but pulled the transaction due to general market conditions. The company was then recapitalized with DLJ Merchant Banking Partners. In 2005, Basic successfully completed an IPO at $20 per share. In April 2008, BAS entered into an agreement with Grey Wolf to combine in a merger of equals transaction. This merger was terminated in July 2008 after GW agreed to be acquired by Precision Drilling. Most recently, the company completed the acquisition of Maverick Companies in July 2011 for $180 mn.
Financial Profile Revenue EBITDA (Adj for non-cash items) Free Operating Cash Flow Capital Expenditures
2008A $1,005 $240 $112 $87
2009A $527 $33 $46 $43
2010A $728 $116 ($14) $64
2011E $1,234 $331 $5 $200
2012E $1,529 $431 $271 $200 Leverage ('11E) 2.3x 6.3x 2.0x Coverage ('11E) 12.8x 2.4x 13.4x Agency Ratings B3/B Ba3/BBB1/B+
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % 2008A 1.7x 10.7x 45% 2009A 15.3x 1.4x 60% 2010A 4.4x 6.1x 62% 2011E 2.3x 12.8x 69% 2012E 1.8x 22.4x 53% BAS HOS PKD
Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2016 Senior notes due 2019 Other Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $225 $275 $63 $563 $563 $0 $340 $903 2.7x Size $72 $0 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $165 $0 $0 $165 $72 $237
Maturities:
500 450 400
Debt maturities ($ mn)
350 300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
21
January 26, 2012
High Yield
Bausch + Lomb Inc. (BOL)

IN-LINE
Updated 01/25/12
Erin Blum Cindy Guan 212-855-7718 212-902-9758
Our rating is based on a volatile financial track record, offset by a well-known consumer brand and a fast-growing pharma business. On its 3Q11 conference call, the company reiterated that it would likely not refinance the bonds when callable in November, instead preferring to wait for an IPO in one or two years. Bond Summary Size (MM) $650 Coupon (%) 9.875 Priority Snr Uns Maturity 01-Nov-15 Agency Ratings Caa1/B Next Call Price $102.469 Date 01-Nov-12 Bid Price $104.750 YTM (%) 8.366% STM bp 826 Snr 5-yr CDS 325 / 355
We are using yield to maturity as the company has said it does not intend to call the bonds.
Company Description
Bausch + Lomb develops, manufactures, and markets eye health products. BOL operates three segments: vision care (e.g., contact lenses, contact lens solution, about 43% of revenue), pharmaceuticals (37%), and surgical products (e.g., cataract and refractive; 20% of revenue). BOL was purchased by Warburg Pincus in October 2007. In March 2010, BOL announced that it had hired a new chairman and a new CEO, both of whom had worked at Schering-Plough. In its 3Q2011 conference call, BOL reiterated its plan to not call the bonds at the first November call date, preferring to wait for an IPO in one to two years. 2011 guidance is for top line growth to be in the "upper single digits" with EBITDA growth at around10%. Guidance does not include any potential impact from Japan (which is less than 10% of revenue). 2H2011 should be helped by various new product launches (PureVision 2HD and a new surgery platform). In September 2011, BOL entered into an agreement granting it the option to buy out its JV partner Technolas Perfect Vision for up to EUR450 mn based on certain milestones and earnouts. BOL CDS was also added to the new HY index S17 in September 2011. In December 2011, TPV's VICTUS platform received CE mark approval. In the same month, BOL acquired Laboratorio Pfortner, the controlling entity of Waicon, the largest Argentinean contact lens company, for an undisclosed sum. Key Dates/Catalysts: - Quarterly earnings announcements (new products for 2H2011). - Additional commentary around potential IPO or plans for calling the notes. -Comments on intention for the TPV JV. Financial Profile Revenue EBITDA Interest Expense, net Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Debt to LTM EBITDA 3.4x 19.9% 4.8x 4.4x 3.4x 20.1% 4Q11E $732 146 $43 12 23 29 $2,715 192 2,524 2011E $2,843 572 $170 91 102 164 $2,715 187 2,528
Investment Strengths: - BOL operates as a hybrid consumer/healthcare company with a well-recognized brand and the high barriers to entry characteristic of a healthcare company. - Pharma sales growth has been robust, offsetting weakness in the vision segment. - Diversified product mix across the eye care business as well as geographically, with over 50% of revenue coming from outside the US. Investment Risks: - EBITDA has been volatile (LTM results have ranged from down 2% to up 46% over the previous year). - Contact lens and solutions markets are highly competitive with the risk of recalls, price compression, and technology shifts. - US contact lens sales have been negatively affected by the weak economy. - The potential buyout of its JV partner TPV and a more acquisitive strategy could cause leverage to creep higher.
Comps BOL Snr BMET Sub ALR Sub
Coverage 3.4x 2.0x NA
Agency Ratings Caa1/B Caa1/BB2/B-
Description Revolver 10/25/2013 Term Loan--US 4/26/2015 Term Loan--Euro 4/26/2015 Total Snr Sec debt Snr Uns Notes due 2015 Old debt remaining Total Snr Uns debt Total Sub debt Other Debt Total Debt Market Cap Enterprise Value Maturities: 3,000 3,000 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 0 500 0 2012 2013 2012 2013
Amount $65 $1,439 $548 $2,052 $649 $12 $661 $0 $27 2,740 NA NA
3.8x
5.0x
5.0x
2014 2014
2015+ 2015+
22
January 26, 2012
High Yield
Beazer Homes USA Inc. (BZH)

OUTPERFORM
Updated
1/26/2012
212-357-6157 212-902-0459
We are Outperform rated on Beazer because we believe its bonds are highly attractive from a valuation standpoint. We expect the company's results in FY2012 to demonstrate improvement; moreover, with no near-term maturities and ample liquidity, we believe the company is well positioned to weather the final years of the housing downturn. In our view, the current spread gap between Beazer and KB Home is unwarranted given their relatively similar credit metrics and performance outlooks. Bond Summary GS Rating OP OP Size (MM) 250 250 Coupon (%) 12.0 9.125 Priority Sr. Sec Sr. Nts Maturity 15-Oct-17 15-May-19 Agency Ratings B2/B Caa3/CCC Next Call Price 106.00 104.6 Date 10/15/2012 11/15/2014 Bid Price 108.5 77 YTW (%) 7.86% 14.29% OAS bp 771 1,300
Company Description
Beazer Homes, established in 1985, builds single family homes in 16 states. The company caters mostly to first-time home buyers, with this cohort accounting for 64% of its home closings in FY2010. Approximately three-quarters of the companys homes are under 2,500 square feet, and its average home price in fiscal year 2010 was $221,700. Beazer is moderate in size relative to other builders, with 4,513 homes closed in FY2010. The company has relatively balanced regional exposures, with 39% of its closings in the West, 38% in the East, and 22% in the Southeast. Key Dates/Catalysts: 1QFY12 earning release
Investment Strengths: - Primarily targets finished lots. - Significantly improved capital structure, liquidity, and maturity schedule. - Willingness to issue equity to reduce outstanding debt. Investment Risks: - Relatively weak operating margins versus peers. - High SG&A as a percentage of sales. - Company remains highly leveraged. - Difficult path to profitability at current sales pace and cost structure.
Financial Profile ($, mn)* Total Revenues Total Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Homebuilding Debt Total Cash and Cash Equivalents Key Credit Statistics Homebuilding Debt / Capitalization (3) Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) (3) Homebuilding Gross Margin (1)
FY:10 991 1 (127) 118 (11) 46 1,227 576 76% 63% 0.9x 18%
FY:11 742 (43) (131) 2 (21) (217) 1,507 647 86% 82% 0.9x 17%
FY:12E 977 25 (131) (10) (121) 1,507 527 91% 89% NA 19%
1Q:11 110 (19) (32) 1 (2) (150) 1,322 522 79% 71% 0.9x 17%
4Q:11 335 9 (33) 2 (8) 94 1,507 647 86% 82% 0.9x 16%
1Q:12E 216 (1) (33) (3) (111) 1,507 537 87% 84% NA 18% Comps Beazer KB Home Standard Pacific Debt-toCap 86% 81% 69% Inventoryto-Debt 1.0x 1.1x Ratings B2/B+ B3/B 0.9x Caa3/CCC
PF Capitalization ($, mn) Description Secured revolving credit facility Cash-secured delayed draw term loan 12% 2nd priority secured notes Other secured notes payable Model home financing obligations Total Secured 9.125% senior notes 9.125% senior notes TEU senior amortizing notes 6.5% senior notes 6.875% senior notes 8.125% senior notes Total Senior Mandatory convertible subordinated notes Junior subordinated notes (2) Total Balance Sheet Debt Joint Venture Repayment Guarantees Total Debt Outstanding Share price Market Capitalization Enterprise Value Size 247 250 2 500 250 300 10 172 173 1,405 58 50 1,512 18 1,530 3.1 228 1,387 200 180 160 140 120 100 80 60 40 20 0 2011 2012 2013 2014 2015 2016 Maturities: Cash Restricted Cash Total Liquidity 370 277 669 Revolver Letters of credit (LoC) Borrowings Availability 22 22 Cash-secured facility Borrowings Availability 275 247 28 Liquidity
23
January 26, 2012
High Yield
Berry Petroleum (BRY)

OUTPERFORM
Bond Summary Size (MM) $300 Coupon (%) 6.750% Priority Sr. Maturity 11/1/2020 Agency Ratings B2/BB-
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $107.28
YTW (%) 5.40%
STW bp 463 Investment Strengths: Heavy oil fundamentals remain strong Approximately 65% of 2011E production is oil, making BRY one of the most oily producers in our coverage 57% of 2012 production protected through hedges Investment Risks: Increasing natural gas exposure Almost half of production is high-cost CA heavy oil, which heightens BRYs exposure to negative reserve revision potential High PUD component (51% of reserves) requires elevated ongoing development spending Rising services costs pressuring results Increasingly difficult California regulations Key Dates/Catalysts: Potential acquisitions, particularly in the Permian Update on next-generation oil projects California permitting
Company Description
Berry Petroleum has transformed from a traditional California heavy oil producer to a more diversified E&P with both crude oil and natural gas interests. We expect the company to continue to use cash flow from its mature California assets to expand its East Texas, Rockies, and Mid-Continent natural gas platforms, and in the current environment the company is focused on increasing its California heavy oil production to increase this cash flow. Management has been conservative over time; however, the pace of acquisitions and divestitures has recently increased. The company has indicated that it would be interested in additional diatomite assets if something became available at an attractive price. BRY started in 1909 as a California heavy crude producer and has been publicly traded since 1987. In 2000, the California energy crisis led the company to rethink its strategy. Historically, Berry had been reliant on steam injection for heavy oil production. With the shortage in electricity needed to generate steam, the company was forced to shut in more than 10% of production. In response, the company adopted a new strategy to diversify beyond heavy oil. Berry has since built a growth platform in East Texas and the Rockies/Mid-Continent areas through a series of acquisitions. The most recent acquisition was in the Wolfberry for $180 mn. The immediate Berry family currently owns around 35% of the shares and has no special voting rights.
2008A $786 $402 $12 $398
2009A $568 $293 $78 $135
2010A $696 $375 $37 $331
2011E $902 $519 ($40) $557
2012E $1,162 $715 $175 $641
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Debt + Preferred per Proved Boe Debt + Preferred per PDP Boe Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes due 2014 Senior sub notes 2016 Senior notes due 2020 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $352 $200 $300 $852 $1,354 $0 $1,244 $2,599 Size $0 $503
2008A 2.9x 13.6x 58% $4.70 $8.58
2009A 3.4x 5.9x 59% $4.29 $7.48
2010A 3.0x 5.6x 52% $4.11 $8.34
2011E 2.6x 7.2x 51% $4.70 $9.54
2012E 1.9x 9.5x 47% $4.41 $8.94
Comps BRY FST
Leverage ('11E) 2.6x 2.8x
Coverage ('11E) 7.2x 4.0x
Agency Ratings B2/BBB1/B
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $875 $24 $503 $349 $0 $349
2.8x
Maturities: 500
450 400 350 300 250 200 150 100 50 0
Debt Maturities ($ mn)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
24
January 26, 2012
High Yield
Berry Plastics Corporation (BERRY)

Bond Summary Size (MM) $370 $800 $168 Coupon (%) 8.250 9.750 10.250 Priority Sr Sec Nts Sr Sec Nts Sr Sub Nts Maturity 15-Nov-15 15-Jan-21 1-Mar-16 Agency Ratings B1/B Caa1/CCC Caa2/CCC Price 104.125 104.875 105.125
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Date 15-Nov-12 15-Jan-16 Current
Bid Price 107.000 104.000 97.000
YTW (%) 4.372 8.965 11.176
STW (bp) 428 748 1,050
Company Description
Berry Plastics manufactures and markets plastic packaging products, plastic film products, specialty adhesives, and coated products. The company's principal products include containers, drink cups, bottles, closures and overcaps, tubes and prescription containers, trash bags, stretch films, plastic sheeting, and tapes, which are sold into a diverse selection of attractive and stable end-markets, including food and beverage, healthcare, personal care, quick service and family dining restaurants, custom and retail, agricultural, horticultural, institutional, industrial, construction, aerospace, and automotive.
Investment Strengths: - Leading market positions: Berry has leading competitive positions in many product lines, including polypropylene containers; drink cups; pharmaceutical bottles and vials; closures; aerosol overcaps and plastic squeeze tubes; plastic trash bags, stretch film, and sheeting; and cloth and foil tape products and adhesives. - Diverse and stable customer base: Berry has over 13,000 customers, ranging from large corporations to small local businesses. Investment Risks: - Rapid increases in resin prices: Although many of Berry's sales contracts allow for the pass-through of resin price increases, rapid increases in resin prices can have a material adverse impact on the company's profitability. - Leveraging acquisitions: Berry is growth oriented and might make additional leveraging acquisitions.
Financial Profile Net sales EBITDA Interest expense Capital spending Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Revolver 1st lien term loan (2015) 1st lien FRNs (2015) 1st lien 8.250% nts (2015) Capital leases and other 2nd lien FRNs (2014) 2nd lien 9.500% nts (2018) 2nd lien 9.750% nts (2021) 10.250% sr sub nts (2016) 11.000% sr sub nts (2016) Unamortized discount Total debt 10/1/2011 Size 195 1,146 681 370 100 210 500 800 127 455 (13) 4,571
10/2/2010 FY:10 4,257 541 282 223 4,374 148 4,226
10/1/2011 FY:11 4,561 656 237 160 4,571 42 4,529
10/2/2010 4Q:10 1,154 153 77 52 4,374 148 4,226
7/2/2011 3Q:11 1,187 177 78 32 4,412 171 4,241
10/1/2011 4Q:11 1,229 188 76 34 4,571 42 4,529 Comps Ball Crown Owens-Illinois Leverage 2.8x 2.9x 3.1x 3.2x 6.3x 6.8x Coverage 6.6x 4.9x 4.7x 3.2x 1.5x 1.9x Ratings Ba1/BB+ Ba3/BB Ba3/BB B3/B B2/B Caa1/B-
7.9x 7.6x 1.9x 12.7%
6.4x 6.4x 2.8x 14.4%
7.9x 7.6x 2.0x 13.2%
7.1x 6.8x 2.3x 14.9%
6.4x 6.4x 2.5x 15.3%
Plastipak Solo Cup Reynolds
Liquidity Revolver size Borrowings Letters of credit & other Revolver availability Cash Total liquidity
10/1/2011 650 195 38 417 42 459
Maturities: 3,000
2,000
1,000
2012 2013 2014 2015 2016+
25
January 26, 2012
High Yield
Bombardier Inc. (BBDBCN)

OUTPERFORM
Bond Summary Size Ticker BBDBCN BBDBCN (MM) $850 $250 Coupon (%) 7.750 7.450 Priority Sr. Unsec. Sr. Unsec. Maturity 15-Mar-20 1-May-34
Updated 1/26/12
Brian Jacoby, CFA Cody Sauer, CFA
212-902-3258 212-855-8553
Agency Ratings Ba2/BB+ Ba2/BB+ NC NC
Next Call Next Call Date -
Bid Price $113.00 $111.00
YTW (%) 5.7 6.5
T-sprd bp 377 341
5 Yr CDS 340 340
Company Description
Bombardier is a leading manufacturer of transportation solutions, with $17.9 billion in FY2011 sales. It ranks as the world's largest rail transportation company and the third-largest civil aerospace company. Bombardier operates under two business segments: Bombardier Aerospace (BA), which represents 47% of fiscal ytd consolidated revenues, and Bombardier Transportation (BT), which represents 53% of total revenues. The company's aerospace segment designs and manufactures aviation products, and is a provider of related services for the business, commercial, amphibious, and specialized aircraft markets. Within its aerospace segment, business aircraft represents approximately 47% of sales. Bombardier sells business aircraft under the following brands: Learjet (light jets), Challenger (mid-size), and Global family (large). In commercial aircraft, Bombardier manufacturers regional jets (CRJ family) and turbo props (Q-series). The company is also developing a new 110-149 seat commercial aircraft called the C-series, which is expected to enter service in late 2013 and currently has 138 firm orders. The company's transportation segment is a global leader in the rail industry and operates in four key market segments: rolling stock (rail vehicles), services, systems, and signaling. The transportation segment generates 65% of its revenues in the European market. From a total consolidated revenue perspective, Bombardier's geographic mix is as follows: 48% Europe, 29% in North America, 18% Asia-Pacific, and 6% other regions. Key Dates/Catalysts: 1H2012: Potential for additional CSeries orders; update on development of new CSeries and Learjet 85 aircraft
Investment Strengths: - Bombardier is the world's largest rail transportation company and the third-largest civil aerospace company, which both have high barriers to entry. - High public support for rail infrastructure, and most of Bombardier's rail transportation revenues are derived from large rail operators in the public sector. - Bombardier has significant backlog, which totaled $55.3 billion at 3QFY12, consisting of $33.0 billion at its Transportation segment and $22.3 billion at its Aerospace segment. - Bombardier has a strong liquidity position, with $2.7 billion in cash at 3QFY12, and minimal near-term debt maturities.
Fiscal YE Jan 31; ($ million, except where noted) Canadian GAAP Financials (FYE Jan 31; $mn) Transportation Aerospace Revenue % YoY Chg EBITDA EBITDA margin Interest Expense Pretax Income Net income Gross operating cash flow Working Capital Net Operating Cash Flow Capital Expenditures Dividends Free Cash Flow Asset sale/(acqs) Equity increase/(decrease) Debt increase/(decrease) Other cash flow Net increase/(decrease) in cash Transportation Backlog ($ billion) Aerospace Backlog ($ billion) Total Backlog ($ billion) Total Consolidated Debt Cash Net Consolidated Debt Manufacturing Debt Key Credit Statistics Consolidated Debt/EBITDA Consolidated Net Debt/EBITDA Manufacturing Debt/EBITDA Pension & Lease Adj Leverage: NPV of Operating Leases Pension Deficit (@ Dec. 31) Pension & Lease Adj Debt/EBITDA Debt/Capital Oper cash flow/Debt LTM FCF/Debt EBITDA/Interest expense EBITDA Margin 482 1,180 3.8x 58.0% 54.2% 42.7% 3.7x 8.1% 402 1,543 2.7x 60.2% 23.0% 3.6% 6.5x 10.1% 545 1,514 3.4x 52.5% 13.3% -10.4% 7.2x 8.2% 581 1,630 4.8x 86.1% 14.2% -11.9% 9.3x 8.6% 581 1,630 4.4x 75.3% 36.1% 8.3% 7.1x 9.0% 0 1,630 3.8x 83.1% 20.5% -10.8% 11.9x 8.5% 581 1,630 4.0x 80.7% 12.0% -23.6% 10.4x 8.5% 581 1,630 3.8x 69.3% 34.3% -3.9% 7.7x 8.9% 3.1x 0.6x 3.1x 2.0x 0.2x 2.0x 2.6x 0.5x 2.6x 3.3x 1.4x 3.1x 2.9x 0.3x 2.9x 2.9x 1.4x 2.9x 3.2x 1.0x 3.2x 2.9x 1.1x 2.9x FY08 7,793 9,713 17,506 17.6% 1,422 8.1% (383) 447 325 920 1,460 2,380 (472) (30) 1,878 55 (50) (1,076) 147 954 30.9 22.7 53.6 4,393 3,602 791 4,393 FY09 9,756 9,965 19,721 12.7% 1,984 10.1% (307) 1,291 1,026 1,726 (817) 909 (621) (147) 141 54 (47) (166) (114) (132) 24.7 23.5 48.2 3,952 3,470 482 3,952 FY10 10,009 9,357 19,366 -1.8% 1,596 8.2% (223) 915 707 1,208 (656) 552 (805) (178) (431) 38 (19) (7) 321 (98) 27.1 16.7 43.8 4,162 3,372 790 4,162 F3Q11 2,168 1,829 3,997 -13.1% 343 8.6% (37) 189 145 237 (91) 146 (254) (49) (157) 0 (4) 40 70 (51) 32.7 16.2 48.9 4,824 2,725 2,099 4,824 FY11 9,098 8,794 17,892 -7.6% 1,615 9.0% (227) 997 775 1,193 485 1,678 (1,094) (197) 387 21 (66) 500 (19) 823 33.5 19.2 52.7 4,645 4,195 450 4,645 Restated for IFRS F3Q12 2,318 2,305 4,623 15.7% 394 8.5% (33) 243 194 321 (274) 47 (393) (50) (396) 0 0 3 (125) (518) 33.0 22.3 55.3 5,069 2,708 2,361 5,069 5,069 3,486 1,583 5,069 5,069 3,239 1,830 5,069 FY12E 9,803 9,075 18,878 5.5% 1,605 8.5% (155) 1,079 854 949 (341) 608 (1,593) (211) (1,196) 9 (84) 90 472 (709) FY13E 9,700 9,869 19,569 3.7% 1,733 8.9% (225) 1,148 898 1,338 400 1,738 (1,700) (235) (197) 0 (50) 0 0 (247)
- Management has a stated goal to regain investment grade ratings. - Bombardier recorded a fiscal ytd book-to-bill of 1.3x in its business jet operation, a leading indicator that demand is improving, particularly for its large business aircraft. Investment Risks: - Potential development risks (e.g., delays) associated with CSeries commercial airliner and Learjet 85 business aircraft. - Bombardier has a significant amount of exposure to aircraft residual value guarantees and credit guarantees. - The fiscal challenges in Europe could delay some rail transportation contracts in this region or cause orders to slow. - Bombardier faces significant competition from Boeing, Airbus, and Embraer, all of which are investment grade rated with strong financial flexibility.
Capitalization Description Revolvers 6.75% due 2012 Floating rate notes due 2013 6.3% due 2014 8% due 2014 7.25% due 2016 () 7.5% due 2018 7.75% due 2020 6.125% due 2021 () 7.35% due 2026 (C$) 7.45% due 2034 Other Sr. Debt Total debt Market Cap Enterprise Value
10/30/2011 Size 0 151 0 162 0 1,129 650 850 1,042 149 250 686 5,069 7,937 10,298 2.9x 4.6x 6.0x BT facility BA facility PSG facility Total Letter of credit facilities Amount Committed 4,760 600 900 6,260 Cash Total Liquidity EBITDA (x) Liquidity Revolver (matures June 2014) Borrowings Revolver Availability
10/30/2011 750 0 750 2,708 3,458
Comps Textron Inc. L-3 Communications
Leverage 2.0x 2.3x
EBITDA Coverage 8.0x 8.1x
Agency Ratings Baa3/BBBBaa3/BBB-
Maturity Issued 3,595 241 412 4,248 Available 1,165 359 488 2,012 (fiscal year) 2016 2014 2012
Debt maturities, fiscal year basis:

250 200
($MN)
150 100 50 0 FY2012 FY2013 FY2014 FY2015
26
January 26, 2012
High Yield
Bon-Ton (BONT)
Updated: 1/26/12
Karen Eltrich Jordan Hughes
212-902-6957 212-357-7875
NOT COVERED
Bond Summary Size (MM) $480 Coupon (%) 10.25 Priority Sr Nts Maturity 15-Mar-14 Agency Ratings Caa2/CCC+ Next Call Price $102.56 Date Current Bid Price 59.75 YTW (%) 40.10% STW bp 3958
Company Description
Bon-Ton was founded in 1898. After completing the acquisition of the Northern Department Store Group from Saks Inc. (now being called Carsons internally) on March 6, 2006, it became one of the largest regional department store chains in the United States. The company operates 275 department stores and includes 11 furniture galleries located in 23 states (in the Northeast, Midwest, and upper Great Plains). Bon-Ton operates under the Bon-Ton, Bergner's, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger's, and Younkers nameplates. Key Dates/Catalysts: January and February same store sales number and any corresponding guidance updates. Fourth quarter earnings results in mid-March
Company Strengths: - One of the largest regional department store chains in the US - Strong brand name recognition in its markets - Closing underperforming stores Company Risks: - Highly competitive marketplace (large overlaps with J.C. Penney and Kohl's) - Sales highly cyclical with the economy - Reduced EBITDA guidance repeatedly post 3Q - Negative same store sales momentum - Majority of sales are in the Midwest
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin As of 10/29/11 Description Revolver ($625 million, 2016)
FY08A 3,225.4 158.9 97.8 0.0 89.1 (28.1) 1,157.6 19.7 7.3x 7.2x 1.6x 4.93%
FY09A 3,034.9 218.1 98.8 0.0 33.0 86.3 1,029.3 18.9 4.7x 4.6x 2.2x 7.19%
FY10A 3,046.5 249.8 112.3 1.4 58.6 77.6 930.5 16.3 3.7x 3.7x 2.2x 8.20%
LTM 2,976.0 204.5 95.3 (0.1) 71.7 37.6 1,054.8 12.8 5.2x 5.1x 2.1x 6.87%
Comps Bon-Ton Dillard's NMG
Yield 40.10% 6.56% 7.66%
Coverage 8.2x 3.5x
Ratings B2/BBCaa1/B-
2.1x Caa2/CCC+
Size 122.5 0.0 237.0 8.0 367.5 510.0 63.0 940.5
Debt to EBITDA
Liquidity Revolver Size Borrowings Revolver Availability
3Q11A 625.0 241.6 379.5 NA 0.0 NA 12.8 392.3
Second Lien Term Loan due 11/18/13 Mortgage Loan Facility Mortgage Notes Total Secured Debt 10.25% Sr Nts due 2014 Capital Leases Total Debt
1.8x
A/R facility Borrowings A/R Availability
4.6x
Cash Total Liquidity
Market Cap Enterprise Value Maturities: 800 700 600 500 400 300 200 100 0 2012 2013
71.3 1011.8 4.6x
2014+
27
January 26, 2012
High Yield
Boyd Gaming Corp. (BYD)
Updated
1/23/12
212-357-9918 212-902-4751
OUTPERFORM / IN-LINE: We believe the 6.3x-levered senior notes offer are attractive compared to the 9.0x-levered MGM senior notes. In BYD, investors pick
150 bps for a credit that should start to see the benefit of a Las Vegas Strip recovery in 2012 as the local economy improves, albeit at a slow rate. Bond Summary Next Call Size Coupon Agency Bid YTW STW Z-spread 5-year Maturity Ratings Price Date Price (%) bp bp CDS (MM) (%) Priority $500 9.125 Senior 1-Dec-18 B3/B 104.56 1-Dec-14 98.750 9.37% 803 793 16.5+500 $241 7.125 Sr. Sub 1-Feb-16 Caa1/CCC+ 103.56 current 89.000 10.57% 1,001 973 16.5+500 7.125s call price steps down to 102.375 in February 2012. Investment Strengths: Company Description - Experienced management team. Boyd Gaming wholly owns 16 casinos in nine markets in six states. At December 31, 2010, the company - Deep knowledge of local markets and geographic owned 21,000 slot machines and 415 table games in 812,500 square feet of aggregate gaming space. The diversification. company is also 50%-owner of Atlantic Citys Borgata Hotel Casino and Spa. BYD's plan to build a $4.5 - Increasing geographic diversity by entering Biloxi, billion destination resort called Echelon Place on 65 acres on the Las Vegas Strip is currently on hold. MS gaming market. BYD also owns a Hawaiian travel agency that operates six weekly flights. The Boyd family owns - Mississippi has one of the lowest gaming tax rates approximately 37% of the equity, according to SEC filings. in the US. Key Dates/Catalysts: - October 2011: Closed the acquisition of IP Casino Resort & Spa in Biloxi, MS, for $288 mn in cash. The property generated $41 mn in LTM EBITDA through May 2011, and BYD expects to spend $44 mn within the first year on capital improvements. Including the planned capex, The purchase price represents a transaction multiple of 8.1x, including an expected $5 mn of synergies during the first year. - October 2011: Announced agreement with MGM and online poker service provider bwin.party (BPTY). If online poker is legalized in the US, MGM would acquire a 25% stake and BYD would acquire a 10% stake in a new company that would operate online poker using BPTY's technology and brands PartyPoker and World Poker Tour. - November 2011: Issued $350 mn incremental term loan to repay non-extended revolver that matured in May 2012. - November 2011: Canceled agreement to sell its Dania Jai-Alai assets for $80 mn following the two month closing date extension to the end of November. Financial Profile Net revenue Adj. EBITDA Interest Paid Cash Taxes CapEx Free Cash Flow Total Debt Unrestricted Cash Net Debt Key Credit Statistics Total Debt/LTM EBITDA Net Debt/EBITDA FY10 2,299.2 439.8 129.1 (9.7) 87.5 232.9 3,218.8 145.6 3,073.1 1Q11 564.9 111.5 49.9 0.0 20.9 40.7 3,187.5 173.8 3,013.6 2Q11 574.4 118.4 78.5 1.2 10.0 28.7 3,179.8 175.8 3,004.0 3Q11 590.2 122.0 92.6 (0.0) 24.6 4.9 3,165.7 187.1 2,978.6 4Q11E 611.2 117.3 56.6 0.0 17.0 43.7 3,328.4 102.1 3,226.3 FY11E 2,340.7 469.3 220.1 1.2 72.5 175.5 3,328.4 102.1 3,226.3 Investment Risks: - Potential liquidity shortage if capital markets do not improve in 2012. Echelon Place: Uncertainties remain regarding the outcome for the property going forward. - Sluggish US economy and high unemployment are limiting consumer discretionary spending. - Unemployment in Las Vegas at 12.5% in November. - Availability under its stock repurchase program of $92 million as of 3Q2011. - BYD entered into a purchase option agreement and periodic fee agreement with LVE Energy Partners. BYD must pay LVE ~$11 mn annually related to prior energy commitments associated with Echelon Place development. - Table hold in Atlantic City has become more volatile since the installation of Pennsylvania table games, placing pressure on earnings. - Operations concentrated in Nevada. - Under the senior note indenture, the restricted payment capacity was $419 million as of 2Q2011.
7.3x 7.0x
7.2x 6.8x
7.1x 6.7x
7.0x 6.6x
7.1x 6.9x 2.1x 19.2%
7.1x 6.9x 1.9x 20.1%
EBITDA/Interest 2.5x 1.9x 1.8x 2.0x EBITDA margin 19.1% 19.7% 20.6% 20.7% Note: Results above include the consolidation of the Borgata joint venture. Capitalization Description Revolver due 2012 Revolver due 12/17/2015 Term Loan due 12/17/2015 (incl. add-on Total Borgata senior secured debt Total senior secured debt 9.125% Senior Notes - 12/1/18 Total senior debt 6.750% Senior Sub Notes - 4/15/14 7.125% Senior Sub Notes - 2/1/16 Other Total Debt 3Q11 0.0 754.1 831.8 783.7 2,369.6 500.0 2,869.6 215.7 240.8 2.4 3,328.4 Lvg
Comps BYD GCCN PNK MNTG
Ratings Leverage Coverage 7.4x 2.0x Caa1/CCC+ 2.8x 4.8x B2/BB5.0x 2.8x Caa1/B 7.1x 1.4x B3/B-
Liquidity Source Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity 3Q11 960.0 15.5 754.1 190.4 187.1 377.5
Enterprise Value Source Shares OS (mm) Stock Price Market Cap Net Debt Minority interest Enterprise Value (EV) EV/ LTM EBITDA Size 86.3 $9.08 783.8 3,141.3 203.2 3,925.1 8.7x
5.2x 6.3x
7.4x
Note: Leverage statistics calculated to include the consolidation of the Borgata JV.
Credit Agreement Maintenance Covenants (amended December 2010) 4Q11 1Q12 2Q12 4Q12 Secured leverage 4.50x 4.50x 4.25x 4.00x Total leverage 7.75x 7.50x 7.50x 7.25x Interest coverage 2.00x 2.00x 2.00x 2.00x Operating segments
2Q13 3.75x 7.00x 2.00x
Maturities: 2000 1500 1000 500 0 2012 2013 2014 2015 2016+ Revenue: Downtown Las Vegas Locals Las Vegas Midwest & Gulf Coast Borgata Property EBITDA: Downtown Las Vegas Locals Las Vegas Midwest & Gulf Coast Borgata
4Q10 57.1 152.1 172.5 168.8
1Q11 55.7 154.5 184.1 169.1
2Q11 56.6 151.8 181.8 182.8
3Q11 53.3 145.9 187.9 202.0
10.9 34.1 30.4 34.1
9.0 39.6 41.2 31.7
9.4 38.6 42.3 38.7
6.0 30.8 44.5 49.9
28
January 26, 2012
High Yield
Bristow Group (BRS)

UNDERPERFORM
Bond Summary Size (MM) $350 Coupon (%) 7.500% Priority Sr. Maturity 9/15/2017 Agency Ratings Ba3/BB
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $104.25
YTW (%) 6.16%
STW bp 595 Investment Strengths: Global leader in a market that is undersupplied and has only two major global competitors Significant asset base supported by liquid aftermarket for helicopters Strong geographic diversity, with 83% of revenue non-US Helicopter rates more resilient than pricing in many other oil services sectors (i.e., drilling rigs) Long-term contracts provide some measure of credit support Investment Risks: Aggressive capital expenditure program Potential for additional acquisitions Exposure to US Gulf shallow shelf activity; GOM is 17% sales European operations, 39% of 2011E sales, have underperformed Key Dates/Catalysts: Company has firm orders for 11 aircraft and has 67 incremental aircraft built into the five-year plan Potential bond issuer to fund growth plans Outstanding investigations by the DOJ for potential payroll and other accounting violations Management sees growth opportunities in Norway, Mexico and Brazil Management has indicated an intention to shift toward leasing more of its fleet (over time the intent is to own 80-85% of the fleet versus 95% currently)
Company Description
Bristow (formerly Offshore Logistics) is the largest provider of helicopter services to the oil and gas industry, with a fleet of 574 aircraft, including 378 in the consolidated fleet and 196 in unconsolidated affiliates. 83% of sales from outside North America. Bristow Group's predecessor, Offshore Logistics, was formed in 1955 as a boat company and began providing helicopter services in the early 1970s. Offshore Logistics acquired Bristow Helicopters, which had greater eastern hemisphere exposure, in 1996. In 2002, Offshore Logistics increased its Nigeria exposure through an investment in Pan Africa. Bill Chiles assumed the CEO position in mid-2004, and the company adopted the name Bristow Group in 2006. In late 2006, BRS also sold its aircraft engine overhaul business, Turbo Engines, Inc., for $12 mn. In March 2007, BRS sold its 50% interest in its Brazilian joint venture. In April 2007, BRS acquired Helicopter Adventures, Inc., a flight training provider, for $20 mn and renamed it Bristow Academy, Inc. In October 2008, BRS sold 53 aircraft in the US GOM for $65 mn. Finally, BRS is part of an ongoing SEC and DOJ investigation regarding competitive practices in the US GOM.
2008A $1,119 $215 ($303) $437
2009A $1,160 $246 ($130) $317
2010A $1,205 $251 ($32) $179
2011E $1,292 $251 ($40) $247
2012E $1,205 $324 $2 $300
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2013-17 Term loan Convertible sr. notes 2038 Other Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $350 $200 $101 $25 $677 $764 $0 $1,517 $2,282 Size $140 $88
2008A 3.4x 6.9x 38%
2009A 2.8x 6.3x 34%
2010A 2.8x 5.5x 33%
2011E 3.0x 7.8x 33%
2012E 2.3x 18.1x 32%
Debt to EBITDA
Comps BRS HOS
Agency Ratings Ba3/BB Ba3/BB-
3.1x
Maturities:
400 350
300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
29
January 26, 2012
High Yield
Brookstone (BRSTNE)
OUTPERFORM
Bond Summary Size (MM) $116 Coupon (%) 13 Priority Sr Sec Maturity 15-Oct-14 Agency Ratings NR/CCC+
Updated: 1/26/12
212-902-6957 212-357-7875
Next Call Price $106.50 Date 15-Oct-12
Bid Price 79.50
YTW (%) 23.69%
STW bp 2262
Company Description
Brookstone is a product development and specialty retail company that operates over 300 Brookstone branded stores nationwide and in Puerto Rico. The stores feature unique and innovative consumer products, and are typically located in high-traffic regional malls and airports.
Investment Strengths: - Strong brand name - At secured level (senior secured notes) - Backed by strategic investor (Brookstone is OSIM's gateway into the US) Investment Risks: - Highly levered - Significant seasonality (holiday season represents more than 100% of full-year EBITDA) - Minimal free cash flow generation - High exposure to malls, which are seeing weak traffic - Significant non-cancelable operating leases limit flexibility - Over 50% of assets are intangible - May have difficulty replacing skills of prior CEO
Key Dates/Catalysts: Late March fourth quarter earnings release.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
FY09A 430.3 20.8 24.2 (12.4) 3.5 5.5 173.5 31.8 8.3x 6.8x 0.9x 4.84%
FY10A 468.2 19.3 23.8 (8.9) 5.8 (1.3) 152.0 32.1 7.9x 6.2x 0.8x 4.13%
FY11E 505.8 23.1 19.6 0.6 7.1 (4.2) 167.5 2.3 7.2x 7.1x 1.2x 4.58% 3Q11A Debt to EBITDA
4Q10A 249.4 52.2 5.4 0.1 0.9 45.7 152.0 32.1
4Q11E 262.0 47.1 6.2 0.1 2.0 38.8 167.5 2.3 Comps Brookstone Rite-Aid J. Crew Yield 23.69% 11.00% 8.70% Leverage 4.4x 6.9x 5.4x Coverage 1.8x 1.7x Ratings NR/CCC+ Ca/CCC
3.2x Caa1/CCC+
9.6x 20.92%
7.6x 17.98%
Description ABL ($125mm, due 4/14) Mortgage Notes 12% Senior Secured Notes due October 2012 13% Senior Secured Notes due 2014 Total Secured Debt Concession on 2010 Note Exchange, net
Size 29.5 2.7 9.9 125.6 167.7 11.2
Estimated Liquidity Revolver Size Borrowings
3Q11A 125.0 29.5
5.9x A/R facility Borrowings A/R Availability Cash NA 0 NA 1.2
Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities: 160 120 80 40 0 2012 2013
178.9 n/a n/a
6.3x
2014+
30
January 26, 2012
High Yield
Brunswick Corporation (BC)

Updated 01/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $350 $200 Coupon (%) 11.25% 7.125% Priority Sr Sec Sr Notes Maturity 01-Nov-16 01-Aug-27 Agency Ratings Ba2/B+ B3/B Price 105.625 MW Next Call Date 01-Nov-13 T+15 Bid Price 116.250 89.000 YTW (%) 4.594 8.519 STW bp 439 645 Z-Spread bp 409 614 5-yr CDS 285 285
Company Description
Brunswick Corporation is a leading global manufacturer and marketer of boats, marine engines, fitness equipment, and bowling and billiards equipment, with approximately 45% of sales generated outside the United States. Total revenues reached $3.7 bn in the LTM ending 3Q2011. Boating includes the boat segment (manufactures and markets pleasure and luxury boats) and the marine engine segment (recreational marine engines). Together, the two segments made up more than 75% of Brunswicks total sales in 2010. Fitness and Bowling & Billiards made up 16% and 9%, respectively, of sales in 2010. Significant equityholders include Wellington (12%), Fidelity (10%), T. Rowe Price (8%), and Vanguard (5%). Key Dates/Catalysts: - 2011 Guidance: Adjusted EPS of $0.65-$0.75 per share (vs $0.60-$0.75 per share). - August 2011: Announced plans to build a 150,000 sq ft manufacturing facility in Brazil. The facility will have the capacity to build 400 Sea Ray and Bayliner boats annually and is expected to be completed to provide boats in advance of the 2012 summer boating season (3Q12). - October 2011: Year to date, BC has repurchased $44 million of the 11.75% senior notes due 2013, $41 million of the 11.25% senior secured notes of 2016, $10 million of the 7.375% senior notes due 2023, and $32 million of the 7.125% senior notes due 2027 for total debt reduction of $127 million. - February 15, 2012: Brunswick Investor Day.
Company Strengths: - Leading market shares in pleasure boats, marine engines, commercial fitness equipment, bowling products, and billiards tables - Recognized global brand names . - Strong liquidity and no near-term maturities. - Company has been delevering through EBITDA growth and debt repurchases. - Under terms of the EDC loan, up to 43% of the principal is forgiven if BC achieves certain employment target levels. - Management continues to rationalize product lines to reduce expenses.
Company Risks: - Larger categories are seasonal businesses. - Large ticket price on a mostly discretionary purchase. - End consumer subject to changes in gas prices; high gas prices may make leisure boating less appealing. - Subject to rising commodity costs.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
3Q10 815 68 23 5 12 28 834 677 158 5.5x 1.0x 3.0x 8%
4Q10 729 (25) 24 5 26 (80) 830 636 194 4.0x 0.9x nm -3%
2010 3,403 208 94 26 57 31 830 636 194 4.0x 0.9x 2.2x 6%
1Q11 986 101 23 13 13 51 812 501 311 3.2x 1.2x 4.3x 10%
2Q11 1,096 133 21 18 19 76 787 606 181 2.8x 0.7x 6.3x 12%
3Q11 877 74 19 0 26 29 703 479 225 2.5x 0.8x 3.8x 8% LTM Comps BC 11.25s BC 7.125s ZZ 10.875s ZZ 8.25s Leverage 1.3x 2.5x 3.9x 6.3x Coverage 4.8x 4.8x 1.4x Agency Ratings Ba2/B+ B3/B Ba3/BB-
1.4x Caa1/CCC+
Description ABL facility due March 2016 EDC secured loan due 2021 11.25% senior secured notes due 2016 (a) Total senior secured debt 11.75% senior notes due 2013 7.375% debentures due 2023 7.125% senior notes due 2027 Other Total gross debt
3Q11 50 307 357 74 115 168 4 718
Debt to LTM EBITDA
Liquidity ABL Size Letters of Credit Borrowings
3Q11 267 24 0 243
Enterprise value (EV) Shares O/S (mm) Stock price Market cap Net debt Enterprise value (EV) EV/ LTM EBITDA $ 89.1 21.61 1,924.9 238.9 2,163.8 7.7x
1.3x
Revolver Availability
2.5x Cash 479 $722
(a) 11.25s are secured by a first priority lien on BC's headquarters and the domestic retail bowling centers owned by BC and a second-lien on substantially all of the other assets securing the credit facility (other than certain subsidiary stock). Maturities: $700 $600 $500 $400 $300 $200 $100 $0 2012 2013 2014 2015 2016+
Total Liquidity
31
January 26, 2012
High Yield
Burger King (BKC)

UNDERPERFOM
Bond Summary Size Coupon (MM) (%) $796 9.875
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts
Maturity 10/15/2018
Agency Ratings B3/B-
Next Call Price Date $ 104.94 13-Apr-00
Bid Price 109.25
YTW (%) 7.51
STW bp 643 Investment Strengths: - Strong No. 2 market position in hamburger QSR - Franchise-heavy model, with plans for more refranchising - Exportable concept with demonstrated international growth Investment Risks: - US/Canada sales trends have been weak - Restaurant base needs capital investment - Forecasted EBITDA growth heavily dependent on cost cuts - Free cash flow to be strained by interest burden and franchisee incentives
Company Description
Burger King is the fifth largest quick service restaurant (QSR) chain in the US and the No. 2 player in the hamburger sub segment. It operates through a network of over 12,300 restaurants in 76 countries and territories worldwide. Roughly 60% of its restaurants are in the US and Canada. Eighty-nine percent of its locations are franchised and 11% company owned. Its trademark sandwich is the Whopper, and it has historically sought to differentiate itself on the basis of customization ("Have it your way"), its flame-broiled sandwiches, and in recent years, its King mascot.
Key Dates/Catalysts: Late-March, fourth quarter earnings release
FY09A 2,512.2 445.0 51.3 81.9 184.8 127.0 859.0 207.0 1.9x 1.9x 8.7x 17.72%
FY10A 2,403.4 453.4 100.5 36.7 133.1 183.1 2,768.7 207.0 6.1x 6.1x 4.5x 18.87%
FY11E 2,338.1 557.2 194.2 48.3 64.0 250.7 3,199.7 530.2 5.7x 5.0x 2.9x 23.83% LTM Debt to EBITDA
4Q10A 583.5 113.6 63.6 (26.2) 32.6 43.6 2,768.7 207.0
4Q11E 594.9 137.5 46.5 18.0 22.0 51.0 3,199.7 530.2
Comps DineEquity Carrols Burger King
Yield Leverage Coverage 8.10% 5.7x 2.3x 8.50% 3.3x 4.0x 7.51% 5.0x 2.9x
Ratings B3/CCC+ B2/B B3/B-
4.5x 19.47%
2.9x 23.12% Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 3Q11A $150.0 28.5 0.0 $121.5
Description Revolver ($150mm due 9/7/15) Term Loan B (L+300, due 9/7/16) Term Loan B Euro (L+325, due 9/7/16 Total Secured Debt Capital Leases/Other 9.875% Senior Notes due 10/15/18 Holdco Discount Notes due 4/15/19 Total Sub debt Total Debt Market Cap Enterprise Value
Size 0.0 1588.0 265.9 1853.9 138.3 800.0 403.8 1342.1 3196.0 N/A N/A
3.4x A/R facility Borrowings A/R Availability N/A N/A N/A
5.1x 5.8x 5.8x
468.5 $590.00
Maturities and required debt payments 60 50 40 30 20 10 0 2012 2013 2014+
32
January 26, 2012
High Yield
Burlington Coat Factory (BCFACT)

OUTPERFORM
Bond Summary Size (MM) $450 Coupon (%) 10.00% Priority Sr Nts Maturity 2/15/2019 Agency Ratings Caa1/ CCC
Updated: 1/26/12
212-902-6957 212-357-7875
Next Call Price $105.00 Date 15-Feb-15
Bid Price $95.00
YTW (%) 11.04%
STW bp 948
Company Description
Burlington Coat Factory is a recognized retailer of high-quality, branded apparel at everyday low prices (EDLP). The company operates more than 460 stores in 44 US states, primarily under the Burlington Coat Factory Warehouse name.
Investment Strengths: - Value positioning a positive in a weak economy - Attractive yield for moderate leverage - Improved selection of in-season merchandise - Strong management team
Key Dates/Catalysts: 4Q same store sales and late-April fourth quarter earnings release.
Investment Risks: - Highly competitive marketplace (department stores, Wal-Mart, Target) - Historically underperforming same-store sales - Weather impacting inventory and sales more than expected
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description
FY09A 3,553.8 306.7 84.4 (29.8) 130.0 122.1 1,292.2 24.8 4.2x 4.1x 3.6x 8.63%
FY10A 3,701.1 338.1 99.3 22.1 132.1 84.6 1,372.3 30.2 4.1x 4.0x 3.4x 9.14%
FY11E 3,859.0 340.7 128.0 (8.0) 146.2 74.4 1,450.6 40.5 4.3x 4.1x 2.7x 8.83%
4Q10A 1,197.6 188.9 21.0 45.7 28.9 93.4 1,372.3 30.2
4Q11E 1,215.4 178.7 30.0 39.8 30.0 78.9 1,450.6 40.5
Comps Burlington Bon-Ton J Crew
Yield 11.04% 43.43% 8.99%
Coverage 2.7x
Ratings Caa1/ CCC
1.9x Caa2/CCC+ 3.2x Caa1/CCC+
9.0x 15.77%
5.9x 14.70%
Size 158.1 978.7 1136.8 450.0 24.3 474.3 1611.0 N/A N/A
Debt to EBITDA
Liquidity Revolver Size Letters of Credit
3Q11A 600.0 40.5 0.0 559.9
ABL Revolver ($600, L+325, due 9/2/16) Term Loan B (L +475 (150 floor), due 2/23/1 Total Secured Debt 10% Senior Notes due 2/15/19 Capital Leases Total Sub debt Total Debt Market Cap Enterprise Value Maturities: 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013
3.2x 4.6x 4.6x 4.6x
Borrowings Revolver Availability
45.8 605.7
2014+
33
January 26, 2012
High Yield
Cablevision Systems Corporation (CVC)

Updated 1/20/12
Jason Kim Satya Tagat
212-902-2233 212-902-4427
We rate the CVC Holdco bonds Outperform as we believe that the company's relatively weak performance through 3Q2011 drove bonds to depressed levels that were not consistent with CVC's strong asset value. We also believe the company is likely to be prudent with respect to its balance sheet relative to its past. We rate the CVC Opco bonds In-Line as we believe they are fairly valued at current levels. Bond Summary Size (MM) $526 $500 Coupon (%) 8.625 8.000 Issuing Entity / Priority CSC Hold Sr Nts* CVC Sr Nts* Maturity 15-Feb-19 15-Apr-20 Agency Ratings Ba3/BB Ba3/BB NC NC Next Call Price Date NC NC Bid Price 116.25 109.00 YTW (%) 5.782 6.562 STW bp 421 475
*CSC Hold = CSC Holdings, Inc. CVC = Cablevision Systems Corporation.
Company Description
Cablevision Systems Corporation (Cablevision) is a publicly traded holding company (Ticker: CVC). Cablevision operates its businesses through its CSC Holdings, Inc. (CSC Holdings) subsidiary. CSC Holdings is the fifthlargest cable operator in the US based on the number of basic video subscribers (3.0 million subs), serving in and around the NYC metropolitan area. In addition, through its wholly owned subsidiary Cablevision Lightpath, Inc., CSC Holdings provides telephone services and high-speed Internet access to the commercial/business market. CVC also owns Bresnan Broadband Holdings, LLC, which owns cable systems in Montana, Wyoming, Colorado, and Utah serving approximately 302k video subscribers. For financing purposes, Cablevision is structured as a Restricted Group (cable operations and Lightpath) and an Unrestricted Group (principally Bresnan). Key Dates/Catalysts: February 28, 2012: 4Q2011 earnings. We will also look for an update on management's capital deployment plans and progress on filling the management vacancies.
Investment Strengths: (1) Attractive demographics: CVC's cable systems are located in the NY-NJ-CT tri-state area, which has very attractive demographics. This has led to higher ARPU and deeper penetration of advanced services, as evidenced by CVC's industry-leading financial and operational metrics. (2) Highly clustered systems: CVC's clustered cable systems allow the company to operate its entire footprint with a single master head-end, increasing cost efficiency and speeding up time-to-market for advanced services. (3) Potential consolidation candidate: (1) and (2) have meant that CVC has long been viewed as a potential consolidation candidate by strategic competitors. The completion of the Rainbow spin-off leaves CVC as a pure-play cable operator and potentially a more attractive acquisition candidate. Investment Risks: (1) Limited incremental growth in consumer cable business segment relative to peers: Owing to the already-high penetration rates of all of its products, unlike its less-penetrated peers, growth in CVC's consumer cable business segment is likely to be limited going forward.
Financial Profile* Basic Subscribers Digital Subscribers Data Subscribers Phone (VoIP) Subscribers Revenue EBITDA Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Total Debt/Basic Sub EBITDA Margin Capitalization* Description (Restricted Group Only) RC-1 ($180 mn Facility) RC-2 ($1.23 bn Facility) Term Loan A-2 Term Loan A-4 Term Loan B-1 Term Loan B-2 Term Loan B-3 Total Sr Sec debt CSC Hold Sr Nts / Sr Debs Guarantee of Newsday Debt Other Total CSC Hold Sr debt CVC Corp Sr Nts Total CVC Sr debt Net Debt Market Cap Enterprise Value Maturities: 12,000 10,000 8,000 6,000 4,000 2,000 0 2012
FY09A 3,063,000 2,893,000 2,568,000 2,052,000 $5,432 2,228 753 10,541 255 10,286 4.4x $3,219 41.0%
FY10A 3,008,000 2,906,000 2,656,000 2,121,000 $5,713 2,365 819 11,170 315 10,855 4.4x $3,463 41.4%
2Q11A 2,980,000 2,905,500 2,681,000 2,787,000 $1,461 586 188 10,074 357 9,718 4.0x $3,128 40.1%
3Q11A 2,962,000 2,902,760 2,692,000 2,817,000 $1,445 547 205 9,974 189 9,786 4.2x $3,113 37.9%
4Q11E 2,946,775 2,902,574 2,701,211 2,830,869 $1,464 579 206 10,534 764 9,769 4.2x $3,319 39.5%
FY11E 2,946,775 2,902,574 2,701,211 2,830,869 $5,923 2,443 905 10,534 764 9,769 4.3x $3,319 39.5%
(2) Competition from Verizon: In light of CVC's attractive demographics, its footprint has been one of the first to be targeted by Verizon as the RBOC rolls out its FiOS product. (3) Dolan family: The Dolan family controls 70% of the total voting power of CVC stock and has historically not been viewed as creditorfriendly. (4) Management turnover: Tom Rutledge resigned as COO on December 15 and was subsequently named CEO at Charter Communications. Mr. Rutledge has been regarded as one of the best executives in the sector, guiding CVC to industry-leading performance over his 10-year tenure at the firm.
*Financials are for Restricted Group only. Debt to Size $0 413 600 322 1,137 1,653 $4,125 3,170 650 $7,944 2,177 $10,121 $9,451 NA NA NA 4.6x 3.6x 1.9x Cash** Total Liquidity 669 $2,021 EBITDA Restricted Group Liquidity Revolver Size* Letters of Credit Borrowings Revolver Availability $1,412 (61) 1352 Charter - CCOH DISH DBS Corporation Videotron 4.3x 2.4x 2.0x 2.8x 6.9x 6.7x B1/BBBa3/BBBa1/BB Comps Leverage Coverage Agency Ratings
* $180 mn RC-1 due Feb-2012 and extended $1.23 bn RC-2 Mar-2015. ** Estimate - Restricted Group cash is not separately disclosed.
*Capitalization and cash are pro forma for the November 2011 refinancing and tender transactions
10,121
2013
2014
2015
2016+
34
January 26, 2012
High Yield
Caesars Ent. Operating Company (HET)
Updated 1/23/12
212-357-9918 212-902-4751
OUTPERFORM / IN-LINE: We continue to prefer the first-lien notes due to the attractive yield vs. the secured gaming paper of MGM Mirage (MGM, IL)
and Wynn Las Vegas (WYNN, IL). We also recommend the 10.75% notes due to the attractive yield, location in the maturity profile, and operating subsidiary guarantees. Bond Summary Size (MM) $2,095 $4,515 $479 Coupon (%) 11.250 10.000 10.750 Priority Sr. Sec (1st lien) notes Sr. Sec (2nd lien) notes Sr Nts (Guar) Maturity 1-Jun-17 15-Dec-18 1-Feb-16 Agency Ratings B3/B - / CCC Ca/CCC Next Call Price 105.62 105.000 105.375 Date 1-Jun-13 15-Dec-13 1-Feb-12 Bid Price 108.00 76.00 77.50 YTW (%) 8.44 15.85 19.03 STW bp 812 1,446 1,848 Z-spread bp 775 1,445 1,822 5-year CDS 42.5 + 500 42.5 + 500 42.5 + 500
Company Description
Caesars Entertainment (formerly known as Harrah's Entertainment ) operates 52 casinos primarily in the US and UK, most of which are under the Harrah's, Caesars, and Horseshoe brand names. The company operates landbased casinos, riverboat and dockside casinos, casinos on Indian reservations, and racinos. HET properties have over 40,000 hotel rooms and 3 million square feet of casino floor space. HET also operates the World Series of Poker tournament circuit. In January 2008, HET was acquired by TPG Capital and Apollo Management. The LBO was financed using $14 billion of new bank and bond debt, $6.5 billion of CMBS financing, and $6 billon of new equity. HOC will own and/or operate 44 of the properties, while $5.4 billion of CMBS financing will be supported by six other properties in Las Vegas, NV, Laughlin, NV, and Atlantic City, NJ. Key Dates/Catalysts: - March 2011: Announced new $450 mn term loan to partially fund the completion of the Octavius Tower at Caesars Las Vegas and to build a new retail and entertainment corridor between Flamingo and Imperial Palace on the Strip. Termed "the Linq," it will include over 20 bars and restaurants and a 550 seat observation wheel. Linq is expected to open in late 2013. - May 2011: Completed amendment of its credit facility, which included extending $1.2 bn of maturities to 2018. Among other things, HET received permission to repurchase bank debt below par. - November 2011: Filed Form S-1 IPO registration statement with SEC. - January 2012: 668-room Octavius Tower opens at Caesars Palace in Las Vegas.
Caesars Ent. Operating Company (CEOC) Financial Profile Revenue EBITDA Interest Expense Cash Taxes paid (refund) CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver ($1.2 billion) due Jan 2014 Term loan B & other secured debt 11.125% sr secured (1st) due 2017 Total senior secured (1st lien) debt 10% sr secured (2nd) due 2015 / 2018 12.75% sr secured (2nd) due 2018 10.75% sr nts (guaranteed) due 2016/18 5.625% senior notes due June 2015 5.75% senior notes due Oct 2017 Other senior debt Total debt (gross) Total debt (including OID) (a) excludes yet-to-be-realized cost savings Maturities: 2012 2013 2014 2015 2016 2017+ CEOC (3Q11) 24 149 24 6,286 2,128 10,301 Caesars Property Company (PropCo) $5.0B CMBS Harrah's LV Rio (Las Vegas) Flamingo LV Paris LV Harrah's AC, Harrah's Laughlin Caesars Ent. Operating Company (CEOC or OpCo) (includes customer OpCo summary Net Revenue by Region: Las Vegas Atlantic City Louisiana / Mississippi Iowa / Missouri All material operating subs (excluding Harrah's Chester, Planet Hollywood, Octavius) Illinois / Indiana Other Nevada Managed / Int'l. Total revenue 12.5x 12.1x 0.9x 21.4% 12.5x 12.1x 2.0x 21.2% 12.6x 12.2x 0.6x 23.2% 12.8x 12.2x 0.9x 21.5% 12.6x 12.2x 0.9x 22.4% 12.6x 12.2x 0.9x 22.1% FY10A 6,856 1,465 1,723 (190) 135 (203) 18,295 619 17,675 1Q11A 1,708 362 184 (7) 34 151 18,057 588 17,470 2Q11A 1,718 398 635 2 45 (284) 18,939 650 18,289 3Q11A 1,734 372 395 2 62 (87) 18,911 778 18,133 4Q11E 1,665 373 398 0 138 (163) 18,905 609 18,296 FY11E 6,825 1,505 1,612 (2) 279 (383) 18,905 609 18,296
Investment Strengths: - Largest gaming operator, with geographic and end market diversification (from wealthy clients to less affluent ones). - Large inventory of undeveloped land on Las Vegas Strip (125 acres @ $3 mn / acre = $375 mn) and Macau (175 acres). - Large customer rewards program - 43 million; rewards cards member can be cross-marketed to play within the HET system of casinos; makes HET less reliant on group / convention travel. - Management believes that an increase in $5 in Las Vegas ADR would increase EBITDA by $33 mn, and an increase in $5 of gaming revenue per person would increase EBITDA by $36 mn. In the regional markets, it believes a $5 increase in ADR would result in $27 mn of incremental EBITDA and an increase of $5 gaming revenue per trip could result in an additional $137 mn of EBITDA. - Optionality in online gaming market with WSOP. - Approximately $350 mn of cash at other HET subsidiaries due to investments by Paulson & Co. and sponsors. - Pursuing low capital expansion opportunities in Ohio (Cleveland and Cincinnati). Investment Risks: - High leverage: 12.6x leverage provides low interest coverage and low FCF. - Credit agreement covenants allow for increases in senior secured debt ahead of the unsecured notes. ($750 mn of lien capacity, of which $500 mn can be first lien). - OpCo / PropCo structure with CMBS financing limits FCF benefit to OpCo from PropCo properties. - Weak economy slowing discretionary spending. Comps MGM (sr) PNK BYD Liquidity Source Revolver Size Leverage 9.2x 5.0x 7.4x Coverage 1.7x 2.8x 2.0x Ratings B3/BCaa1/B Caa1/CCC+
Caesars Ent. Operating Company Size 1,207 127 1,080 778 1,858
LTM EBITDA $ 1,482 LTM EBITDA $ 1,918 Caesars Ent. Oper. Co. Caesars Entertainment 3Q11A Lvg (a) 3Q11A Lvg (a) 0 8,410 2,095 10,505 4,768 750 490 792 539 1,067 (b) 18,911 15,730 12.8x 10.8x 11.1x 7.1x 0 13,442 2,095 15,537 4,768 750 490 792 539 849 23,724 20,761 (b) includes $290 mn intercompany note. Caesars Entertainment (HET) 12.4x 10.6x 10.8x (CMBS) 8.1x
Letters of Credit & other Borrowings Revolver Availability Cash Total Liquidity
Note: Approx. $350 mn of cash must remain in the cage; cash balance excludes $409 mn of restricted cash.
CEOC maintenance covenant calculation Bank debt Less cash Net bank debt Covenant EBITDA Covenant net leverage Covenant threshold 4Q10A 387.2 312.3 284.5 175.1 278.2 61.8 156.1 1,655 1Q11A 392.2 334.9 286.1 177.4 277.1 69.2 171.2 1,708 2Q11A 417.0 356.6 267.7 185.1 268.8 72.3 150.2 1,718 7,209.1 778.2 6,430.9 1,654.3 3.89x 4.75x 3Q11A 378.1 368.9 291.7 184.2 260.0 102.8 147.6 1,733
35
January 26, 2012
High Yield
Calpine Corp
OUTPERFORM/IN-LINE
Updated 1/25/2012
212-357-5764 212-902-9355
We rate the 2017 notes Outperform due to the company's well-positioned and diverse portfolio, with expectations of gradual financial improvement. Size (MM) $1,200 $1,000 Coupon (%) 7.875 8.000 Priority Sec'd Sec'd Maturity 15-Jan-23 1-Jun-16 Agency Ratings B1/BBBa3/BB Next Call Price 103.94 104.00 Date 15-Jan-17 1-Jun-16 Bid Price 103.01 107.25 YTW (%) 7.367 5.232 STW bp 537 501 Investment Strengths: - CPN's generation assets are well-positioned given its modern fleet with an average age of 11 years and favorable heat rate position (approximately 7,400 Btu/kWh). - The company's generation portfolio should benefit from its geographical diversity and is well-positioned given the increasing environmental regulations faced by coal-fired generation. - Stability in near-term cash flow, as the company's energy position in 2012 and 2013 is hedged at 63% and 39%, respectively. Also, capacity revenues should contribute to near-term cash flow certainty. - Liquidity remains strong with $1.9 bn of availability that includes about $1.3 billion of cash. The company has no major debt maturities through 2015 and expects FCF of $475-$525 mn for 2011 and $375-$575 mn for 2012. - Given the low heat rate of its fleet, the company should benefit from economic recovery that would expand heat rates. Investment Risks: - Declining commodity prices and a challenging economy may pressure future margins given CPN's reliance on intermediate capacity. - Leverage remains high, but is expected to improve due to a simplified capital structure. - Inability to execute plan of strong plant performance and implemented hedging strategy would lead to FCF generation shortcomings. - Parent level bonds remain structurally subordinated to subsidiary level debt and have an investment-grade-like covenant package. - CCFC is exposed to Calpine counterparty risk. The majority of capacity is in a tolling agreement with Calpine Energy Services.
Company Description
Calpine is a wholesale power generator that owns and operates natural-gas-fired and geothermal plants in the West, Texas, Southeast, North, and parts of Canada. The company owns nearly 28GW of generating capacity. Although the portfolio is predominately gas-fired, the generation portfolio is geographically diverse: North (28%), Southeast (22%), West (24%), and Texas (26%). Calpine sells wholesale power, steam, capacity, renewable credits, and ancillary services. Calpine Construction Finance Co (CCFC) owns six gas-fired plants with 3.6GW of capacity in Texas, Florida, Maine, Oregon, and California. CCFC is 100% owned by Calpine and sells its output under a tolling arrangement to Calpine Energy Services, LP. Key Dates/Catalysts: - On Feb. 10, CPN is expected to report 4Q2011 earnings . Key areas of investors focus will center around an update on the overall business, the company's hedging profile, and outlook for power markets. - In terms of guidance, the company expects adjusted EBITDA of $1.7-1.75 bn and free cash flow guidance of $475-$525 million for 2011. For 2012, CPN expects $1.55 to $1.75 billion in EBITDA and free cash flow of $375 to $575 million. Major maintenance is included in adjusted EBITDA which is budgeted at $235 million for 2011 and $185 million for 2012. - Status of the company's $300 million share buyback program. - The company remains proactive in the rationalization of the generation portfolio, which includes divestitures and purchases. - Update on new construction projects - Russell City and Los Esteros. Both projects are targeted for commercial operation in 2013. - May 2012, results of the 2015/2016 PJM capacity auction are expected. Financial Profile Gross Margin EBITDA EBITDAR Interest Expense Income Taxes CapEx Free Cash Flow Adjusted GAAP Debt Cash Net Adjusted GAAP Debt Key Credit Statistics Total Debt/EBITDAR Net Debt/EBITDAR EBITDA/Interest 6.1 5.5 1.9 6.3 5.5 1.9 6.3 5.4 2.1 6.5 5.7 2.0 6.7 5.8 2.0 Calpine 2009 2,667 1,542 1,542 (829) (15) (179) 526 9,459 989 8,470 Calpine 2010 2,571 1,508 1,633 (789) 68 (369) 220 10,256 1,327 8,929 Calpine 2011E 2,686 1,542 1,667 (749) 2 (600) (55) 10,464 1,410 9,054 Calpine 2012E 2,633 1,464 1,589 (748) (13) (470) 133 10,384 1,281 9,103 Calpine LTM3Q11 2,384 1,564 1,564 (791) 151 151 27 10,404 1,285 9,119
Comps AES Corp* Calpine Corp Dynegy Edison Mission GenOn CMS NRG Size 1,658 970 2,628 1,650 1,200 400 1,092 2,000 1,200 234 10,404 9,119 7,220 16,339 17,624 10.4x 11.3x 6.7x 5.8x 1.7x Debt to EBITDAR
* Note our EBITDA does not adjust for maintenance expense that is budgeted at $235 million for 2011. Capitalization* Description Project subsidiary debt Project finance debt CCFC 8% due 2016 Notes payable and other borrowings/lease adj. Total CCFC debt and project debt Revolver First Lien Term Loan Senior secured 7.25% of 2017 Senior secured 8% of 2019 Senior secured 7.875% of 2020 Senior secured 7.5% of 2021 Senior secured 7.875% of 2023 Capital lease Operating leases and other adjustments Total debt and preferred Net Total Debt Minority Interest Market Cap Enterprise Value (using net total debt) Enterprise Value (using total debt) * Proforma for the $2 billion debt issuance. Maturities 250 200 150 100 50 2012 2013 2014 2015
As of September 30, 2011 Liquidity Revolver CDHI LOC Facility Total Capacity Borrowings (revolver) LOC under (revolver) LOC under CDHI Facility Bank line Availability Cash Total Liquidity 1,000 200 1,200 369 193 638 1,285 1,923
36
January 26, 2012
High Yield
Cascades Inc.
IN-LINE
Bond Summary Size (MM) $500 Coupon (%) 7.750 Priority Sr Nts Maturity 15-Dec-17 Agency Ratings Ba3/B+
Updated 1/23/2012
212-902-3299 212-902-9813
Next Call Price 103.875 Date 15-Dec-13
Bid Price 100.500
YTW (%) 7.595
STW bp 697
Company and Europe. more than 100 production units located in North America Description
Cascades produces, converts and markets packaging and tissue products composed mainly of recycled fibers. Cascades employs close to 11,000 people who work in more than 100 production units located in North America and Europe.
Investment Strengths:
- Leading market positions in stable, consumeroriented end markets: A significant portion of Cascades' packaging and tissue products is sold to consumer-oriented end-markets that tend to be relatively insensitive to economic cycles. - Strong focus on improving financial performance and reducing leverage: Cascades has a dedicated and experienced management team focused on improving/divesting underperforming assets and cutting costs.
Investment Risks:
Financial Profile
12/31/2010 FY:10
12/31/2011 FY:11E
9/30/2010 3Q:10
6/30/2011 2Q:11
9/30/2011 3Q:11
Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin
3,182 310 107 NA 1,403 6 1,397
3,655 256 102 125 1,476 11 1,465
832 94 27 19 1,477 15 1,462
991 62 27 22 1,306 18 1,288
947 79 25 23 1,371 11 1,360
- Higher-than-expected input costs: Higher prices than we are expecting for key inputs such as recycled fiber and energy would have a negative impact on the company's performance. - Stronger-than-expected Canadian dollar: Cascades' profitability is highly sensitive to changes in the value of the C$, and exchange rate trends that are less favorable than our expectations would negatively affect the company's results.
3.8x 3.8x 2.9x 9.7%
5.1x 5.0x 2.5x 7.0%
3.6x 3.6x 3.5x 11.3%
4.2x 4.2x 2.3x 6.3%
4.9x 4.8x 3.2x 8.3% Comps GP GPK PKDY ABH Leverage 2.1x 3.8x 4.5x 0.9x Coverage 4.8x 3.8x 2.3x 8.0x
Agency Ratings Baa3/AB2/BBB3/B B1/BB-
Capitalization Description Bank loans and advances Revolving credit facility 7.75% sr nts due 2016 7.75% sr nts due 2017 7.875% sr nts due 2020 Other recourse debt Total recourse debt Non-recourse debt Unamortized costs Total debt
9/30/2011 Size 111 140 198 513 256 56 1,274 115 (18) 1,371 4.9x 4.5x Cash Total liquidity 11 611 Debt to EBITDA Liquidity Revolver size Letters of credit Borrowings Revolver availability 9/30/2011 750 10 140 600
Total debt Market cap Enterprise value
1,371 437 1,797
Maturities: 1200 1000 800 600 400 200 0 2012 2013 2014 2015 2016+
37
January 26, 2012
High Yield
Catalent Pharma Solutions (PTSAC)

Updated 01/25/12
212-855-7718 212-902-9758
NOT COVERED
Bond Summary Size (MM) $565 Coupon (%) 9.5 Priority Sr. Uns. Maturity 15-Apr-15 Agency Ratings Caa1/B Price $104.750 Next Call Date 2/27/2012 Bid Price $103.500 YTW (%) 3.858% STW bp 382 Company Strengths: - Long-standing customer relationships with well-established pharmaceutical and biotechnology companies, none of which account for more than 7% of revenues. - Strong value proposition to customers because of technical expertise, breadth of services provided, and geographic reach. - Highly diversified business based on customers, geography, and end-user markets. - No maintenance covenants and large $350 mn revolver.
Company Description
Catalent is a pharma outsource manufacturing and packaging company. Its business is primarily focused on Oral Technologies, Sterile Technologies, and Packaging services. Oral Technology is the company's core business, and includes Softgels (e.g., Advil Liqui-Gels) and fast-dissolve tablets. Catalent owns the softgel/fast-dissolve technology and collects a royalty on sales of products using it. Sterile Technologies includes blow-fill-seal plastic containers, which hold respiratory drugs and eye drops, and pre-filled syringes. Packaging is a commoditized/low-growth business and includes printing drug inserts and packaging pills. Catalent was formed from the sale of Cardinal Health's Pharmaceutical, Technical and Services (PTS) unit to Blackstone, which was completed in April 2007. Since then, the company has hired a new CEO and CFO. In August 2011, the company announced that it has entered into an agreement to purchase Aptuit for $410mn. Aptuit will double PTSAC's clinical services business. PTS's credit agreement allows for a $300 mn incremental term loan though the company is subject to a 4x secured incurrence limit. PTSAC has stated that it is looking to amend and extend the credit facility subject to market conditions. Key Dates/Catalysts: - Quarterly earnings (strength in the core oral technologies business has been offset by weakness in packaging and sterile technologies) - Progress on plans to wind down UK softgel operations and plans to transfer production to other softgel facilities - Financing and closing of the Aptuit acquisition. - Potential amend and extend of the credit facility. - Recovery of insurance revenue due to the March fire in England.
Company Risks: - Highly levered. - Growth in sterile manufacturing business has been below the company's expectations. - History of volatile margins industry-wide.
2009
2010A
Dec 2Q10
Mar 3Q11
Jun 4Q11
Sep 1Q11
$1,640 267 $182 17 84 (10) 2347 64 2283
$1,703 310 $161 22 79 155 2270 164 2106
$413 81 $41 9 16 0 2294 141 2153
$418 93 $40 8 21 54 2335 201 2134
$449 103 $44 6 38 15 2347 205 2142
$411 75 $42 4 25 (3) 2344 187 2156 Agency LTM Comps Leverage 5.6x 5.6x 4.2x 5.0x 6.0x Coverage NA 2.0x 2.5x 3.4x 2.0x Ratings Caa1/B Caa1/BB3/B Caa1/B Caa1/B-
NA NA 1.5x 16.3%
7.3x 6.8x 1.9x 18.2% 2.0x 19.6% 2.3x 22.2%
LTM:
6.7x
Catalent (PTSAC) snr VWR Int'l (VWRINT) snr IMS Health (RX)
2.3x 22.9%
1.8x 18.3%
Bausch & Lomb (BOL) Biomet (BMET) sub
Description Revolving Credit Facility due April 2013 Extended Revolving Credit Facility* Term Loan--Dollar 4/10/2014 Term Loan--Euro 4/10/2014 New Term Loan** Total Sr Sec debt
9.5%/10.25 Sr Notes (PIK Toggle) due 2015
Size 0 0 1,015 363 300 $1,678 624 $624 308 $308 $33 $2,644 NA
Debt to LTM EBITDA
Liquidity Revolver Size* Letters of Credit Borrowings Revolver Availability $350 15 0 335 $0 0 0 $77 $412
4.1x
Total Sr debt 9.75% Sub Notes (Euro) due 2017 Total Sub debt Other Total Debt Market Cap
5.6x Cash** Total Liquidity 6.3x
*$150mn due 2013 and $200mn extended to 2016. **Cash is PF for an assumed $110mn used to fund Aptuit in addition to an assumed $300mn incremental term loan.
6.4x
Enterprise Value NA * Ext revolver matures April 2016 with springing maturity 91 days before TL, senior notes and sub notes ** Assumed incremental term loan to fund Aptuit acquisition, subject to a 4x incurrence limit. Maturities (Includes the assumed incremental TL in 2014): 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015+
38
January 26, 2012
High Yield
Catalyst Paper Corporation (CTLCN)

IN-LINE
Bond Summary Size (MM) US$390 US$250 Coupon (%) 11.000 7.375 Priority Sr Sec Nts Sr Nts Maturity 15-Dec-16 01-Mar-14 Agency Ratings Caa3/D C/C
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Price 103.000 101.229 Date 15-Dec-12 Current
Bid Price 63.500 5.000
YTW (%) 22.298 274.939
STW (bp) 2,140 27,468

Investment Strengths: - Strong focus on efficiency and cost-saving: Catalyst management has maintained a strong focus on increasing efficiency and cutting costs. - Geographically diverse customer base: In 2010, 56% of revenue came from the US, 22% from Asia and Australasia, 9% from Latin America, 12% from Canada, and 1% from Europe and other areas. Investment Risks: - Changes in the value of the C$: All but one of Catalyst's mills are in British Columbia, which gives the company significant exposure to changes in the value of the C$. - Declining demand: Catalyst has experienced declines in demand for many of its products in recent years.
Company Description
Catalyst Paper Corporation is a North American producer of newsprint and other mechanical printing papers. Altogether, Catalyst operates four paper and pulp mills with a combined annual capacity of 1.9 million tonnes.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Credit facilities 11.000% sr sec nts 7.375% sr nts Non-recourse JV debt Total debt Market capitalization Enterprise value 9/30/2011 Size 31.5 391.8 262.0 123.3 808.6 5.7 796.5
12/31/2009 FY:09 1,201.7 141.1 69.3 11.5 775.6 83.1 692.5
12/31/2010 FY:10 1,228.6 71.6 72.0 11.2 774.7 95.4 679.3
9/30/2010 3Q:10 322.3 34.5 19.0 2.4 798.3 82.3 716.0
6/30/2011 2Q:11 297.8 (3.9) 18.7 5.6 729.3 30.2 699.1
9/30/2011 3Q:11 340.3 26.8 19.0 5.6 808.6 17.8 790.8
5.5x 4.9x 2.0x 11.7%
10.8x 9.5x 1.0x 5.8%
13.7x 12.3x 1.8x 10.7%
9.7x 9.3x -0.2x -1.3%
12.0x 11.7x 1.4x 7.9%
Debt to EBITDA 6.3x 6.3x 10.2x 12.0x
Liquidity Revolver size Borrowing base Letters of credit Borrowings Minimum availability Revolver availability Cash Total liquidity
9/30/2011 330.0 167.3 27.7 31.5 108.1 17.8 125.9
Maturities:
600 500 400 300 200 100 0 2012 2013 2014 2015+
** Unless otherwise noted, all references to dollars are in Canadian dollars.
39
January 26, 2012
High Yield
CF Industries Inc. (CF)

OUTPERFORM
Updated
1/26/2012
212-357-6157 212-902-0459
We are Outperform rated on CF's 6.875% senior unsecured notes and its 7.125% senior unsecured notes, as we believe the bonds present a potential crossover opportunity. In our view, CF is likely to be upgraded to investment grade over the near term (Fitch already rates bonds BBB-) owing to its favorable performance outlook and accelerated debt reduction. We believe CF's bonds offer incremental upside from current levels, as they still trade well wide of comparable investment grade companies. Bond Summary GS Rating OP OP Size (MM) 800 800 Coupon (%) 6.875 7.125 Priority Sr. Nts Sr. Nts Maturity 1-May-18 1-May-20 Agency Ratings Ba1/BB+ Ba1/BB+ Next Call Price MW MW Date Bid Price 115.25 118.75 YTW (%) 4.09% 4.39% OAS bp 316 294
Company Description
CF Industries is the second-largest producer of nitrogen fertilizers globally (first in North America) and the world's thirdlargest public phosphate producer. On April 15, 2010, the company acquired Terra Industries through the short form merger procedure under Maryland law. CF's acquisition of Terra valued the company at approximately 7.3x 2010E EBITDA (excluding $135 million of synergies expected by the company, the $123 million Yara termination fee, debt redemption premiums, and other items). Key Dates/Catalysts: 4QFY11 earning release Potential ratings upgrade by credit agencies
Investment Strengths: - Leading market positions. - Cost-advantaged natural gas feedstocks (based on location in North America). - Extensive storage and distribution system. - Strong management team. Investment Risks: - Fertilizer industry is cyclical. - Margins are vulnerable to fluctuations in natural gas prices. - Minimal product differentiation. - Significant customer concentration.
Financial Profile ($, mn)* Net Sales Adjusted EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Key Credit Statistics PF LTM Debt/EBITDA (3) PF LTM Net Debt/EBITDA LTM EBITDA/Interest LTM EBITDA margin
FY:09 4,190 1,209 (25) (291) (370) (198) 607 1,198 2.2x 1.9x NA 29%
FY:10 4,374 1,463 (224) (228) (293) 1,016 1,959 798 1.3x 1.1x 6.5x 33%
FY:11E 6,075 3,001 (116) (841) (259) 1,864 1,613 977 0.5x 0.5x 25.8x 49%
Q4:10 1,238 494 (50) (122) (70) 470 1,959 798 1.3x 1.1x 6.5x 33%
Q3:11 1,404 682 (30) (194) (64) 783 1,618 1,426 0.6x 0.4x 20.1x 48%
Q4:11E 1,696 797 (32) (233) (90) 254 1,613 977 0.5x 0.5x 25.8x 49% CF Agrium Comps Leverage 0.6x 1.0x Coverage 20.1x 16.8x Ratings Ba1/BB+ Baa2/BBB
PF Capitalization ($, mn) Description Revolver Term Loan B-1 Total Senior Secured Debt 6.875% Senior Notes 7.125% Senior Notes Legacy Terra Notes Other Notes Payable Total Debt Minority Interest Share Price Market Capitalization Enterprise Value Size 800 800 13 5 1,618 487 172.9 12,086 12,764 4.7x 0.6x Cash Total Liquidity 1,426 1,917 0.0x Debt to EBITDA Liquidity Revolver Size Borrowings Letters of Credit Revolver Availability 500 9 491
Maturities: 1800 1600 1400 1200 1000 800 600 400 200 0 2011 2012 2013 2014 2015+
40
January 26, 2012
High Yield
Charter Communications, Inc.

IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
We believe that the Charter bonds are one of the higher-quality names in the HY cable sector and current relative value appears fair compared to the likes of CVC Opco and DISH. Bond Summary Size (MM) $700 Coupon (%) 8.125 Issuing Entity / Priority CCOH Sr Nts Maturity 30-Apr-20 Agency Ratings B1/BBNext Call Price 104.063 Date 30-Apr-15 Bid Price 110.13 YTW (%) 5.81 STW bp 526
Company Description
Charter Communications, Inc., is the fourth-largest cable operator in the United States with approximately 12 million homes passed. Through its hybrid fiber and coaxial cable network, Charter offers its customers analog and digital cable video programming, high-speed Internet access, advanced broadband cable services, and, in many of its markets, telephone service. As of September 30, 2011, Charter served approximately 4.4 million analog video customers, of which approximately 3.4 million were also digital video customers. Charter also served approximately 3.4 million high-speed Internet customers and provided telephone service to approximately 1.8 million customers. On December 19, 2011, Charter announced that Cablevision's former Chief Operating Officer, Tom Rutledge, would be named President and Chief Executive Officer. Mr. Rutledge, who is highly respected within the cable industry and has long been viewed as a top operator, will assume his new positions on February 3, 2012. Key Dates/Catalysts: February 2012: Results of the most recent bond tender offers. February/March 2012: 4Q2011 earnings and 2012 guidance (the company typically only gives capex guidance).
Investment Strengths: (1) Positioned to generate above-peer revenue and EBITDA growth over the intermediate term given CHTR's relatively low product penetration rates, particularly in data. (2) Potential M&A candidate for higher quality strategic players. (3) Relatively tight bond covenants: In terms of debt incurrence tests, Charter's bonds have tighter covenants than most other US cable bonds. Investment Risks: (1) Competition from DBS/telcos. (2) Continued video margin pressure: Due to programming cost increases including retransmission fees cable's video margins are expected to decline for the foreseeable future.
Financial Profile Basic Subscribers Digital Subscribers Data Subscribers Phone (VoIP) Subscribers Revenue EBITDA Free Cash Flow Total Debt excl. Prefs Cash Net Debt Key Credit Statistics Total Debt/EBITDA Total Debt/Basic Sub EBITDA Margin Capitalization *
FY09A 4,824,000 3,218,100 3,062,300 1,595,900 $6,755 2,493 (550) $12,755 754 12,001 5.4x $2,800 36.9%
FY10A 4,520,400 3,363,200 3,246,100 1,717,000 $7,059 2,599 710 $11,549 32 11,517 4.7x $2,725 36.8%
2Q11A 4,412,900 3,386,700 3,352,500 1,747,600 $1,791 673 155 $11,748 194 11,554 4.7x $2,837 37.6%
3Q11A 4,370,900 3,400,900 3,424,100 1,763,800 $1,809 653 90 $11,710 32 11,678 4.8x $2,857 36.1%
4Q11E 4,322,932 3,419,439 3,488,606 1,791,855 $1,834 690 63 $12,111 20 12,091 4.7x $2,982 37.6%
FY11E 4,322,932 3,419,439 3,488,606 1,791,855 $7,204 2,679 380 Agency $12,111 20 12,091 4.8x $2,982 37.2% CSC Holdings CVC Corp. VMED Finance PLC DISH DBS Corporation 3.1x 4.0x 3.5x 2.4x 3.2x 3.2x 3.4x 6.9x Ba3/BB B1/B+ Ba2/BBBa3/BBComps Leverage Coverage Ratings
Debt / Description Bank Debt 2nd Lien Debt CCVIII Preferred * CCOH 3rd Lien Debt CCOH Unsecured Debt CCH II Debt Total Debt Net Debt Market Cap Size $3,667 812 776 350 6,250 1,480 $12,792 12,760 5,791 4.5x 5.1x 4.9x 4.9x Cash Total Liquidity $32 $1,101 EBITDA 1.4x 1.7x Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $1,300 (66) (165) $1,069
Enterprise Value 18,551 7.1x * 70% owned by CCH I, a subsidiary of Charter, and 30% owned by CCI, the issuer of the common stock it is eliminated in consolidation for total debt. ** Capitalization is pro forma for refinancing and tender transactions subsquent to 3Q2011A Maturities:
12,000 10,000 8,000 6,000 4,000 2,000 0 937 267 1,053 105 10,431
2012
2013
2014
2015
2016+
41
January 26, 2012
High Yield
Chesapeake Energy (CHK)

IN-LINE
Bond Summary Size (MM) $669 Coupon (%) 7.250% Priority Sr. Maturity 12/15/2018 Agency Ratings Ba3/BB+
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Next Call Price NC Date
Bid Price $106.70
YTW (%) 6.04%
STW bp 527 Investment Strengths: Size and diversity are above average for the rating category Leader in the Barnett, Haynesville, and Marcellus shales JVs substantially reduce expected future development costs Strong liquidity Aggressive debt reduction plan Investment Risks: High natural gas exposure High absolute leverage and free spending history; we believe rating agencies may be hesitant to upgrade Historically aggressive financial management Relatively unhedged in 2012 Key Dates/Catalysts: Announcements with respect to future VPP transactions and midstream financings Potential for additional shale play JVs Results from the Utica Management is targeting debt redution to $9.5 bn by year-end 2012
Company Description
CHK is the largest independent producer of natural gas in the US. The company has been a leader in the shale play "land grab" over the last few years and has emerged with arguably the industry's strongest inventory of drilling locations. We believe that after years of aggressive growth, CHK has moved into asset conversion mode, and should grow more organically and at a more measured pace. Chesapeake is a "boom, bust and boom again story, founded in 1989 and taken public in 1993. Initially, CHK achieved drilling success in the Austin Chalk of Texas. The company sought to extend its success into the Louisiana Chalk in the late 1990s. However, drilling results and capital costs proved challenging and a concurrent collapse in natural gas prices left the company distressed. Needing a plan for survival, CHK redefined its strategy to allow for a more diversified asset base and focus on unconventional gas. Since then, the company has built a strong presence throughout the Mid-Continent via more than $20 billion of acquisitions and is a player in every natural gas shale play east of the Rockies. In 2005, CHK acquired Columbia Natural Resources, an Appalachian Basin natural gas producer, for $2.2 billion. Chesapeake recently announced a shift in strategy: It has raised over $5 billion in preferred equity, and has reduced debt by $3.5 billion. The company plans to invest $1.5 billion in liquids-rich plays. CHK indicated a goal of achieving investment grade status and also announced its intention to sell a portion of its Marcellus shale asset. In addition, the company plans to shift its focus toward oil, and expects oil to be 20-25% of its production by 2012. In January 2011, Chesapeake announced its 25/25 plan, which includes a 25% reduction in long-term debt and a 25% production growth rate. Since the announcement, the company has announced a JV in the Niobrara for $570 million and the sale of its Fayetteville assets for $4.75 billion. On April 4, CHK announced a tender offer for $1 billion in senior notes and $1 billion in convertible notes. CHK recently announced a plan to devote $1 billion over the next 10 years to ventures that enhance natural gas demand. In November 2011, CHK announced a JV on its Utica properties with Total for $2.3 bn. In January 2012, Chesapeake announced plans to curtail up to 1 bcf/d of gas production due to weak natural gas prices.
2008A $10,831 $5,633 ($3,941) $9,177
2009A $8,373 $4,420 ($870) $5,226
2010A $10,024 $4,959 ($1,451) $6,568
2011E $12,443 $5,242 ($2,794) $7,757
2012E $10,235 $5,063 ($2,605) $7,300
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Debt + Preferred per Proved Boe Debt + Preferred per PDP Boe Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2013-35 Other Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $8,226 $0 $8,226 $11,789 $3,062 $13,236 $28,087 2.3x Size $111 $3,563 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $4,400 $60 $3,563 $777 $111 $888 2008A 2.5x 17.9x 47% $7.18 $10.69 2009A 2.8x 39.1x 50% $5.27 $9.02 2010A 2.5x 141.7x 45% $4.52 $8.45 2011E 2.0x 33.6x 37% $5.04 $7.43 2012E 2.2x 11.4x 36% $4.89 $6.34 CHK PXD NFX FST
Leverage ('11E) 2.0x 1.9x 1.8x 2.8x
Coverage ('11E) 33.6x 8.6x 10.3x 4.0x
Agency Ratings Ba3/BB+ Ba1/BBBBa2/BB+ B1/B
Maturities: 2000
1800 1600 1400 1200 1000 800 600 400 200 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
42
January 26, 2012
High Yield
Chiquita Brands (CQB)

IN-LINE
Updated: 1/26/12
212-902-6957 202-357-7875
Priority Sr Nts
Maturity 1-Nov-14
Agency Ratings Caa1/B-
Next Call Price Date $101.25 Current
Bid Price 100.00
YTW (%) 7.48%
STW bp 698
Company Description
Chiquita is a leading international marketer and distributor of high-quality fresh and value-added food products under the brands Chiquita and Fresh Express and other related trademarks. The company is one of the largest banana producers in the world, and a major supplier of bananas in Europe and North America. Chiquita is the US market leader in value-added salads, with a retail market share of nearly 50%. Key Dates/Catalysts: Early March, quarterly earnings release
Investment Strengths: - Strong global brand - Holds No. 1 or No. 2 position in the major markets in which it competes (bananas, packaged salads) - Ample liquidity with no near-term maturities Investment Risks: - High volatility in banana pricing - Significant exposure to fuel costs and currency - Potential for another health-related product recall - Continued weakness in salad segment
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization 3Q11A
FY09 3,477.0 208.0 62.0 0.6 68.3 77.1 656.0 121.4 3.15 2.57 3.35x 5.98%
FY10 3,226.7 136.1 56.2 (2.0) 70.1 11.8 634.0 156.0 4.66 3.51 2.42x 4.22%
FY11E 3,190.0 141.6 51.0 (77.5) 75.2 92.9 574.4 184.9 4.06 2.75 2.78x 4.44%
4Q10A 773.0 5.0 14.0 (4.0) 37.0 (42.0) 634.0 156.0
4Q11E 773.0 11.6 11.0 (1.5) 25.0 (22.9) 574.4 184.9
Comps Chiquita Dole Foods Dean Foods
Ratings Caa1/BB2/B+ B2/B-
0.36x 0.65%
1.06x 1.51%
Description Revolver ($150) L+250, due 2016 Term Loan ($330mm, 2014) L+300 Total Secured Debt
Size 0.0 325.9 325.9
Debt to EBITDA
2.4x
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability
3Q11A 150.0 23.0 0.0 127.0 NA 0 NA 132.8 259.8
7.50% Senior Notes Due 2014 4.25% Convertible Senior Notes Due 20 Other loans and notes payable Total Sub debt
156.4 141.1 1.0 298.5
A/R facility Borrowings A/R Availability Cash Total Liquidity
Total Debt Market Cap Enterprise Value Maturities: 700 600 500 400 300 200 100 0 2012 2013
624.4 402.4 1036.4
4.6x 7.6x
2014+
43
January 26, 2012
High Yield
Chrysler Group LLC (CHRYGR)

Updated 1/26/12
212-902-3258 212-855-8553
NOT COVERED
Bond Summary Company Chrysler Group Chrysler Group Size (MM) $1,500 $1,700 Coupon (%) 8.00 8.25 Priority 2nd lien 2nd lien Maturity 15-Jun-19 15-Jun-21 Agency Ratings B2/B B2/B Next Call Next Call Date 104.000 15-Jun-15 104.125 15-Jun-16 Bid Price $97.75 $97.00 YTW (%) 8.4 8.7 T-sprd bp 646 677 5-year CDS NA NA
Chrysler Group LLC, headquartered in Auburn Hills, MI, is a North American-based automotive manufacturer selling vehicles in more than 120 countries worldwide. Chrysler is majority-owned by Fiat Spa, an Italy-based auto manufacturer. In 2011, Chrysler produced approximately 1.99 million vehicles, up from 1.57 million in 2010. Approximately 74% of Chrysler's vehicle sales are in the US, 12% in Canada, 4% in Mexico, and the remaining 10% in South America/Asia/Europe. In 2011, Chrysler's US market share increased to 10.6% versus 9.4% in 2010. Chrysler sells vehicles under the brand names Chrysler, Jeep, Dodge and Ram, and also markets automotive parts and accessories under the Mopar brand. Chrysler is responsible for manufacturing and selling the Fiat 500 in North America, and has the exclusive right to distribute the Fiat and Alfa Romeo brands in North America. In April 2009, Chrysler Group LLC was formed when it purchased the principal operating assets of the former Chrysler LLC (Old Carco), which filed for bankruptcy reorganization through a 363 transaction. The reorganization was funded primarily through the following transactions; a $7.1 billion US Treasury facility; a C$2.3 billion Export Development Canada (EDC) loan; a $400 million Mexican Development Bank facility; $4.7 billion UAW VEBA trust note; and a C$974 million Canadian Health Care Trust note. Following the completion of the 363 transaction, Chrysler's shareholders consisted of the UAW Retiree Medical Benefits Trust (67.7% ownership), Fiat (20%), US Treasury (9.9%), and Canada CH Investment Corporation (2.5%). Fiat attained its original 20% stake by contributing intellectual property. In May 2011, Chrysler repaid the US Treasury and the EDC credit facilities by issuing $3.2 billion in 2nd lien senior notes and a $3.0 billion first lien term loan. Fiat's ownership in Chrysler increased by 5% in January 2011 when Chrysler began commercial production of the FIRE engine (Technology Event) and increased another 5% in April 2011 when Chrysler attained revenue expansion outside of North America (Distribution Event). In May 2011, Fiat exercised a call option purchasing 16% of Chrysler for $1.3 billion in cash and in July 2011 Fiat acquired the 1.5% owned by the Canadian government and the 6% owned by the US Treasury. At year-end 2011, Fiat owned 53.5% of Chrysler and in January 2012, Fiat increased its stake to 58.5% following the production of the new 40-mpg Dodge Dart sedan using Fiat architecture (Ecological Event). Chrysler has a strategic relationships with Ally auto finance (retail and wholesale funding), Santander Consumer USA (sub-prime), and US Bank, NA (leasing) for vehicle financing. Fiat does not guarantee Chrysler's debt, nor does Fiat have a formal support agreement with Chrysler.
Financial Profile* ($MN) Revenue Modified EBITDA Interest Expense Consolidated Net Income Depreciation & Amortization Other operating cash flow Change in Working Capital Net Operating Cash Flow CapEx Dividends Free Cash Flow (FCF) Assets Sold (Acquired) Debt Increase (Decrease) Stock Increase (Decrease) Other Cash Flows Total Chg in Cash Cash Total Debt Net Debt (Net Cash) Key Credit Statistics LTM 1st Lien Secured Debt/EBITDA LTM Total Debt/EBITDA LTM FCF/Total Debt EBITDA/Interest Expense EBITDA margin FY08 48,477 250 1,080 (16,844) 4,808 10,130 (3,397) (5,303) (2,765) 0 (8,068) 0 1,058 0 (623) (7,633) 1,898 13,907 12,009 FY09 28,792 (1,631) 1,085 (8,210) 3,124 (749) 1,040 (4,795) (1,327) 0 (6,122) 0 6,663 4,122 1,130 5,793 5,862 9,551 3,689 3Q10 11,018 937 308 (84) 698 (2,570) 300 (1,656) (500) 0 (2,156) 0 682 0 212 (1,262) 8,260 12,883 4,623 FY10 41,946 3,455 1,276 (652) 3,051 256 1,540 4,195 (2,385) 0 1,810 0 (1,417) (109) 1,201 1,485 7,347 13,731 6,384 3Q11 LTM 3Q11 13,067 50,615 1,119 4,459 301 1,346 212 (241) 660 (443) (600) (171) (723) 0 (894) 0 (30) 0 203 (721) 9,454 12,384 2,930 3,010 96 640 3,505 (2,613) 0 892 0 (1,993) (109) 2,404 1,194 9,454 12,384 2,930
Company Description
Company Strengths: - Chrysler is currently renewing a significant portion of its vehicle portfolio through 2014, with several new small, fuel efficient vehicles planned which should benefit from technology sharing with Fiat. - In addition to technology sharing, the alliance with Fiat should allow Chrysler to gain greater access to the European and South America auto markets, areas where Chrysler currently has little exposure. - Over the past four years, Chrysler has significantly reduced its fixed costs by closing under-utilized plants and reducing headcount. - Chrysler and Fiat are lead by Sergio Marchionne, a CEO with a strong reputation for improving profits and operational efficiencies.
Company Risks: - A significant economic slowdown in the US and Europe could reduce demand for Chrysler and Fiat vehicles, and reduce cash flow at both companies. - Chrysler's balance sheet is more levered versus its US peers, Ford and General Motors. - Chrysler's current vehicle sales mix is significantly exposed to light trucks and SUVS, which would likely see lower demand in a higher fuel price environment. - Chrysler does not have its own captive finance company, and is entirely reliant on banks for its retail and wholesale vehicle financing.
NA 55.6x -58.0% 0.2x 0.5%
NA -5.9x -64.1% -1.5x -5.7%
NA NA NA 3.0x 8.5%
2.4x 4.0x 13.2% 2.7x 8.2%
0.8x 2.8x NA 3.7x 8.6%
0.8x 2.8x 7.2% 3.3x 8.8%
Debt-toEBITDA Comps EBITDA Interest cov Agency Ratings Ford Motor Co. 1.3x 10.5x Ba2/BB+ General Motors Co. 0.6x 13.0x Ba1/BB+ Note: Ford and GM debt metrics exclude pension deficits General Motors debt includes Series A preferred stock.
Capitalization Description 1st Lien Term Loan L+475 due 2017 Mexican Development bank facility Other 1st lien sec debt Total 1st lien sec debt 8.00% 2019 8.25% 2021 Total 2nd lien sec debt VEBA Trust note (face value $4.7bn) CAW Healthcare Trust Other unsec debt Total unsec debt Total Automotive Debt Pension & OPEB deficits - tax adjusted Total adj automotive debt Market Cap Enterprise Value Debt Maturities ($mn):
9/30/2011 Size EBITDA (x) 2,993 375 333 3,701 1,481 1,679 3,160 4,180 991 351 5,522 12,383 4,295 16,678 NA NA
9/30/2011 Liquidity Revolvers Letters of Credit/Other Borrowings Revolver Availability Cash Total Liquidity 1,300 0 0 1,300 9,454 10,754
0.8x
1.5x
2.8x 3.5x
750
500
($ MN)
250 0 2012 2013 2014 2015
44
January 26, 2012
High Yield
CityCenter Holdings, LLC (CCTRH)

Updated 1/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size Coupon (MM) (%) Priority $900 7.625 Sr Sec (1st lien) Notes $633 10.750 Sr Sec (2nd lien) PIK Toggle Nts Agency Ratings B1/B Caa2/CCC Next Call Price 103.810 105.375 Bid Price 104.750 107.00 YTW (%) 5.85 9.07 STW bp 506 828 Z-spread bp 523
Maturity 15-Jan-16 15-Jan-17
Date 15-Jan-14 15-Jan-14
PIK coupon = 11.5%; mandatory PIK until July 2012. Afterwards, issuer can decide to either pay coupon at 100% PIK interest, 100% cash or a 50/50 combination. Other terms include: 35% equity clawback, 420 day reg rights. Outlooks: Moody's - positive S&P - negative Company Description Company Strengths: - Brand new property with original investment of $9 CityCenter Holdings LLC is a 50/50 joint venture between MGM Resorts International , Inc. and Dubai World, which billion. owns and operates CityCenter, a multi-use resort and casino on the Las Vegas Strip. The property sits on 67 acres of - 616 of unsold condos could be sold to increase land and includes liquidity (after repayment of $125 mn of cost - Aria, a hotel/casino with 4,000 rooms, 1,991 slot machines, and 131 tables games; overruns to MGM). This excludes 854 condos put - Vdara, a condo/hotel tower with 1,495 units back into room inventory at Vdara and 485 units at - Veer Towers, two room towers with 669 condominiums Vdara not in room inventory. - Mandarin Oriental: a condo/hotel tower with 392 hotel rooms and 225 condos. - Expected support from MGM Resorts in the event The property also includes 322,000 sq ft of meeting space, 367,000 sq ft of retail space called Crystals. The liquidity is required. construction cost was approximately $9 billion, excluding the value of the land. The Mandarin Oriental and Aria have - Strong convention bookings: 170k on books for receive AAA Five Diamond Award status. 2011 (three times the pace from a year earlier). - Las Vegas convention attendance improving: up Recent events: 2.3% YTD through November 2010. - 3Q2011: voluntarily repaid $50 mn of bank debt. - Banks have shown a willingness to work with - October 2011: voluntarily repaid another $50 mn of bank debt. company during downturn in Las Vegas operations. - No near-term maturities provides runway to ramp Bond indenture summary: operations. Security interest: Includes stock of subsidiaries (which hold the gaming licenses) and the real property, - First liens have 18 months of coupons in escrow improvements, fixtures of CityCenter, the personal property of the issuer and the guarantors, the interest escrow while second liens PIK. account control agreement and IP security agreements. - First lien has better call protection than second Covenant highlights: lien. - Restricted payments: builder basket (50% of net income) at zero, $50 mn misc. basket. - Reduced headcount from 8,800 at 12/31/09 to - Debt incurrence: Fixed charge coverage ratio above 2.0x. Carve-outs: capital leases of $100 mn and misc. 5,300 at 12/31/10. incurrence of $100 mn. - Limitation on liens - Limitation on layered indebtedness - First $125 million of condo deal proceeds are required to repay MGM completion guarantee Company Risks: - If MGM sells Crystals mall, proceeds must to used to pay down credit facility. - No proven track record; uncertain what the EBITDA potential could be for CityCenter. - Highly leveraged - No cash on hand and no revolver; reliant on Financial Profile 4Q10 2010 1Q11 2Q11 3Q11 partners for liquidity if FCF is not sufficient. Revenue 258 1,332 271 281 260 - Perini litigation: trial to start in 4Q11. Unfavorable Condo proceeds in revenue 35 526 19 18 15 outcome could be $250 mn or more. EBITDA 16 69 55 57 46 - No guarantee of debt from MGM or Dubai. Interest Expense CapEx Free Cash Flow Total Debt (includes related party debt) Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Senior secured credit facility due 2015 7.625% secured (first lien) nts due 2016 Total first lien debt 10.75% sec (2nd lien) PIK toggle nts due 2017 Total secured debt 3.42% Member notes (MGM/Dubai) due 2018 Total debt (gross value) 66.4 62.5 (112.6) 2,747 78 2,668 nm nm 0.2x 6.3% 240.7 453.7 (625.7) 2,747 78 2,668 nm nm 0.3x 5.2% 65.5 15.1 (25.7) 2,517 108 2,409 nm nm 0.8x 20.2% 67.2 25.0 (35.1) 2,553 183 2,370 nm nm 0.8x 20.3% Liquidity Source Revolver due 2014 Letters of Credit & other Borrowings Revolver Availability Cash Total Liquidity 67.8 6.3 (28.0) 2,541 210 2,331 nm nm 0.7x 17.7%
Comps Leverage Coverage Ratings CCTRH 11.5x 0.7x Caa2/CCC MGM (sr) 9.2x 1.7x B3/BHET 1st lien 7.1x 0.9x B3/B WYNN 1.9x 6.6x Ba2 / BBBBORGAT 5.2x 1.8x B2/BB-
3Q11 450 900 1,350 649 1,999 1,123 3,122
Lvg
3Q11 none Credit facility maintenance covenant Fixed charge coverage ratio 3Q12 1.10x 4Q12 1.15x 1Q13 1.25x 2Q13 1.25x 3Q13 & thereafter 1.50x Capital expenditures Maximum per year $50 mn (unused amount rolls to following yr.)
7.7x 11.5x 17.9x
210 210
Maturities:
2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 2017+
Operating metrics Aria # of rooms ADR Occupancy rate (%) RevPAR Vdara # of rooms (estimated) ADR Occupancy rate (%) RevPAR
3Q11 4,004 $175 82% $142
4Q10 4,004 $190 80% $152
1Q11 4,004 $201 86% $173
2Q11 4,004 $202 90% $181
3Q11 4,004 $200 87% $173
910 $141 70% $99
910 $140 75% $105
1,050 $159 83% $132
1,229 $159 91% $145
1,329 $157 84% $131
45
January 26, 2012
High Yield
Clearwire Communications LLC (CLWR)

IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
CLWR's recent financing efforts, and agreements with Sprint, have ensured that CLWR would be sufficiently funded in the short term as it looks to deploy TDD-LTE in its markets with heaviest data traffic. However, the company still faces sigifnicant questions over the long-term viability of its capital structure and business model, and we think Sprint's much weakend credit profile essentially eliminates the previous optionality of being absorbed as Sprint's credit. Our In-Line ratings on the bonds reflect these challenges offset by the large coupon and CLWR's sufficient near-term liquidity Bond Summary Size (MM) $2,695 $500 Coupon (%) 12.000 12.000 Priority 1st Lien 2nd Lien Maturity 12/1/2015 12/1/2017 Agency Ratings B2/CCC+ Ca2/CCCNC NC Next Call Price Date NC NC Bid Price 94.50 84.25 YTW (%) 13.88 16.27 STW bp 1265 1490 Investment Strengths: (1) CLWR's vast spectrum holdings may make it strategically important to other carriers who may be spectrum constrained. (2) Renewed collaberation and financing arrangements with Sprint give CLWR additional time to augment and transform its business model to its "Switzerland of urban LTE capacity". Investment Risks: (1) The equity offering provides the company with much needed financing room to begin the transition of its business model. However, we continue to believe that CLWR will face an even higher funding deficit in 2013 and that Sprint and CLWR will need to make significant decisions regarding their ownership structure over the next year. (2) CLWR's spectrum is difficult to value, and coverage through the levels of debt varies significantly based on the $/MHz/POP assumptions one uses.
Company Description
Clearwire Corporation is a provider of 4G wireless broadband services with a network reaching 133 million POPs. The company had 9.5 million total subscribers as of 3Q2011. Of this 9.5 million, 1.3 million were retail subscribers who purchased service under Clearwire's CLEAR brand, and 8.2 million were wholesale subscribers, which it derives primarily from its wholesale relationship with Sprint. As of September 30, 2011, Sprint held a 54% non-controlling economic interest in Clearwire Communications LLC and a 49.6% non-controlling voting interest in Clearwire Corporation. On December 1, 2011, Clearwire announced a series of agreements with Sprint that (1) modified their wholesale pricing agreement such that CLWR will provide unlimited WiMAX service for fixed payments through 2013; (2) Sprint will conditionally pay CLWR up to $350mn over two years for LTE capacity; and (3) Sprint would contribute a proportionate amount of equity financing in a new CLWR equity offering. On December 13, 2011, Clearwire closed a Class A common stock offering that it had announced on December 5. After upsizing of the transaction by $50mn from the original $300mn plan offering, as well as the underwriters' exercise of their over-allotment option, net proceeds were $384.1mn. Sprint contributed an additional $331.4mn to CLWR's equity offering through the purchase of Class B common stock in CLWR and a corresponding number of Class B units in Clearwire Communications LLC. Total net proceeds following the two transactions were $715.5mn, which Clearwire will use for general corporate purposes including TDD-LTE development. Key Dates/Catalysts: Update on relationship with Sprint and financing situation beyond 2012. February 2012: 4Q2011 earnings. Financial Profile Wholesale Subs ('000s) Wholesale ARPU FY09A 46 NM FY10A 3,246 NM 2Q11A 6,360 $6.18 3Q11A 8,219 $6.20 4Q11E 8,919 $6.18 FY11E 8,919 $6.52
Wholesale Churn
Retail Subs Retail ARPU Revenue EBITDA Free Cash Flow Total Debt Cash & Liquid Investments Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin Capitalization*
0.6%
642 $39.65 $274 (781) (1,923) $2,772 3,805 (1,032) NM NM
0.9%
1,099 $45.19 $557 (1,091) (3,825) $4,309 1,736 2,573 NM NM
1.3%
1,288 $47.59 $294 (109) (411) $4,302 829 3,956 NM NM
1.5%
1,322 $47.05 $332 (46) (125) $4,297 698 3,956 NM NM
1.7%
1,302 $48.26 $360 (20) (206) $4,297 1,207 3,956 NM NM
1.6%
1,303 $50.02 Comps $1,239 (369) (1,263) $4,298 1,207 3,956 NM NM LEAP Unsecured Nts Sprint 5.7x 3.3x 2.1x 4.0x B3/CCC+ B3/B+ Leverage Coverage Agency Ratings
(284.5%)
(199.8%)
(36.9%)
(14.0%)
(5.4%)
(29.8%)
Debt / Description 12.000% 1st Lien Secured Nts 12.000% 1st Lien Secured Rollover Nts 1st Lien Debt 12.000% 2nd Lien Secured Nts 2nd Lien Debt Vendor Financing Notes Capital Leases 8.250% Exchangeable Nts Total Clearwire Debt Net Debt Market Cap Enterprise Value Maturities:
4,000 3,000 2,000 1,000 0 2,947
Size $2,695 252 $2,947 500 $3,447 53 67 729 $4,297 $2,883 $2,134 $5,017
EBITDA
Liquidity Revolver Size Letters of Credit $0 $0 $1,413 $1,413
NM
NM
Cash* Total Liquidity
*Pro forma for the December 2011 equity raise of approximately $716mn.
NM
NM
*Capitalization pro forma for the December 2011 equity raise of approximately $716mn.
1,349
2012
2013
2014
2015
2016+
46
January 26, 2012
High Yield
CMS Energy Corporation (CMS)
Updated 1/25/2012
212-357-5764 212-902-9355
Our OUTPERFORM on CMS reflects the highly regulated cash flows and gradual financial improvement with an attractive value. We are IN-LINE rated on Consumers Energy.
Bond Summary Size Name CMS Consumers (MM) $300 $500 Coupon (%) 6.25 6.70 Priority Sr Unsec'd FMB Maturity 1-Feb-20 15-Sep-19 Agency Ratings Ba1/BB+ A3/BBB+ Price MW+50 MW+50 Next Call Date --Bid Price 106.56 127.47 YTW (%) 5.24 2.69 STW bp 333 69
Company Description
CMS is a utility holding company with two principal subsidiaries: Consumers Energy Co. and CMS Enterprises, Inc. Consumers Energy is a regulated utility with electric and natural gas distribution operations serving 1.8 million electric and 1.7 million gas customers in Michigan's Lower Peninsula counties. The utility accounts for more than 95% of consolidated cash flows. Through its subsidiaries and equity investments in the power generation business, Enterprises is engaged primarily in domestic operations, with plants fueled by natural gas and biomass. Key Dates/Catalysts: - CMS will report 4Q2011 earnings on Feb. 23. We will look for an update on its business with an emphasis on capital spending. The company is budgeting capex at $6.6 billion for 2012 to 2016 period - Management is targeting EPS of $1.44 for 2011 which is consistent with its 5% to 7% annual earnings growth target. - Update on its pending electric and gas rate cases. The company on June 10, 2011 filed an electric base rate increase seeking a net $115 million rate increase with a 10.7% authorized ROE. The company's gas request is seeking a $49 million rate hike. Decisions are expected mid-to-late 2012. - Potential for opportunistic refinancing.
Investment Strengths: - CMS' primary asset is a solid investment grade utility, Consumers Energy, that accounts for about 95% of cash flow. The utility's financial profile is strong with 3x debt-to-EBITDA. - Improving supportive Michigan regulatory treatment with decoupled rate mechanisms and the ability to self-implement interim rate increases. - Management expects operating cash flow of $1.6 billion in 2011 and 2012. - Liquidity remains strong at over $2.0 billion, with about $623 million in cash. Also, the company has 0.7 bn of net NOLs and credits in 2012. - Management has improved and stabilized the balance sheet following an extensive asset rationalization program that led to divestment of non-core assets. Investment Risks: - Capital spending remains high at $6.6 billion through 2016 that includes significant environmental spending given the utility's reliance on coal generation. - Ongoing rate relief needs owing to its large spending program. - The economic downturn could pose a greater challenge given CMS's exposure to the auto industry (5% of revenues). Michigan's unemployment rate remains high at 10.6%. - Parent debt levels are expected to remain flat at about $2 billion. - Debt maturities are significant in the near term, with about 25% of consolidated outstanding debt maturing in the next three years.
Financial Profile
CMS FY09
CMS FY10 6,432 1,551 420 224 821 (182) 6,746 247 6,499
CMS LTM 3Q11 6,565 1,518 410 185 834 (45) 7,138 623 6,515
Consumers FY10 6,156 1,490 265 254 815 (239) 4,529 71 4,458
Consumers LTM 3Q11 6,308 1,529 256 279 825 (69) 4,348 373 3,975
Revenue EBITDA
6,205 1,293 422 115 818 (13) 6,103 90 6,013 4.72 4.65 3.06 21%
Adjusted Interest Expense Income Taxes CapEx Free Cash Flow Adjusted GAAP Debt Cash Net Adjusted GAAP Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Consumers Energy - FMBs Consumers Energy - Other Total Consumers Energy Debt CMS Revolver ($550) CMS Senior Unsecured Notes CMS Convertible Notes due 2023-2029 Other Adjustments Total Parent and Consumers Energy Debt Securitization and Non-recourse debt Total debt
4.35 4.19 3.69 24%
4.70 4.29 3.70 23%
3.04 2.99 5.62 24%
2.84 2.60 5.97 24%
Size 3875 283 4,158 1925 460 623 (28) 7,138 182 7,319
Debt to EBITDA
Liquidity CMS Revolver Size Consumers Revolver 550 650 134 250 1,584 3 135 1,446 623 2,069
2.7x
Consumers LOC AR facility Total bank lines CMS LOC outstanding Consumers LOC outstanding Borrowings
4.7x 4.8x
Revolver Availability Cash Total Liquidity
Market Cap Enterprise Value Maturities: 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015
5,621 12,941 8.5x
2016
Source: SNL Energy, company documents and Goldman Sachs
47
January 26, 2012
High Yield
Community Health Systems (CYH)

UNDERPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate CYH Underperform as (1) leverage is highest of the group (excluding Iasis) and (2) we see the Medicare fraud investigation as a serious overhang, particularly the impact on operating results. Size (MM) $1,000 Coupon (%) 8 Priority Snr. Uns. Maturity 15-Nov-19 Agency Ratings B3/B Next Call* Price $104.000 Date 15-Nov-15 Bid Price $102.500 YTW (%) 7.457% STW bp 666 CDS Level Snr 5-Year 668 / 696
*Currently callable at $104.4375
Company Description
Suburban/rural hospital operator with 132 hospitals; approximately half are rural and half are urban/suburban. CYH purchased Triad, a mid-sized small urban hospital company, in July 2007. 65% of the combined company's hospitals are the sole hospital or one of two hospitals in the community served. CYH is centrally operated and its strategy is to extend that discipline to acquired facilities. CYH completed three acquisitions in 2010 (Marion Regional in South Carolina, Bluefield in West Virginia, and Forum Health in Ohio). Year to date 2011, CYH has acquired Mercy and Moses in Pennsylvania, divested two hospitals in Oklahoma to Ardent Health and acquired Tomball in Houston. On its 2Q11 call, management stated that the Medicare fraud lawsuit has not been disruptive to its operations at the hospital level. However, on its 3Q11 call, CYH cited negative press around the lawsuit as one reason for its 7% s/s admissions decline. In December 2010, CYH announced an unsolicited bid for THC at $6 a share for a combination of cash and stock, which THC rejected. In April 2011, THC alleged that CYH had overbilled Medicare, with a potential liability in excess of $1 bn. CYH subsequently changed its bid to all cash and later also raised its bid to $7.25 a share. In May 2011, CYH withdrew its bid for THC. CYH's recent acquisitions of Moses Taylor (closed January 2012) and MetroSouth (expected 1Q12) make a revolver borrowing in 1Q12 likely. In January 2012, CYH announced its intent to amend and extend a portion of its credit facility. Key Dates/Catalysts: - Quarterly earnings announcements (commercial volumes have been weak industry-wide, although bad debt expense has been relatively stable). - Ongoing investigations by the DOJ and other government agencies related to alleged Medicare overbilling. - Potential acquisitions. - Potential refinancing of the bonds (callable July 15, 2011). - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals.
Investment Strengths: - High-quality asset base: Largely rural/suburban facilities tend to be less competitive for patients and physicians, require less capex investment, and may have more-favorable rates. - Excellent track record of margin improvement achieved at acquired facilities: CYH was able to improve margins from low single-digits to mid-teens in a matter of a few years.
Investment Risks: - Medicare and Medicaid reimbursement could be reduced. - CYH is under investigation by the DOJ and other government agencies related to allegations of filing false Medicare claims. Historically, Medicare fraud investigations have taken years to resolve and settlements are determined partially based on a company's ability to pay. In 3Q11, negative press surrounding the investigation appears to have impacted volumes to some degree. - Volumes have been weak across the industry and are expected to remain so for the near term. - CYH's EBITDA growth has lagged its peer group, and leverage has remained high as a result.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due 2013 Term Loan due 2014* Extend Loan due Jan 2017 Total Sr Sec debt 8.875% Snr Notes due 2015 Total Sr bonds Other debt Total Debt Market Cap Enterprise Value
2009 $12,087 1,671 $649 141 577 500 $8,911 345 8,567 0.8x 5.1x 2.6x 13.8%
2010 $12,987 1,770 $652 160 667 521 $8,872 299 8,572 0.8x 4.8x 2.7x 13.6%
2011E $13,823 1,842 $652 171 743 407 $8,811 54 8,757 0.8x 4.8x 2.8x 13.3%
4Q10A $3,403 452 $166 37 286 5 $8,872 299 8,572
3Q11A $3,436 454 $159 37 181 54 $8,830 266 8,563
4Q11E $3,547 466 $165 45 210 120 $8,811 54 8,757 LTM Comps CYH VANGUA THC HMA HCA sr uns Leverage 4.8x 4.4x 3.9x 3.0x 4.2x Coverage 2.8x 2.7x 2.7x NA NA Agency Ratings B3/B B3/BCaa1/CCC+ --/BBB3/B-
2.7x 13.3%
2.8x 13.2%
2.8x 13.1%
Size
Debt to LTM EBITDA
Liquidity Revolver Size Letters of Credit Borrowings $750 38 0 712 $266 $978
$0 $4,476 1,485 5,961 $2,784 $2,784 $84 $8,830 1,720 $10,284 5.6x 5.6x 4.8x 4.8x 4.8x 4.7x 3.3x 3.2x
*In January 2012, CYH announced its intent to extend a portion of the 2014 TL as well as other amendments including the option to replace its revolver. Maturities: (includes term loan amortization)
6,000
4,000
2,000
0 2012 2013 2014 2015+
48
January 26, 2012
High Yield
Constellation Brands (STZ)

UNDERPERFORM
Bond Summary Size Coupon (MM) (%) $500 8.375 $700 7.250 $700 7.250
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts Sr Nts Sr Nts
Agency Maturity Ratings 15-Dec-14 Ba2/BB+ 1-Sep-16 Ba2/BB+ 15-May-17 Ba2/BB+
Next Call Price Date NC NC NC NC NC NC
Bid Price 112.75 110.25 110.75
YTW (%) 3.68 4.74 4.92
STW bp 302 367 368
Company Description
Constellation Brands, Inc., is a leading international producer and marketer of beverage alcohol brands, with a broad portfolio across the wine, imported beer, and spirits categories.
Investment Strengths: - Leading, diversified portfolio - Asset-rich company - Strong cash flow generation and deleveraging capability Investment Risks: - Management has stated its openness to a large acquisition; no ambitions to become IG - Significant portion of earnings reported via joint venture format - Shift to premium products has made the company more vulnerable to slowdown in consumer spending
Key Dates/Catalysts: Early April - fourth quarter earnings release
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization 3Q12 Description
FY10 3,364.8 963.3 260.5 160.0 107.7 435.1 3,835.5 43.5 4.0x 3.9x 3.7x 28.63%
FY11 3,332.0 908.2 195.3 (8.5) 108.1 613.3 3,236.3 9.2 3.6x 3.6x 4.7x 27.26%
FY12E 2,717.3 856.3 178.6 (18.5) 70.1 626.1 2,869.6 53.6 3.4x 3.3x 4.8x 31.51%
4Q11A 715.3 182.5 47.4 (172.8) 38.0 269.9 3,236.3 9.2
4Q12E 691.1 189.7 45.5 (130.0) 16.0 258.2 2,869.6 53.6
3.9x 25.51%
4.2x 27.45%
Comps Dean Foods Constellation Del Monte
Yield Leverage Coverage Ratings 6.96% 5.2x 2.9x B2/B4.74% 3.4x 4.8x Ba2/BB+ 8.10% 6.4x 2.4x B3/CCC+
Size 247.0 105.3 624.7 201.9 1178.9 500.0 694.5 700.0 31.2
Debt to EBITDA
Revolving Credit Facility ($650 due 06/15/1 Other notes payable to banks Term Loan B (due 6/5/13) L+250 Term Loan B (due 6/15/15) L+275 Total Secured Debt 8.375% Sr Nts due 2014 7.25% Senior Notes due 09/01/16 7.25% Senior Notes due 05/15/17 Other Debt
3Q12A 650.0 12.2 247.0 390.8 NA 0.0 NA
1.4x A/R facility Borrowings A/R Availability
Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities & required debt payments 3,000
3104.6 4212.6 7308.0
3.7x 8.6x
55.8 446.6
2,000
1,000
0 2012 2013 2014+
49
January 26, 2012
High Yield
Convatec (CONVAT)
OUTPERFORM
Updated 01/25/12
Our rating reflects (1) compelling relative value, (2) favorable industry characteristics, and (3) improving cash flow. The ostomy industry has several creditor-friendly characteristics, including few competitors, sales to an installed base, non-discretionary products, and slow technology shifts. Management reiterated that it should be "reasonably close to its" 2011 EBITDA guidance of being up yoy. Bond Summary Size (MM) $745 Coupon (%) 10.5 Priority Snr Uns Maturity 15-Dec-18 Agency Ratings Caa1/B Next Call Price $105.250 Date 15-Dec-14 Bid Price $97.500 YTW (%) 11.023% STW bp 1,023 Snr 5-yr CDS 995 / 1071
Company Description
Convatec manufactures and distributes medical products in four business segments: ostomy (37% of LTM revenue), wound care (32%), continence and critical care (17%), and infusion (14%). Ostomy is a surgically created opening in the abdomen to allow the discharge of waste when a portion of the intestines has to be removed due to cancer or other disease. CONVAT was spun out from Bristol-Myers Squibb on August 1, 2008, in an LBO by Nordic Capital and Avista Capital at approximately 11x June 2008 LTM EBITDA. Subsequently, on September 2, 2008, CONVAT acquired Nordics portfolio company Unomedical for $593.6 million and divested the Unomedical Wound Care and Ophthalmic businesses for $22.3 million as mandated by the European Commission. In December 2010, Convatec refinanced its capital structure to remove the old LBO term loans and mezzanine debt, and put in place new term loans, secured and unsecured notes. On its 3Q11 conference call, Convatec reiterated that it would be "reasonably close to its" EBITDA guidance of being up yoy over 2010. In August 2011, the press reported that CONVAT made a bid for KCI but in October 2011, KCI announced that the second bidder has withdrawn. CONVAT CDS was recently added to the new xover index in Europe. Key Dates/Catalysts: - Quarterly earnings announcements. (Company has guided that 2011 should be up yoy) - Announcements of acquisitions. Convatec has been buying small distributors in Latin America and other markets.
Investment Strengths: - Convatec makes non-discretionary, one-time-use products. - Sales are to a large permanent installed base. Approximately 95% of ostomy patients are permanent, using 60 pouches per month . Product loyalty is strong. Roughly 30% of patients switch in the first six months but this falls to virtually 0% after the first year. - FCF should improve due to a drop-off in one-time items and better NWC management. - End market is growing at 2-3%, driven by an aging population, increased use of stoma surgeries, increased penetration of advanced wound care, critical and continence care and infusion sets; offset by about 1% pricing declines. Investment Risks: - Leverage remains high at mid 6x. Public comparable Coloplast trades at 12x. We expect a slow deleveraging path. - Pricing pressure in Europe could be greater than expected due to government austerity measures. - Market share losses could continue if Convatec is not able to win new nurse sponsoring initiatives in the UK or if the new product uptake is less than expected.
Financial Profile* Revenue EBITDA Cash Interest Expense, net* Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
2009E $1,527 440 $206 (33) 75 (59) $2,749 103 2,646 6.2x 6.0x 2.1x 28.8%
2010A $1,513 428 $165 104 42 35 $2,718 69 2,648 6.4x 6.2x 2.6x 28.3%
2011E $1,579 433 $230 (3) 32 74 $2,708 56 2,652 6.3x 6.1x 1.9x 27.4%
4Q10A $396 119 $28 51 7 30 $2,731 69 2,662
3Q11A $411 126 $59 (54) 7 86 $2,710 80 2,630
4Q11E $419 122 $54 10 11 (15) $2,708 56 2,652
Comps CONVAT snr DJO sub ACCINC sub
Agency Ratings Caa1/B Caa1/CCC+ Caa2/CCC+
4.3x 30.0%
2.1x 30.7%
2.3x 29.0%
*Cash interest does not include interest on the preferred equity which is accrued Capitalization Debt to LTM Amount EBITDA $0 $496 $731 $402 $1,629 $745 $335 $1,080 $2 2,710 NA NA 6.3x 6.3x Cash & marketable securiti Other Debt Total Debt Market Cap Enterprise Value Maturities: 3,000 2,500 2,000 1,500 1,000 500 0 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2012 2013 2014 2014 2015+ 2015+ Total Liquidity 6.3x 6.3x $80 $327 3.8x 3.8x A/R facility 10.5% Snr unsec US 12/15/2018 10.875% Snr unsec EURO 12/15/2018 Total Snr Uns debt Borrowings A/R Availability $0 0 0 Debt to 2011E EBITDA
Description Revolving Credit Facility 12/22/2015 TL B USD due 12/22/2016 TL B EUR due 12/22/2016 7.375% Snr Sec 12/15/2017 EUR Total Snr Sec debt
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $250 3 0 247
50
January 26, 2012
High Yield
Cooper Tire (CTBUS)

IN-LINE
Bond Summary Size (MM) $174 Coupon (%) 8.00% Priority Sr. Nts Maturity 15-Dec-19 Agency Ratings B2/BB-
Updated 1/26/2012
212-902-7537 212-357-2769
Next Call Price NC Date NC
Bid Price 107.00
YTW (%) 683.3%
STW bp 552
Company Description
Cooper Tire & Rubber Company manufactures and markets replacement tires. The company focuses on the manufacture and sale of passenger and light truck replacement tires. Cooper also manufactures radial medium truck tires and materials and equipment for the truck tire retread industry. It currently commands a small share of the US replacement tire market, and sells to a wide variety of aftermarket stores and tire dealers. Cooper offers a variety of branded tires (about 60% of volume) and a large percentage of private label product (about 40% of volume). Key Dates/Catalysts: - Cooper Tire is expected to report 4Q2011 earnings in late February/ early March.
Investment Strengths: - Long debt maturity runway mitigates raw material risk: CTBUS's next major debt maturity comes in 2019 with the maturity of its 8% senior notes. - Adequate liquidity: CTBUS ended 3Q2011 with more than $450 million of liquidity, consisting of $90 million of cash and cash equivalents and $375 million of company credit lines. - Price raises partially offset raw material risk: Cooper Tire has announced a series of tire price increases in response to escalating raw material costs. Investment Risks: - Raw materials will remain a headwind: Management estimates that about 50% of the companys COGS are derived from raw materials particularly natural rubber and oil. Although natural rubber prices have declined from their early 2011 levels, they remain moderately elevated. - Moderating North American replacement tire volumes: After a strong 2010 in which volumes increased about 7%, North America light vehicle replacement tire shipments were flat in 2011 and are expected to grow by a modest 2% in 2012. - 421 Tariff stepping down: The 30% tariff on Chinese tires declined to 25% in September 2011 and will decline to 0% in September 2012. We believe Cooper Tire is at risk of losing market share if the tariff is not extended by the US government.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes W/C and Other CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due 2016 8.0% Sr Notes due 2019 7.625% Sr Notes due 2027 Other Total Debt Less cash Net Debt Market Cap Enterprise Value
FY08 2,881.8 31.8 (45.5) (8.0) (170.3) (128.8) (320.8) 658.3 247.7 410.6 20.7x 12.9x 0.8x 1.1%
FY09 2,779.0 335.5 (48.0) (8.0) 140.1 (79.3) 340.3 503.2 427.0 76.2 1.5x 0.2x 8.0x 12.1%
FY10 3,361.0 332.7 (35.9) (8.0) (139.9) (119.7) 29.2 473.6 413.4 60.2 1.4x 0.2x 10.6x 9.9%
LTM-3Q11 3,801.3 282.2 (37.0) (8.0) (228.4) (166.0) (157.2) 356.1 90.6 265.6 1.3x 0.9x 8.4x 7.4%
FY11E 3,802.9 243.1 (34.6) (8.0) (104.3) (156.3) (60.1) 356.1 244.1 112.1 1.5x 0.5x 7.5x 6.4%
FY12E 3,823.6 237.5 (33.9) (8.0) (2.0) (170.0) 23.6 333.9 267.7 66.2 1.4x 0.3x 7.0x 6.2%
Leverage 2.8x 1.3x 3.0x 3.0x 2.2x 0.9x
Coverage 4.8x 8.4x 6.5x 3.6x 4.5x 13.6x
Size 0.0 173.6 116.9 65.7 356.1 (90.6) 265.6 934.2 1199.8
Debt to EBITDA 0.0x 1.3x 1.3x 1.3x 1.3x -0.9x 4.9x
Liquidity Revolver Size - Amt Drawn - LCs Drawn Amt Unutilized A/R Facility Cash Liquidity Unsecured Asian Lines 200.0 0.0 0.0 200.0 175.0 90.6 465.6 231
Maturities: 350 300 250 200 150 100 50 0 2011 2012 2013 2014 2015 After
51
January 26, 2012
High Yield
Crown Holdings, Inc. (CCK)

IN-LINE
Bond Summary Size (MM) $700 Coupon (%) 6.250 Priority Sr Nts Maturity 01-Feb-21 Agency Ratings Ba3/BB
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Price 103.125 Date 01-Feb-16
Bid Price 107.500
YTW (%) 4.884
STW (bp) 422 Investment Strengths: - Strong, stable customer base: Crown provides packaging to many of the world's leading consumer products companies, including Anheuser-Busch, Cadbury Schweppes, Coca-Cola, and Pepsi. - Exposure to international growth markets: Crown operates 135 plants in 41 countries and generated approximately 72% of sales from international operations in 2010. - Stable earnings and cash flow: Crown operates in a recession-resistant segment of the packaging industry, and enjoys relatively stable earnings and cash flow generation throughout the cycle. Investment Risks: - Irrational price competition could lead to lower profitability: Although can manufacturers have behaved rationally in recent years, irrational selling price competition remains a possibility. - Future M&A activity may lead to higher leverage: Crown could make a leveraging acquisition in the near to intermediate term.
Company Description
Crown manufactures metal packaging. The company's primary products include steel and aluminum cans for food, beverage, household, and other consumer products, and metal caps and closures. Crown is the largest global producer of metal food cans and aerosol cans in the world, the second-largest producer of metal vacuum closures, and one of the largest producers of metal beverage cans in the world.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Revolving credit facilities Term loan facilities Bank loans and overdrafts 7.625% senior notes due 2017 7.125% senior notes due 2018 6.250% senior notes due 2021 7.375% debentures due 2026 7.500% debentures due 2096 Other debt Total debt Market value of equity Enterprise value
12/31/2009 FY:09 7,938 1,006 247 180 2,798 459 2,339 2.8x 2.3x 4.1x 12.7%
12/31/2010 FY:10 7,941 1,042 203 320 3,048 463 2,585 2.9x 2.5x 5.1x 13.1% 9/30/2011 Size 472 567 295 400 670 700 350 64 239 3,757 5,252 8,658
9/30/2010 3Q:10 2,205 335 55 83 3,229 415 2,814 3.2x 2.8x 6.1x 15.2%
6/30/2011 2Q:11 2,281 316 60 81 3,876 546 3,330 3.5x 3.0x 5.3x 13.9%
9/30/2011 3Q:11 2,423 347 58 89 3,757 479 3,278 3.4x 2.9x 6.0x 14.3%
Comps Berry Plastics Owens-Illinois Ball
Ratings Caa1/CCC Ba3/BB Ba1/BB+
Debt to EBITDA 1.2x 1.2x 1.2x 2.8x 2.8x 2.8x 3.4x 3.4x 3.4x
Liquidity Revolver size Letters of credit Borrowings Revolver availability Cash Total liquidity
9/30/2011 1,200 60 472 668 479 1,147
Maturities: 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015+
52
January 26, 2012
High Yield
DaVita, Inc. (DVA)

UNDERPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We remain Underperform on DVA due to (1) the risk that Medicare re-coups the RUGs IV overpayments, (2) the risk of more aggressive international investments, and (3) the potential ongoing shift to lower margin Medicare patients from managed care. Bond Summary Size (MM) $775 $775 Coupon (%) 6.375% 6.625% Priority Sr. Uns. Sr. Uns. Maturity 1-Nov-18 1-Nov-20 Agency Ratings B2/B B2/B Next Call Price $104.781 $104.969 Date 11/1/2013 11/1/2014 Bid Price $105.000 $105.500 YTW (%) 5.172% 5.495% STW bp 437 470 Investment Strengths: - Large market share in a growing market due to increased incidence of diabetes, hypertension, and other causes of renal disease. Dialysis is needed at least three times per week for the duration of an ESRD patient's life. - Largely insulated from bad debt expense because Medicare covers dialysis patients regardless of age. Private insurance, if available, pays for the first 33 months. Otherwise, Medicare covers the patient immediately. - Significant free cash flow at 18% of debt at LTM 3Q2011 (pro forma for recent acquisitions and debt raise).
Company Description
Second-largest operator of dialysis centers in the US (Fresenius is the largest). DVA serves 112,000 end-stage renal disease (ESRD) patients (approximately a 30% market share) in 43 states through 1,582 dialysis centers. Medicare covers people with ESRD regardless of age. Medicare reimbursement is low, so Medicare accounts for 87% of treatments, but is only 50% of DVA's revenue and contributes negative EBIT. Currently, private insurance pays for the first 33 months of dialysis and then Medicare takes over. Medicare bundled payments began January 2011. Under bundled payments, providers have an incentive to reduce drug usage because the drugs no longer garner separate payments. Reimbursement of the Amgen drug EPO (an anemia drug commonly prescribed to dialysis patients) previously accounted for 20% of DVA's revenue. Centers are leased, not owned. DVA acquired DSI for $690 mn on September 6 and was required by FTC to divest 30 facilities. In November 2011, Amgen and Davita announced a new seven-year exclusive contract on Epogen. Key Dates/Catalysts: - Quarterly reports implementation of new EPO protocols and cost cutting are key. - PDUFA date for Affymax/Takeda's ESA that could compete with Epogen in March 2012.
Investment Risks: - The company's payer mix has deteriorated due to an increasing number of uninsured in the US. DVA says that most Medicare patients are unprofitable. - While dialysis has historically not faced significant Medicare cuts, the 2% sequestration and potential other cuts could be headwinds. - Already at the low end of net leverage target range of 3x-3.5x which suggests company may increase leverage.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due 2015 Term Loan A of 2015 Term Loan A-2 of 2016 Term Loan B of 2016 Total Sr Sec debt 6.375% Senior Notes due 2018 6.625% Senior Notes due 2020 Other debt Total Sr bonds Total Debt Market Cap Enterprise Value Maturities: 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012
2009A $6,109 1,169 $186 278 275 392 $3,630 539 3,090 3.1x 2.6x 6.3x 19.1%
2010A $6,447 1,231 $182 260 274 566 $4,317 860 3,457 3.5x 2.8x 6.8x 19.1%
2011E $6,975 1,410 $242 315 347 881 $4,491 595 3,896 3.2x 2.8x 5.8x 20.2%
4Q10A $1,649 315 $54 40 104 16 $4,317 860 3,457
3Q11A $1,808 386 $61 94 97 398 $4,508 541 3,967
4Q11E $1,850 391 $62 91 95 104 $4,491 595 3,896 LTM Comps DVA CYH UHS uns Leverage 3.2x 4.8x 2.9x 3.2x 1.6x Coverage 5.7x 2.8x NA 4.3x NA Agency Ratings B2/B B3/B Baa3/BB+ B2/B+ Ba1/BB-
5.9x 19.1%
6.3x 21.4%
6.3x 21.1%
HLS LPNT
Size $0 963 200 1,737 $2,899 $775 $775 $59 $1,609 $4,508 7,591 $11,558
Debt to LTM PF EBITDA*
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $350 46 0 304 $541 $845
2.1x
2.1x Cash Total Liquidity
3.2x 3.2x 8.3x
3.2x 3.2x 8.2x
*LTM PF EBITDA includes $63mn of EBITDA from DSI, closed Sept 6, 2011.
2013
2014
2015+
53
January 26, 2012
High Yield
Dean Foods (DF)

UNDERPERFORM
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts
Maturity 1-Jun-16
Next Call Price Date NC NC
Bid Price 100.13
YTW (%) 6.96
STW bp 596 Investment Strengths: - Leading position as only national dairy beverage company - Deep customer relationships across all channels. - Low cyclicality for dairy demand Investment Risks: - High debt leverage - Demanding amortization schedule - Continued dairy pricing pressure - Price sensitivity to organic - Further anti-trust settlements
Company Description
Dean Foods is the largest processor and distributor of milk and various other dairy products in the United States. It has two divisions: (1) Fresh Dairy Direct-Morningstar, the largest US processor and distributor of milk, creamer, and cultured dairy products, selling its products under a variety of local and regional brand names and under private labels; and (2) WhiteWave-Alpro, which develops, manufactures, markets, and sells a variety of nationally branded soy, dairy, and dairy-related products, such as Silk soymilk, Horizon Organic dairy products, International Delight coffee creamers, and Land O'Lakes creamers and fluid dairy products. Key Dates/Catalysts: February Class 1 Mover prices and mid-February fourth quarter earnings release
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization FY11E
FY09 11,160.0 940.4 246.4 152.1 268.2 273.7 4,489.3 36.0 4.77 4.74 3.8x 8.43%
FY10 12,134.1 748.3 248.3 73.5 302.0 124.5 4,067.5 92.0 5.44 5.31 3.0x 6.17%
FY11E 13,127.7 728.0 255.1 (360.5) 325.4 507.9 3,791.0 150.1 5.21 5.00 2.9x 5.55%
4Q10A 3,153.0 184.7 70.6 14.4 121.4 (21.7) 4,067.5 92.0
4Q11E 3,368.2 200.0 63.5 27.5 110.0 (1.0) 3,791.0 150.1
Ratings B2/BBa2/BB+ B3/CCC+
2.6x 5.86%
3.2x 5.94%
Revolver ($225, L+125) due 4/2/12 Revolver, L+325 ($1275) due 4/2/14 Tranche A Term , L+ 125 (due 4/2/12) Tranche A Term L+325 (due 4/2/14) Tranche B Term L+150 (due 4/2/14) Tranche B Term L+325 (due 4/2/16) Total Secured Debt 7.00% Notes due 2016 6.90% Notes due 2017 Capital Lease Obligations 9.75% Senior Notes due 2017 Receivables-backed facility Total Sub debt Total Debt Market Cap Enterprise Value Maturities and required debt payments 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013
Amt 0.0 0.0 71.1 588.7 677.3 1040.4 2377.5 498.8 128.7 1.0 400.0 385.0 1413.5 3791.0 2020.7 5703.9
Debt to EBITDA
3Q11A 1,500.0 169.9 46.5 1,283.6
3.3x
600.0 385.0 215.0
Cash Total Liquidity 5.2x 7.6x
107.7 1,606.3
2014+
54
January 26, 2012
High Yield
Del Monte Foods (DLM)

OUTPERFORM
Bond Summary Size Coupon (MM) (%) $1,300 7.625
Updated: 1/26/12
212-902-6957 202-357-7875
Priority Sr Notes
Agency Maturity Ratings 15-Feb-19 B3/CCC+
Next Call Price Date $103.81 15-Feb-14
Bid Price 97.50
YTW (%) 8.10
STW bp 649
Company Description
Del Monte Foods is one of the largest producers, distributors, and marketers of premium-quality, branded food and pet products for the US retail market. Its leading brands are Del Monte, Contadina, S&W, and other brand names, and its pet food and pet snacks include the brands 9Lives, Kibbles 'n Bits, Pup-Peroni, Snausages, Pounce, Meow Mix, Alley Cat, Milk-Bone, and other brand names.
Investment Strengths: - Strong brands; DLM billion-dollar brand - Holds No. 1 or No. 2 position in its major categories - Pet food and snacks, which now comprise 60% of operating income, are growth categories - Significant free cash flow generation - Pet appeared to stabilize in 2Q Investment Risks: - Relapse in pet if competitors behave irrationally - Inability to pass through pricing as expected - Potential for acquisitions
Key Dates/Catalysts: Early March, third quarter earnings
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization FY2012E
FY10A 3,739.8 620.8 116.3 139.9 104.9 259.7 1,290.8 53.7 2.1x 2.0x 5.3x 16.60%
FY11A 3,666.1 661.6 159.3 90.8 82.5 329.0 4,002.0 205.2 6.0x 5.7x 4.2x 18.05%
FY12E 3,792.0 584.3 240.4 34.0 77.2 232.8 3,749.8 117.5 6.4x 6.2x 2.4x 15.41%
3Q11A 969.4 191.4 18.8 48.2 13.1 111.3 1,275.3 74.0
3Q12E 1,022.7 165.6 58.0 21.7 22.0 63.9 3,945.9 117.5
Yield Leverage Coverage Ratings 6.96% 5.2x 2.9x B2/B4.74% 3.4x 4.8x Ba2/BB+ 8.10% 6.4x 2.4x B3/CCC+
10.2x 19.74%
2.9x 16.19%
Description Amount Revolver ($750, due 3/8/16) 0.0 Term Loan L+300, 150 libor floor (due 2445.0
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total Liquidity
2Q12A 750.0 38.2 0.0 651.8 NA 0 NA 117.5 769.3
Total Secured Debt 7.625% Senior Sub Nts (due 2/15/19) Other Total Sub debt
2445.0 1300.0 4.0 3749.0
4.2x
6.4x
Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities & required payments: 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013
3749.0 NA NA
6.4x
2014+
55
January 26, 2012
High Yield
Delta Air Lines Inc. (DAL)

OUTPERFORM/UNDERPERFORM
Bond Summary Size (MM) $120 $499 $601 Coupon (%) 8.954 7.750 9.500 Priority EETC EETC Sr. Secured Maturity 10-Aug-14 17-Dec-19 15-Sep-14 Agency Ratings Ba3/B Baa2/ABa2/BBNC NC NC
Updated 1/24/2012
Justine Fisher Joshua Pinkerton
212-357-6711 212-357-9774
Next Call Price Date NC NC NC
Bid Price 99.8 107.0 106.5
YTW (%) 9.09% 5.89% 5.26%
STW bp 888 512 516 Investment Strengths: - Size: Delta is the world's second-largest airline. This has allowed it to complete deals with partners that would not be available to smaller competitors (for example the $2 billion credit card deal it signed with American Express). - Route structure: Delta acquired a strong route network in the Pacific when it bought Northwest. - New JFK terminal should help Delta gain a stronger foothold in New York when it is complete. Investment Risks: - Japan risk: Delta is the largest US carrier with service into Tokyo Narita airport, which has seen a decline in travelers following the earthquake and tsunami. - Capital expenditures: Delta recently placed an order for 100 Boeing 737-900ERs. The company says it intends to finance the aircraft with cash, though this could entail additional debt as well. We think replacing ageing DC-9s is positive. - Acquisition risk: Recent press reports have indicated that Delta may make a bid for AMR.
Company Description
Delta is the world's second-largest airline. It operates domestic and international routes through its mainline operations, along with the regional brand Delta Connection. It is a member of the Skyteam Alliance. Delta is headquartered in Atlanta and has its main hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York JFK, Salt Lake City, Amsterdam, and Tokyo Narita. It merged with Northwest in 2008. Key Dates/Catalysts: - Delta is expected to report earnings on January 25.
Financial Profile Revenue EBITDAR Interest Expense Income Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics EBITDA/Interest Leverage EBITDA margin
FY10 31,755 4,565 (1,004) (15) (1,342) 1,490 15,252 4,019 11,233 4.5 x 3.3 x 14.4%
2Q11 9,153 1,088 (186) 4 (313) 673 14,661 4,254 10,407 5.8 x 11.9%
3Q11 9,816 1,311 (229) 2 (233) (331) 14,494 3,670 10,824 5.7 x 13.4%
4Q11E 8,133 964 (224) (15) (350) 147 14,460 3,783 10,677 4.3 x 11.9%
FY11E 34,849 3,732 (907) 62 (1,236) 937 14,460 3,783 10,677 4.1 x 3.9 x 10.7%
FY12E 34,375 3,988 (881) (65) (1,200) 1,721 13,680 4,592 9,089 4.5 x 3.4 x 11.6%
Comps UAL DAL LUV JBLU LCC
Leverage 2.6x 3.9x 2.1x 4.5x 3.6x
Coverage 5.4x 4.1x 9.9x 4.6x 3.9x
Ratings B2/B B2/B Baa3/BBBB3/BCaa1/B-
Capitalization Description Secured debt payable through 2022 6.718% due 1/2/23 (2002-1, G-1) 6.417% due 7/2/12 (2002-1, G-2) 6.821% due 8/10/22 (2007-1, A) 8.021% due 8/10/22 (2007-1, B) 8.954% due 8/10/14 (2007-1, C) 7.75% due 12/17/19 (2009-1, A) Other Total debt Market Cap Enterprise Value Size 6,738.0 287.6 370.3 699.1 190.3 116.7 531.7 5,560.2 14,494.0 8,657.8 19,481.8 5.2 x 3.9 x Cash Total Liquidity 3,670 5,470 Debt to EBITDAR Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 1,800 0 0 1,800
Maturities: 6,000 5,000 4,000 3,000 2,000 1,000 0 2012 2013 2014 2015 Thereafter
56
January 26, 2012
High Yield
Denbury Resources (DNR)

OUTPERFORM
Bond Summary Size (MM) $400 Coupon (%) 6.375% Priority Sr. Maturity 8/15/2021 Agency Ratings B1/BB-
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $108.00
YTW (%) 5.02%
STW bp 425 Investment Strengths: Production and reserves are both around 80% oil Tertiary recovery operations have little geologic risk Identified roadmap of nine development phases with expected peak production of 65k bbl/d in 2016 from around 24k bbl/d in 2009 Competitive advantage with ownership of Jackson Dome, a naturally occurring CO2 reservoir; high barriers to entry Investment Risks: Tertiary oil operations have inherently higher costs, which the company estimates at $15-$25 opex/bbl and $7-$12/bbl total capital cost, including acquisition and CO2; requires $35+ oil to be economic in most instances Key Dates/Catalysts: Additional non-core asset sales Additional acquisitions
Company Description
DNR is one of the leaders in tertiary oil recovery using CO2 and has a dominant position in CO2 reserve ownership. The company owns the Jackson Dome CO2 source, the largest east of the Mississippi, and has a 750 mile existing/planned pipeline network. In late 2009, Denbury announced the acquisition of Encore Acquisition (EAC), which established a new core EOR area in the Rockies for Denbury. The addition of the EAC assets more than doubled Denbury's Enhanced Oil Recovery (EOR) potential. EAC also brought substantial positions in the Bakken and Haynesville shales. Denbury's predecessor entity was incorporated in Canada in 1951. In 1992, that company acquired Denbury Management, Inc., in the US and subsequently divested all of its Canadian assets. Since 1992, the company has been exclusively focused on the US, primarily in LA, MS, AL, and TX. In December 1997, DNR acquired the Heidelberg field in MS from Chevron for $202 mn. In July 2004, the company sold its offshore assets for $200 mn. In September 2008, DNR exercised a call option to purchase the Hastings field from Venoco. In May 2009, the company announced the sale of 60% of its Barnett Shale acreage to privately held Talon Oil and Gas for $270 mn, and in late 2009 DNR divested the remainder of its Barnett assets to Talon. In November 2009, DNR made a transformative acquisition with the $4.5 bn purchase of Encore Acquisition. Encore began as a private equity portfolio company in 1998 and went public in March 2001. The company's primary expertise was in applying secondary and tertiary production techniques to hydrocarbon recovery. DNR plans to leverage EAC's shale exposure and EOR expertise going forward. Denbury also announced the acquisition of a 95% working interest in the Conroe Field in Texas for $431 mn. The company recently sold $900 mn of non-core assets that it acquired in the EAC acquisition. In June 2011, Denbury announced plans to acquire the remaining 57.5% interest in Riley Ridge that it did not already own for $191 mn. In January 2012, Denbury sold $155 mn in non-core properties.
2008A $1,297 $861 ($280) $1,054
2009A $1,035 $551 ($479) $1,010
2010A $1,771 $1,007 ($117) $973
2011E $2,205 $1,391 ($346) $1,350
2012E $2,652 $1,769 ($439) $1,300
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2013-21 Other Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $2,295 $0 $2,295 $2,405 $0 $4,936 $7,340 Size $24 $110
2008A 1.0x 16.6x 32%
2009A 2.4x 9.2x 40%
2010A 2.4x 5.7x 36%
2011E 1.9x 7.9x 34%
2012E 1.7x 8.8x 35% Comps DNR FST PXP WLL Leverage ('11E) 1.9x 2.8x 4.0x 1.2x Coverage ('11E) 7.9x 4.0x 7.0x 22.0x Agency Ratings B1/BBB1/B B1/BB Ba3/BB+
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,600 $0 $110 $1,490 $24 $1,514
1.7x
Maturities: 1200
1000 800 600 400 200 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
57
January 26, 2012
High Yield
Dillard's Inc. (DDS)

Updated: 1/26/12
212-902-6957 212-357-7875
NOT COVERED
Bond Summary Size (MM) $162 Coupon (%) 7.13% Priority Sr Nts Maturity 1-Aug-18 Agency Ratings 0 NC Next Call Price Date NC Bid Price $106.70 YTW (%) 5.88% STW bp 435
Company Description
Dillard's ranks among the nation's largest fashion apparel and home furnishings retailers, with annual revenues of approximately $6.2 billion. The company operates more than 300 Dillard's locations across 29 states, all under the nameplate Dillard's.
Company Strengths: - Significant real estate value - One of the largest regional department store groups - Improving sales trends Company Risks: - Unsecured notes have investment grade covenants (no change-of-control provision) - Strong family involvement limits detailed information on operations - High economic sensitivity; recent comps deceleration
Key Dates/Catalysts: mid-February, quarterly earnings release. Early February, January same stores sales.
Financial Profile Revenue EBITDA Interest Expense Cash TAZes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolving Credit Facility ($1000mm due 2012)
FY08A 6,988.5 166.5 92.9 (132.2) 189.5 16.3 1,209.0 96.8 7.3x 6.7x 1.8x 2.38%
FY09A 6,226.6 421.3 74.0 27.7 78.4 241.2 973.5 341.7 2.3x 1.5x 5.7x 6.77%
FY10A 6,253.5 600.8 73.8 85.4 75.6 366.0 960.0 343.3 1.6x 1.0x 8.1x 9.61%
LTM 6,308.8 687.3 72.3 120.5 118.6 375.9 1,046.0 131.3 1.5x 1.3x 9.5x 10.89%
Comps Bon-Ton Dillard's Express NMG
Yield 46.32% 5.88% 5.98% 7.70%
Ratings B2/BBB3/B+ Caa1/B-
1.9x Caa2/CCC+
Amt 142.0
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings
3Q11A 1,000.0 55.8 142.0 802.0 NA 0 NA 131.3 933.3
Total Secured Debt Senior Notes 7.5% Grnt'd Pfd Beneficial Int. in Sub Debs Capital Lease Total Sub debt Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities: 900 800 700 600 500 400 300 200 100 0 2012 2013
142.0 692.1 200.0 11.9 904.0
0.2x
Revolver Availability A/R facility Borrowings A/R Availability Cash
1046.0 2347.3 3051.7
1.5x 7.2x
Total Liquidity
2014+
58
January 26, 2012
High Yield
DineEquity, Inc. (DIN)

OUTPERFORM
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts
Maturity 30-Oct-18
Agency Ratings B3/CCC+
Next Call Price Date $104.75 30-Oct-14
Bid Price 107.50
YTW (%) 7.59%
STW bp 658 Investment Strengths: - Leading brands in family and casual dining segments - Stable historical operating performance at IHOP - Applebee's turnaround under way - Strong cash flow generation from franchiseheavy model Investment Risks: - Potential inability to refranchise remaining Applebee's restaurants at attractive prices - Highly competitive market - Franchise model limits growth upside
Company Description
DineEquity owns the leading US casual and family dining concepts in Applebee's and IHOP, respectively. Its restaurant base of primarily franchised restaurants generates system-wide sales of approximately $7 billion. The Applebee's system includes more than 2,000 restaurants (approximately 25% company-owned), and the IHOP system includes more than 1,500 restaurants (substantially all franchised). Key Dates/Catalysts: Early March, earnings release.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization 2011E Description
FY09A 1,414.0 352.8 186.5 5.2 15.4 145.8 2,124.6 82.3 6.0x 5.8x 1.9x 24.95%
FY10A 1,333.1 352.0 171.5 (9.3) 18.7 171.1 2,038.9 102.3 5.8x 5.5x 2.1x 26.41%
FY11E 1,069.7 313.6 135.1 26.8 26.3 125.3 1,787.9 53.8 5.7x 5.5x 2.3x 29.31%
3Q10A 299.8 78.1 40.1 (33.6) 7.3 64.4 2,038.9 102.3
3Q11E 236.7 64.5 33.7 5.1 5.5 20.1 1,787.9 53.8
Comps DineEquity Del Monte Carrols
Ratings B3/CCC+ B3/CCC+ B2/B
2.0x 26.06%
1.9x 27.23%
Size 0.0 722.0 722.0 785.2 312.1 1097.3 (31.4) 1787.9 862.8 2596.8
Debt to EBITDA
Revolver ($75mm due 10/31/15) Term Loan (L+300, 1.25 floor due 10/ Total Secured Debt 9.5% Senior Notes due 10/30/18 Capital Leases Total Sub debt Discount Total Debt Market Cap Enterprise Value
2.3x
3Q11A 75.0 15.7 0.0 59.3
5.7x 8.3x
53.9 113.2
Maturities and required debt payments 2,000 1,500 1,000 500 0 2012 2013 2014+
59
January 26, 2012
High Yield
DISH Network Corporation (DISH)

IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
Our In-Line rating reflects the binary nature of the implications from DISH's decision with respect to its spectrum holdings and wireless strategy. On the one hand, DISH could be an attractive acquisition candidate to large telcos that would be interested in DISH's spectrum position if the company can get an FCC waiver. On the other hand, if DISH attempts to pursue a more aggressive wireless strategy that would require meaningful amount of capital, the bonds could be vulnerable given the trading levels, although this is somewhat offset by DISH's strong credit profile currently. Bond Summary Size (MM) $1,400 Coupon (%) 7.875 Issuing Entity / Priority DISH DBS Sr Nts Maturity 1-Sep-19 Agency Ratings Ba3/BBNC Next Call Price Date NC Bid Price 114.75 YTW (%) 5.47 STW bp 380
Company Description
DISH Network Corporation, a publicly traded holding company (Ticker: DISH), is a leading provider of satellitedelivered digital television to customers across the United States. As of September 30, 2011, DISH Network had approximately 14.0 million subscribers. Key Dates/Catalysts: February 2012: 4Q2011 earnings. Update on plans for spectrum and other potential investments/acquisitions. FCC decision on whether or not to grant DISH a waiver to operate a terrestrial network without a satellite component in its 2Ghz spectrum band.
Investment Strengths: (1) Solid credit fundamentals: DISH exhibits some of the strongest credit metrics in the US cable & satellite sector, with LTM gross leverage of 2.4x (1.4x net) and significant free cash flow generation. (2) Strong liquidity. (3) Strategic optionality due to its spectrum holdings. The looming spectrum shortage in the U.S. wireless space has led to speculation that DISH could be attractive to a higher quality company. Investment Risks: (1) Technological limitations: Unlike the cable companies, the business model of DBS providers is video-only. (2) DISH has been very acquisitive recently, and the management team has not delineated a long-term capital allocation strategy to investors. (3) The lack of clarity with respect to the company's wireless plans could serve as a credit overhang. A costly plan to enter the wireless market could be negative for the credit.
Financial Profile Subscribers Revenue Adj. EBITDA Cash Flow From Ops CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/Adj. EBITDA Net Debt/Adj. EBITDA Adj. EBITDA/Interest Adj. EBITDA Margin Capitalization *
FY09A 14,100 $11,664 2,688 $2,195 (1,037) $1,157 $6,497 2,139 $4,357 2.4x 1.6x 7.5x 23.0%
FY10A 14,133 $12,641 3,150 $2,140 (1,216) $924 $6,515 2,940 $3,575 2.1x 1.1x 7.3x 24.9%
2Q11A 14,056 $3,590 979 $414 (170) $244 $8,501 4,593 $3,909 2.5x 1.1x 7.5x 27.3%
3Q11A 13,945 $3,603 854 $733 (191) $542 $8,407 3,365 $5,043 2.4x 1.4x 6.9x 23.7%
4Q11E 13,930 $3,646 783 $815 (295) $519 $7,490 2,075 $5,415 2.1x 1.6x 6.6x 21.5%
FY11E 13,930 $14,062 3,488 $2,806 (889) $1,917 $7,490 2,075 $5,415 2.1x 1.6x 6.6x 24.8%
Agency Comps CSC Holdings Videotron Charter - CCOH Leverage 3.1x 2.0x 4.3x Coverage 3.2x 6.7x 2.8x Ratings Ba3/BB Ba1/BB B1/BB-
Debt to Description Capital leases and other debt Total Capital Leases and Other Debt DDBS 7.000% Sr Nts due 2013 DDBS 6.625% Sr Nts due 2014 DDBS 7.750% Sr Nts due 2015 DDBS 7.125% Sr Nts due 2016 DDBS 7.875% Sr Nts due 2019 DDBS 6.750% Sr Nts due 2021 Total DDBS Debt Net Debt Market Cap Enterprise Value Maturities: 6,000 5,000 4,000 3,000 2,000 1,000 0 2012 2013 2014 2015 2016+ 500 1,000 750 5,243 Size $343 $343 500 1,000 750 1,500 1,400 2,000 $7,493 5,043 11,216 16,258 4.6x 2.1x 1.4x Total Liquidity $2,450 *Includes marketable investment securities and pro forma for the redemption of the $914mn of the 6.375% senior notes due 2011 on October 1, 2011. Cash* $2,450 0.1x EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $0 -
* Pro forma for the redemption of the 6.375% senior notes due 2011, which matured on October 1, 2011.
60
January 26, 2012
High Yield
Dole Foods
IN-LINE
Updated: 1/26/12
212-902-6957 202-357-7875
Priority Sr Sec Nts
Maturity 1-Oct-16
Next Call Price Date $104.00 10/1/2012
Bid Price 106.13
YTW (%) 4.54
STW bp 409 Investment Strengths: - Strong, diversified global brand - Holds No. 1 or No. 2 position in the major markets in which it competes (bananas, pineapples, packaged salads, fruit cups) - Owns more than 20,000 acres in Oahu - Strong management team Investment Risks: - Exposure to fluctuations in currency, commodity pricing, and fuel. - Has shown increased appetite for acquisitions
Company Description
Founded in Hawaii in 1851, Dole is the world's largest producer and marketer of high-quality fresh fruit and fresh vegetables. The company does business in more than 90 countries. Dole also markets a growing line of packaged and frozen foods, and is a produce industry leader in nutrition education and research.
Key Dates/Catalysts: Mid-Late March; fourth quarter earnings release
FY09A 6,778.6 416.5 206.0 21.7 51.2 137.6 1,598.3 120.0 3.8x 3.5x 2.0x 6.1%
FY10A 6,892.6 318.4 164.0 13.4 108.0 33.1 1,603.6 170.1 5.0x 4.5x 1.9x 4.6%
FY11E 7,251.5 387.7 145.9 20.2 80.8 140.8 1,613.0 230.8 4.2x 3.6x 2.7x 5.3%
4Q10A 1,556.6 19.6 36.6 (6.4) 48.0 (58.7) 1,603.6 170.1
4Q11E 1,563.6 72.3 34.2 1.4 25.0 11.6 1,613.0 230.8
Comps Chiquita Dole Dean Foods
Ratings Caa1/BB2/B+ B2/B-
0.5x 1.3%
2.1x 6.3%
Size 0.0 897.8 174.9 315.0 1387.7 0.0 155.0 36.5 57.2 248.7
Debt to EBITDA
Revolver ($350mm Capacity due 2016 Term Loans due 7/13/18 L+375 13 7/8% Sr Sec Notes due 3/15/14 8% Sr Sec Notes due 10/1/16 Total Secured Debt 8.875 Sr Notes due 3/15/11 8.75% Debs due 7/15/13 Various Notes due 2003-2014 Capital Leases Total Sub debt
3Q11A 350.0 82.1 0.0 227.6 NA 0.0 NA
3.6x
Revolver Availability A/R facility Borrowings A/R Availability
4.2x Cash Total Liquidity 190.6 418.2
Total Debt Market Cap Enterprise Value Maturities: 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013
1614.4 815.2 2259.5
4.2x 5.8x
2014+
61
January 26, 2012
High Yield
DR Horton Inc. (DHI)

OUTPERFORM
Updated
1/26/2012
212-357-6157 212-902-0459
We rate DR Horton's 6.5% senior unsecured notes of 2016 Outperform. At current spread levels, we think the Horton bonds offer room for outperformance versus similarly rated, comparably levered peers. Horton has been the most proactive among its peer group in terms of debt reduction; as a result, we believe that its credit metrics should continue to improve relative to peers, and that the current spread differential between the DHI 6.5s and their tighter-trading comparables will converge. Bond Summary GS Rating OP Size (MM) 409 Coupon (%) 6.5 Priority Sr. Nts Maturity 15-Apr-16 Agency Ratings Ba3/BBNext Call Price MW Date Bid Price 105 YTW (%) 5.16% OAS bp 451
Company Description
DR Horton is one the largest homebuilders in the United States, with operations in 26 states and 71 markets. The company is primarily focused on the entry level segment and favors a "spec strategy." Key Dates/Catalysts: 1QFY12 earning release Further debt reduction
Investment Strengths: - Largest homebuilder in the United States based on LTM closings. - Broad geographic footprint. - Focus on entry level segment and spec strategy have enabled market share gains. - Lean cost structure, with one of the lowest SG&A/sales ratios among its peer group. - Conservative management team, committed to debt reduction. Investment Risks: - Spec strategy could result in inventory overhang issues, which might require pricing reductions and compress gross margins. -Share buybacks.
Financial Profile ($, mn)* Total Revenues Total Adjusted EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Balance Sheet Debt Total Cash and Cash Equivalents Key Credit Statistics Homebuilding Debt / Capitalization Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) Homebuilding Gross Margin (1)
FY:10 4,400 377 (173) 423 (19) 619 2,172 1,661 44% 15% 1.7x 20%
FY:11 3,637 213 (131) 63 (16) (107) 1,705 1,079 38% 18% NA 19%
FY:12E 4,123 322 (88) (12) 124 1,705 1,200 37% 14% NA 20%
4Q:11 1,098 83 (30) 4 (4) 62 1,705 1,079 38% 18% 2.2x 18%
4Q:11 1,098 83 (30) 4 (4) 62 1,705 1,079 38% 18% 2.2x 18%
1Q:12E 930 65 (22) (3) 3 1,705 1,079 38% 17% NA 19% Comps DR Horton Toll Ryland Debt-toCap 38% 38% 64% Inventoryto-Debt 2.2x 2.1x 0.9x Ratings Ba1/BB+ Ba3/BBB1/BB-
PF Capitalization ($, mn) Description Mortgage repurchase facility Other secured Total Secured 6% senior notes 7.875% senior notes 5.375% senior notes 6.875% senior notes 6.125% senior notes 2% convertible senior notes 5.625% senior notes 5.25% senior bonds 5.625% senior notes 6.5% senior notes Total debt outstanding Minority Interest Share Price Market Capitalization Enterprise Value Size 117 6 122 172 145 418 138 157 170 383 1,705 2.9 14.1 4,467 5,095 Liquidity Homebuilding Cash Marketable Securities Financial Services Cash Restricted Cash Total Cash 716 298 17 49 1,079
Maturities: 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016
62
January 26, 2012
High Yield
Dynegy Holdings, LLC (DYN)

Updated 1/25/2012
212-357-5764 212-902-9355
NOT COVERED
Bond Summary Size (MM) $1,100 Coupon (%) 7.75 Priority Sr Unsec'd Maturity 1-Jun-19 Agency Ratings --/D -Next Call Price Date -Bid Price 58.500 YTW (%) 17.382 STW bp 1543
Dynegy Inc. (DYN) is engaged in the production and sale of electric energy with about 11.6GW of generation capacity. DYN is the parent to Dynegy Holdings, LLC, which is an intermediate-holding company that indirectly owns the company's 6.77GW of gas-fired generation held under Dynegy Power, LLC (GasCo) and Dynegy Northeast Generation, which holds the company's 1.7GW of plants related to Danskammer and Roseton. The company's 3.1GW coal-fired generation portfolio is held under Dynegy Midwest Generation LLC (CoalCo), which is an indirect subsidiary of DYN. On a consolidated basis, the company's generation portfolio operates in three regions: Midwest (42% of capacity), West (29%), and Northeast (29%). Baseload capacity accounts for 29% of total production. In November 2011, Dynegy Holdings and four of its subsidiaries (Dynegy Northeast Generation, Hudson Power LLC, Dynegy Danskammar LLC and Dynegy Roseton, LLC filed a petition for Chapter 11 bankruptcy protection. Key Dates/Catalysts: - In early March, DYN is expected to report 4Q2011 earnings. Key areas of focus will be further clarity on the company's Ch. 11 debt restructuring, the company's current environmental compliance plan and hedging strategy. In a January 23 8K filing, the company indicated consolidated EBITDA of $245.1 million for 2012 and $459.7 million for 2013 with net debt of about $2.2 billion. - Ongoing developments related to the company's Chapter 11 bankruptcy filing.
Company Description
Company Strengths: - Generation portfolio diversity based on fuel, dispatch, and geographical location. Also the company's Baldwin coal plant is largely scrubbed. - Spending will decline over time owing to lower environmental expenditures. Capex is budgeted at $227 million for 2012, but declines to $141.9 million for 2013. - New management team with extensive industry experience. - Emphasis on cost cutting with targeted fixed cost reduction of $49 million in 2011 over 2010 and an additional $36 million expected in 2012. - First lien agreement hedging may free cash collateral. Company Risks: - Leverage remains high. - Cash flow are exposed to volatile commodities market, which may pressure margins given the declining hedge profile and gas price environment. Hedges are 48%/20% in 2012 and 14%/3% in 2013 for GasCo/CoalCo. - Future environmental requirements may entail additional costs and spending. Remaining environmental capital spend is about $160 million through 1Q2013. Estimated total capital expenditures are approximately $960 million.
Financial Profile Gross Margin EBITDA - ex MtM and items EBITDAR - ex M2M Interest Expense Cash Taxes CapEx Free Cash Flow Lease Adjusted Debt Cash Net Debt Key Credit Statistics Lease Adj Debt/EBITDAR Net Lease Adj Debt/EBITDAR EBITDAR/Interest EBITDAR/Gross Margin Capitalization-As of September 30, 2011 Description Roseton/Danskammer Pass-thru* Sithe Total Subsidiary/SLOB Debt Dynegy Power (GasCo) Dynegy Midwest Generation (CoalCo) Other Total Secured and Subsidiary debt Dynegy Holdings debt DHI 8.75% due 2012 DHI 7.5% due 2015 DHI 7.5% due 2015 DHI 8.375% due 2016 DHI 7.125% due 2018 DHI 7.75% due 2019 DHI 7.625% due 2026 Other Total Senior Debt DHI Subordinated 8.316% due 2027 Total debt Cash ex collateral posting Net debt Market Cap Enterprise Value (Net Debt) *Off-balance sheet Maturities: 900 800 700 600 500 400 300 200 100 0 2012 2013
FY08 1,696 792 885 (447) (23) (611) (115) 5,140 694 4,446 5.8x 5.0x 2.0x 52%
FY09 1,274 776 873 (421) (2) (612) (252) 4,332 471 3,861 5.0x 4.4x 2.1x 69%
FY10 1,142 510 563 (367) (7) (333) (174) 4,474 291 4,183 8.0x 7.4x 1.5x 49%
LTM3Q11 689 351 404 (378) (7) (248) (286) 4,133 881 3,252 10.2x 8.1x 1.1x 59%
*AES reflects sub distributions to parent obligations; LTM4Q2011
Size 550 550 1,078 588 2,216 89 771 1,044 172 1,100 171 5,563 200 5,763 768 4,995 252 5,247
Debt to EBITDAR
Liquidity - As of Nov. 8, 2011
Revolver Size 1.4x Synthetic LOC Size Total facilities Letters of Credit Borrowings Revolver Availability 5.5x Cash Balances
Dynegy Inc. Dynegy Holdings Dynegy Gas HoldCo Dynegy Coal HoldCo Dynegy Power (GasCo) Dynegy Midwest Generation (CoalCo) Collateral Posting Account & Other
660 660 (475) (19) 166 80 12 170 190 106 210 135 1,069
Total Liquidity 13.8x 14.3x 12.4x
13.0x
2014
2015
63
January 26, 2012
High Yield
Edison Mission Energy (EIX)

IN-LINE
Bond Summary Size (MM) $1,200 Coupon (%) 7.00 Priority Sr Unsec'd Maturity 15-May-17 Agency Ratings Caa1/B-
Updated 1/25/2012
212-357-5764 212-902-9355
Next Call Price MW+50 Date --
Bid Price 55.500
YTW (%) 21.454
STW bp 2066
Company Description
Edison Mission Energy is an independent power production company that owns, operates, develops, and sells energy and capacity. Edison Mission's ultimate parent is Edison International (EIX), which also owns Southern California Edison Co., a regulated electric utility. Through a series of intermediate holding companies, Edison Mission owns Midwest Generation, a portfolio of 5.2GW of generating plants in Illinois, and EME Homer City Generation, which owns a 1.88GW of generating capacity in Pennsylvania. Mission operates roughly 10.3GW of generation capacity, with coal accounting for about 7.1GW. The portfolio also includes 1.68GW of wind capacity, with another 185MW under construction. Key Dates/Catalysts: - On February 29, EIX expects to report 4Q2011 results. Along with a business and environmental spend update, we will focus on future wind expenditures and environmental plans and hedging position. The company expects adjusted EBITDA of $529 million in 2011 at Edison Mission Group. - June 2012, the company's credit facilities expire. Also the company has a 2013 bond maturity. - Update on the environmental spending strategy to comply with the Illinois consent decree projected at $1.2 bn at Midwest Gen and Homer City's environmental spending of $500-$700 million. - The three rating agencies have Edison Mission on review for downgrade or a negative outlook. - Status of the construction of the 479MW Walnut Creek plant. - In May 2012, results of the PJM RPM 2015-2016 capacity auction are expected.
Investment Strengths: - Generation portfolio provides a degree of asset protection, with about 921MW of unencumbered wind assets. Overall, wind business is mostly contracted. - Tax-credits and vendor/bank financings are expected to help fund its wind development program. Also, tax-sharing with parent, EIX, could provide a benefit. - Near-term liquidity is supported by the company's large cash balance of $1.3 billion. - Coal assets are eligible for PJM capacity auction revenues. Investment Risks: - Leverage is expected to rise to over 10x on a leaseadjusted debt to EBITDAR ratio owing to negative free cash flow due to lower margins as a result of lower realized power prices and higher coal transportation costs. - The lowest hedges amongst IPPs: Midwest Gen's energy output is 29% hedged for 2012. Homer City's hedged energy output is about 12% for 2012. - More-aggressive stance in dealing with bondholders. - Future environmental requirements will elevate spending to comply with the Illinois consent decree, with about $1.2 billion for SO2 compliance. - Expiration of the company's rail contract may result in higher transportation and fuel costs after 2011. - Refinancing requirements tied to the maturity of its 2012 bank line and 2013 bond. - Lack of explicit support from parent.
Financial Profile Revenue EBITDA EBITDAR Interest Expense Cash Taxes CapEx Free Cash Flow Lease Adjusted Debt* Cash Net Debt Key Credit Statistics Lease Adj Debt/EBITDAR Net Lease Adj Debt/EBITDAR EBITDAR/Interest EBITDAR margin Capitalization Description Midwest Generation WC facility ($500) Midwest Generation pass-thru Homer City Funding pass-thru Project financing and other subsidiary debt Total Project/Subsidiary Level Debt EME secured revolver ($564) EME 7.5% due 2013 EME 7.75% due 2016 EME 7% due 5/15/17 EME 7.2% due 5/15/12019 EME 7.5625% due 5/15/27 Other debt Total Edison Mission Debt Cash Total Net Debt Market Cap Enterprise Value
FY09 2,317 729 906 (458) (344) (562) 137 5,406 796 4,610 6.0x 5.1x 2.0x 39%
FY10 2,368 704 880 (385) (263) (736) (119) 5,677 1,075 4,602 6.5x 5.2x 2.3x 37%
FY11E 2,224 465 641 (451) (349) (690) (468) 5,760 1,417 4,343 9.0x 6.8x 1.4x 29%
FY12E 2,248 259 435 (411) (320) (565) (450) 5,368 1,101 4,267 12.3x 9.8x 1.1x 19%
LTM3Q11 2,239 504 680 (479) (306) (744) (433) 5,763 1,235 4,528 8.5x 6.7x 1.4x 30%
Size 460 678 926 2,063 500 500 1,200 800 700 5,763 1,235 4,528 NA NA
Debt to EBITDAR
Liquidity Midwest Gen WC facility EME secured revolver Total Revolvers Outstanding 500 564 1,064 (68) 996 734 333 108 60 1,235 2,231
3.0x
LOC Revolver Availability Cash EME - Unrestricted MWG Homer City Other Total Cash Total Available Liquidity
8.5x 6.7x
Maturities (excluding sale-lease back debt): 700 600 500 400 300 200 100 0 2012 2013 2014
64
January 26, 2012
High Yield
El Paso Corp. (EP)

NOT RATED
Bond Summary Size (MM) $477 Coupon (%) 7.250% Priority Sr. Maturity 6/1/2018 Agency Ratings Ba3/BB-
Updated:
1/26/12
(212) 902-3585 (212) 902-2514
Bid Price $111.50
YTW (%) 5.10%
STW bp 394 Company Strengths: Largest pipeline company in US, with significant growth opportunities Pipeline business is extremely stable and insulated from fluctuations in commodity prices Company Risks: Total debt is still more than $13 bn Natural gas exposure Key Dates/Catalysts: Further non-core asset sales, including dropdowns to the MLP Completion of acquisition by Kinder Morgan
Company Description
El Paso has transformed itself from a diversified production, processing, power, and pipeline conglomerate to a pure play focused on E&P and pipeline activities. The company's pipeline network is a world-class asset, with significant capacity expansions available. The E&P business has attractive opportunities in the Haynesville and Eagle Ford shales, as well as the Altamount oil program. In 2003, El Paso had $22.5 bn of debt, debt/cap of 83%, and EBITDA/interest expense of 0.9x. The company's E&P business experienced significant reserve write-downs, particularly from EP's Gulf of Mexico properties. As a result of operational and liquidity challenges, EP significantly underperformed the peer group from 2003 to 2006. Beginning in 2H2005 EP began selling non-core assets and raised $5.8 bn for debt reduction. Debt came down to just over $14 bn by the end of 2006. The company streamlined the business portfolio from five segments to two by 2007: pipelines and E&P. EP also restructured its E&P business, consolidating all E&P operations into El Paso Exploration and Production Company, increasing reserve life (RP ratio from six years in 2003 to almost 10 in 2006) and reducing its focus on higher-risk offshore prospects. EP acquired E&P company Medicine Bow Energy Corp. in August 2005 for $800 mn. In February 2007, EP sold its ANR pipeline to TransCanada for $4.14 bn. In August 2007, EP acquired Houston-based E&P People's Production for $875 mn in cash. People's had significant assets in Arkansas, Louisiana, and Texas particularly South Texas. In December 2008, EP raised $200 mn through sales of non-core assets, including a stake in a Brazilian power plant. In 2010, the company began actively dropping assets down into its MLP, raising approximately $2.4 bn YTD. The company announced its first dropdown of 2011 in March with the sale of 22% of Southern Natural Gas Company to EPB for $587 mn. In May 2011, El Paso announced plans to separate the company, with plans to spin off the E&P business. In October 2011, Kinder Morgan agreed to acquire El Paso for $26.87/share. The transaction is pending. Financial Profile Revenue EBITDA (Adj for non-cash items) Free Operating Cash Flow Capital Expenditures 2007A $4,648 $3,080 ($690) $2,495 2008A $5,153 $3,425 ($387) $2,757 2009A $4,949 $3,243 ($695) $2,810 2010A $4,637 $3,263 ($2,228) $4,073
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes, various Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $12,181 $12,181 $13,431 $0 $4,376 $17,807 Size $390 $1,250
2007A 4.2x 3.1x 71%
2008A 2.3x 6.7x 78%
2009A 2.7x 3.0x 81%
2010A 4.6x 3.1x 78%
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $3,250 $600 $1,250 $1,400 $390 $1,790 EP
Comps WMB
Leverage ('10) 4.6x 2.8x
Coverage ('10) 3.1x 5.1x
Agency Ratings Ba3/BBA3/A-
4.5x
Total Liquidity
Maturities:
2500
2000 1500 1000 500 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
65
January 26, 2012
High Yield
Elan Corporation (ELN)

IN-LINE
Updated 01/25/12
212-855-7718 212-902-9758
We continue to rate ELN In-Line. While proactive debt repurchase seems more likely than we previously thought, we believe this is fully reflected at current levels. The first call price is $108.75 in October 2012. Elan EBITDA is now completely derived from one drug and leverage remains moderately high at 3.6x on a 3Q2011 annualized basis. Bond Summary Size (MM) $625 Coupon (%) 8.75 Priority Sr. Uns. Maturity 15-Oct-16 Agency Ratings B2/B Next Call Price $108.750 Date 10/15/2012 Bid Price $109.375 YTW (%) 5.402% STW bp 518 Investment Strengths: - Sizable equity market cap provides cushion to bonds. - Large cash balance. ELN also has a 25% stake in ALKS, a $1.6 bn company. ELN could monetize this over time and use the proceeds to further delever. - Differentiated science. Widely recognized superior efficacy of Tysabri in an underserved multiple sclerosis patient population.
Company Description
Elan is a neuro-science based biotech company focused on autoimmune diseases such as multiple sclerosis, and neurodegenerative diseases such as Alzheimers and Parkinson's. The franchise drug Tysabri was introduced to treat MS in November 2004. Three months later, ELN and Biogen (BIIB) pulled the drug due to three cases (two fatal) of PML, a very rare brain infection. The FDA re-approved Tysabri in June 2006 and the drug was also approved for commercial distribution in July 2006 in the EU. Elan owns a 25% stake in a leading Alzheimer's disease drug candidate, bapineuzumab. Pfizer and Johnson & Johnson (JNJ) are the partners. In September 2010, two of ELN's directors resigned from the board after auditor McKenna Long & Aldridge cleared ELN of any wrongdoing despite shareholder and director allegations. In May 2011, ELN announced the sale of EDT (a contract manufacturer) to Alkermes for $500 mn in cash and $460 mn in shares. ELN closed the sale of EDT in mid September 2011. ELN has tendered at par for the 2016s and the 2013 FRNs, and at $103.239 for the 2013s. In 3Q11, ELN announced that post quarter end, it repurchased $200 mn face value of the 2016 notes in a private transaction. Key Dates/Catalysts: - Expected debt repayment. Monetization of Alkermes stock position over time could result in additional debt reduction. - Quarterly earnings - especially Tysabri adoption. - Market uptake of oral MS drugs Gilenia (Novartis) and updates on oral drug candidate BG-12 (Biogen). - From JNJ and Pfizer: mid-2012 data on Phase III trials for Alzheimer's disease drug bapineuzumab.
Investment Risks: - Very concentrated revenue base. Post the sale of EDT, ELN EBITDA is now completely derived from one drug. - Likely need to contribute funding to JAI's bapineuzumab in 1H2012. As of 3Q11, JAI has roughly $126 mn of the original $500 mn JNJ funding remaining and its current spend rate is $50 mn per quarter to fund its AIP programs. - Tysabri adoption: The incidence of PML is rising as more patients remain on the drug beyond 24 months. This and Gilenia (oral MS drug) are major competitive concerns.
Financial Profile Revenue EBITDA Interest Expense, net Cash Taxes CapEx Free Cash Flow Total Debt Cash & marketable securities Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
2009A $1,113 96 $138 46 39 (125) $1,540 844 696 16.0x 7.2x 0.7x 8.6%
2010A $1,170 166 $118 2 44 24 $1,285 422 863 7.7x 5.2x 1.4x 14.2%
2011E* $1,263 227 $103 4 31 (20) $626 343 283 2.8x 1.2x 2.2x 18.0%
4Q10A $309 46 $29 (1) 10 1 $1,285 422 863
3Q11A $329 60 $28 (5) 10 93 $1,285 1,009 276
4Q11E $288 44 $14 0 10 7 $626 343 283 LTM Comps Elan Pharma (ELN) Bausch & Lomb (BOL) Leverage 4.8x 5.0x 5.6x Coverage 2.4x 3.4x NA Agency Ratings B2/B Caa1/B Caa1/B
1.6x 14.9%
2.1x 18.4%
3.2x 15.3%
Catalent (PTSAC) snr
*2011E estimate includes 3 historical quarters containing EDT revenue. Capitalization - Pro forma for the sale of EDT Debt to PF LTM EBITDA** 0.0x
Description Term Loans Total Sr Sec debt 8.875% Sr. Notes due 12/1/2013* L+412.5 Sr. Notes due12/1/2013* 8.75% Sr Notes due 10/15/2016* Total Sr debt Other Total Debt Market Cap Enterprise Value * PF for debt pay down after 3Q11 quarter end.
Actual $0 0 2 0 625 626 $0 $626 8,251 $8,527
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility $0 0 0 0 $0 0 0 $350 $350
4.8x
Borrowings A/R Availability
4.8x 64.9x
Cash & marketable securities* Total Liquidity
* 3Q11 cash less proceeds for post quarter paydown of debt.
** PF LTM EBITDA is actual LTM EBITDA less EDT EBITDA. Maturities: 700 600 500 400 300 200 100 0 2012 2013 2014 2015+
66
January 26, 2012
High Yield
Emergency Medical Services

Updated 01/25/12
212-855-7718 212-902-9758
NOT COVERED
Bond Summary Size (MM) $950 Coupon (%) 8.125 Priority Sr Maturity 1-Jun-19 Agency Ratings Caa1/BNext Call Price 106.094 Date 6/1/2014 Bid Price $101.500 YTW (%) 7.772% STW bp 698 Company Strengths: - EMS's scale and geographic outreach provide a competitive advantage over smaller players. AMR operates in 38 states and EmCare provides services in 40 states. - By law, most communities are required to provide ambulatory services. Approximately 86% of EMS's net revenues are generated under exclusive contracts. Non-emergency services are under non-exclusive contracts. Company Risks: - EmCare's business model of targeting smaller hospitals in tough markets could be risky even though EmCare may obtain subsidies or walk-away rights. EMS walked away from 17 contracts in 3Q2010, which was higher than the company's historical average in the low teens. - Weak hospital utilization could imply weak results for EMS unless ER utilization picks up. - Highly levered at low 7x.
EMS is a provider of medical transportation services and facility-based physician services in the US, operating under two brands: American Medical Response or AMR (48% of revenue) and EmCare (52%). AMR provides pre and post hospital transport for both emergency and non-emergency, ground and fixed-wing air. AMR has roughly a 7% market share of the total ambulance market. EmCare provides facility-based physician services, including ER staffing, inpatient services, radiology, and anesthesiology. EmCare has roughly an 8% market share of the ER services market. In May 2011, Clayton, Dubilier & Rice acquired EMS for $3.2 bn. Key Dates/Catalysts: - Quarterly earnings announcements. (In 3Q2010, EMS walked away from 17contracts, which is higher than the company's historal average in the low teens; terminating more unprofitable contracts could depress earnings.) - Potential acquisitions as the ambulatory services market is fragmented. - Potential extension of "Medicare Extenders" to keep ambulance rates from being cut. - Reimbursement risk surrounding the Medicare "doc fix". Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver 5/25/2016 Term Loan due 2018 Total Sr Sec debt 8.125% Senior notes 6/1/2019 Total Sr debt Other Total Debt Market Cap Enterprise Value Maturities: 3000 2500 2000 1500 1000 500 0 2012 2013 2014 2015+ Size 0 1440 1440 950 950 2 $2,392 NA NA 7.3x 7.3x 4.4x
Debt to LTM EBITDA
2009A $2,570 281 $41 69 45 183 $454 333 121
2010A $2,859 318 $23 85 49 87 $421 287 134
4Q10A $734 81 $5 22 18 11 $421 287 134
1Q11A $761 84 $5 23 15 41 $411 335 76
2Q11A $780 73 $21 1 6 22 $2,392 187 2,205
3Q11A $788 89 $44 4 16 22
Agency Comps Leverage 7.3x 6.0x 4.6x Coverage 1.9x 2.1x 4.4x Ratings Caa1/BCaa1/CCC+ B3/BEMS IAS KND
$2,373 134 2,239
1.6x 0.4x 6.9x 11.0%
1.3x 0.4x 13.9x 11.1%
5.2x 1.6x 17.2x 11.1% 17.5x 11.1% 3.5x 9.3% 2.0x 11.3%
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $350 0 0 350 $134 484
67
January 26, 2012
High Yield
Endo Pharmaceuticals (ENDP)

UNDERPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate ENDP Underperform. While the company has a stated leverage target of 2-2.5x by 2013, has repaid debt in 3Q, and expects further repayment in 4Q, we see this as already priced in to the bonds. Thus, we think risk is to the downside. We also think potential risk surrounding (1) the transition to new Opana ER and (2) unknown fate of Lidoderm as Watsons 30-month stay expires June 2012, could cause the pace of delevering to slow or lead the company to pursue acquisitions to fill top line. Bond Summary Size (MM) $500 Coupon (%) 7.000 Priority Sr. Maturity 15-Jul-19 Agency Ratings Ba3/BBNext Call Price $103.500 Date 15-Jul-15 Bid Price $108.500 YTW (%) 5.191% STW bp 440 Investment Strengths: - Stated leverage target range of 2x-2.5x. ENDP has stated that its focus post the AMMD acquisition would be to delever. However, the pace of delevering will depend on management appetite for bolt-on acquisitions. - Medical devices products are lower risk profile than pharma due to their shorter and less expensive development time frame and lack of a sharp patent cliff. Entry into medical devices segment also reduced revenue exposure to Lidoderm. - Concentrated focus on pain and urology across its segments could present unique cross-selling opportunities. Management also sees urology as a favorable specialty due to the aging population and a shift toward more minimally invasive procedures. Investment Risks: - Revenue concentration is high with Lidoderm at 28% of LTM PF sales. Consensus estimates imply generic entry some time between 2014-2015, but we see risk that a settlement could allow earlier competition. ENDP has settled with generic companies regarding challenges to Opana and Opana ER. - An unsuccessful transition to the new formulation of Opana ER could cause market share loss as it did with the Oxycontin transition (Oxycontin is made by Purdue). - Small "conglomerate" strategy could be risky. The few companies that have both substantial pharma, medical device and other healthcare segments are large companies with substantial scale in R&D and marketing such as JNJ, ABT and AGN. Financial Profile Revenue EBITDA Interest Expense, net Cash Taxes CapEx Free Cash Flow Total Debt Cash & marketable securities Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Debt to LTM EBITDA Debt to 2012E EBITDA 1.8x 1.1x 14.4x 39.0% 3.6x 3.2x 4.9x 35.9% 3.7x 3.1x 7.3x 36.5% 14.6x 39.4% 5.4x 37.3% 7.5x 37.1% 2010A $1,716 670 $47 134 20 434 $1,185 466 718 PF LTM* $2,885 1,037 $211 131 47 566 $3,735 420 3,315 2011E $2,732 998 $137 154 54 574 $3,721 641 3,080 4Q10A $511 201 $14 31 9 162 $1,185 466 718 3Q11A $759 283 $53 34 15 190 $3,735 420 3,315 4Q11E $805 299 $40 54 16 193 $3,721 641 3,080 LTM Comps Endo (ENDP) Warner Chilcott (WCRX) Valeant (VRX) Mylan (MYL) Leverage 3.6x 2.7x 4.3x 3.1x Coverage 4.9x 5.8x 4.6x 4.6x Agency Ratings Ba3/BBB3/B+ B1/BBB1/BB-
Company Description
Endo Pharmaceuticals is a specialty pharma and medical device company specializing in pain, urology, endocrinology and oncology with a portfolio of branded drugs, generic drugs, medical devices, capital equipment and practice management services. Endo sells 175 products, with its largest product Lidoderm, a pain patch, contributing 28% of LTM PF sales. Lidoderm has patent protection until 2015 but two generic companies WPI and MYL have filed paragraph IV challenges. Consensus assumes generic entry some time in 2014-2015. WPI's 30month stay expires June 2012. In December 2010, ENDP closed its acquisition of Qualitest, making it the fifth largest player in generics. It also enhanced ENDP's pain franchise as 40% of Qualitest sales had been in pain. In June 2011, ENDP closed its acquisition of American Medical Systems (AMMD), which it financed with over $2.5 billion of debt. AMMD added critical mass to ENDP's medical device and urology presence. In December 2011, ENDP received approval for its new tamper resistant formulation of Opana ER. In January 2012, ENDP announced that there may be shortages of Opana and other opiod products due to the temporary shutdown of Novartis' plant in Lincoln, Nebraska. Management expects full production levels of the new formulation by the end of 1Q or early 2Q2012. Key Dates/Catalysts: - Quarterly earnings. Management has guided to high single digit growth in devices which we think could prove too optimistic. Transition to the new formulation of Opana ER will be important for the franchise. - Potential settlement on Lidoderm patent challenges from WPI and MYL that could allow generic entry prior to the 2015 patent expiration. Trial is set for February 2012. WPI's 30-month stay expires June 2012.
*PF LTM includes a full year impact of all acquisitions. 2011E does not.
Description Revolver Term Loan A 4/14/2016 Term Loan B 4/14/2018 Total Sr Sec debt 7% senior notes due 12/15/2020 7% senior notes due 7/15/2019 7.25% senior notes due 1/15/2022 Total Sub debt 1.75% Sub Convertible notes 4/15/15 Other Total Debt Market Cap Enterprise Value Maturities: 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013
Amount $0 $1,486 $563 2,049 400 500 $400 1,300 $380 $5 $3,734 NA NA
2.0x
2.0x
Revolver Availability Cash & marketable securities Total Liquidity
3.2x
3.4x
3.6x
3.7x
2014
2015+
68
January 26, 2012
High Yield
Energy XXI (EXXI)

OUTPERFORM
Bond Summary Size (MM) $750 Coupon (%) 9.250% Priority Sr. Maturity 12/15/2017 Agency Ratings Caa1/B
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $110.75
YTW (%) 6.57%
STW bp 627 Investment Strengths: MitEnergy and XOM acquisitions greatly enhance scale Multiple exploration catalysts and growth opportunities, with Davy Jones as the highlight Investment Risks: Singularly focused on the US Gulf of Mexico; low asset diversification Exposed to new regulations facing the Gulf following the Macondo spill Aggressive debt-financed acquisition history Short operating history Key Dates/Catalysts: Flow tests from Davy Jones I and II First production from Davy Jones, expected in 1Q2012 Drilling at newly acquired Exxon Mobile (XOM) properties Booking of reserves from Davy Jones Additional acquisitions
Company Description
EXXI is a Gulf of Mexico producer that has grown through debt-financed acquisitions and has significant exploration upside. The company's strategy is to acquire mature oilfields; management has indicated it is not interested in unconventional resource plays. EXXI was initially established in July 2005 as a special purpose acquisition vehicle in London. The company went public in October 2005, and has since made several significant US GOM acquisitions. In February 2006, the company acquired Marlin Energy for $407 mn. In July 2006, it acquired Louisiana Gulf Coast producing properties from Castex for $312 mn. In June 2007, the company acquired Pogo's GOM shelf properties for $417 mn. In November 2009, Energy XXI announced it would acquire GOM shelf oil and gas properties from MitEnergy Upstream for $283 mn. These properties represent the remainder of the former Pogo properties. In November 2010, the company announced the acquisition of six GOM properties from ExxonMobil for $1.01 bn.
2008A $572 $376 $18 $353
2009A $417 $250 ($20) $119
2010A $607 $346 $10 $226
2011E $1,099 $666 $259 $378
2012E $320 $214 $77 $113
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2017 Senior notes 2019 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $750 $250 $1,000 $1,034 $0 $1,151 $2,185 2.0x Size $18 $750 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $750 $232 $29 $489 $18 $508 2008A 2.8x 4.0x 76% 2009A 3.8x 2.9x 67% 2010A 4.2x 4.0x 59% 2011E 1.7x 6.0x 45% 2012E 1.6x 7.1x 44% EXXI MMR WTI
Leverage ('11E) 1.7x 2.0x 1.2x
Coverage ('11E) 6.0x 15.5x 15.8x
Agency Ratings Caa1/B Caa1/B Caa1/B
Maturities:
800 700
600 500 400 300 200 100 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
69
January 26, 2012
High Yield
Exopack Holding Corp. (EXOPAC)

OUTPERFORM
Bond Summary Size (MM) $235 Coupon (%) 10.000 Priority Sr Nts Maturity 01-Jun-18 Agency Ratings Caa1/CCC+
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Bid Price 102.500
YTW (%) 9.389
STW (bp) 836 Investment Strengths: - Recession-resistant business model: A substantial portion of Exopack's revenue comes from such products as charcoal and pet food bags, which are resistant to cyclical downturns. - Long-term relationships with blue-chip customers: Exopack converts and prints products for many big, stable consumer and industrial products companies such as Procter & Gamble, Masterfoods, Cargill, Clorox, and Kelloggs. - Proven ability to pass through cost increases: Exopack has demonstrated a consistent ability to pass along paper and plastic raw material cost increases in the form of higher selling prices. Investment Risks: - Additional M&A activity: Exopack has an opportunistic acquisition strategy, and additional acquisitions could increase leverage.
Company Description
Exopack produces flexible packaging products made from paper and plastic. The company operates manufacturing facilities in the US, UK, and Canada, and serves over 1,200 customers in a variety of industries including food, medical, pet food, chemicals, beverages, personal care, and lawn & garden.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt
12/31/2009 FY:09 673.7 65.4 28.6 26.4 288.6 0.6 288.0
12/31/2010 FY:10 785.1 92.1 36.4 25.0 389.3 2.5 386.8
9/30/2010 3Q:10 216.7 28.6 10.9 5.8 402.6 1.5 401.1
6/30/2011 2Q:11 219.8 26.6 12.3 14.5 596.4 2.5 593.8
9/30/2011 3Q:11 219.6 25.8 13.0 9.9 599.9 1.3 598.6 Agency Ratings Caa1/CCC Ba3/BB Ba3/BB
Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Revolving credit facility Term loan Senior notes Capital lease obligation and other Total debt 4.4x 4.4x 2.3x 9.7% 9/30/2011 Size 2.5 349.1 235.0 13.2 599.9 Debt to EBITDA 3.3x 3.3x 5.6x 5.6x Liquidity Revolver size Borrowing base Letters of credit Borrowings Revolver availability Cash Total liquidity 9/30/2011 75.0 75.0 3.8 2.5 68.7 1.3 70.0 3.7x 3.7x 2.5x 11.7% 4.1x 4.0x 2.6x 13.2% 5.4x 5.4x 2.2x 12.1% 5.6x 5.5x 2.0x 11.7%
Comps Berry Plastics Crown Holdings Owens-Illinois
Maturities: 700 600 500 400 300 200 100 0 2012 2013 2014 2015+
70
January 26, 2012
High Yield
Felcor Lodging Trust, Inc. (FCH)
Updated
1/23/12
212-357-9918 212-902-4751
UNDERPERFORM: While we still expect FCH to recover further in 2011 as the overall lodging environment improves, we believe the FCH 10% secured notes have limited upside
at current levels. We believe the collateral package may shrink as four of its 14 properties are up for sale and FCH has the option to make a par offer to bondholders.
Bond Summary Size (MM) $492 Coupon (%) 10.000 Priority Sr Sec Nts Maturity 1-Oct-14 Agency Ratings B2 / BMW Next Call Price Date T+50 Bid Price 110.38 YTW (%) 5.75 STW bp 553 Z-Spread bp 516 5-year CDS 550
Company Description
Felcor Lodging Trust is a real estate investment trust ("REIT") that concentrates on upscale and full-service hotels throughout the US and Canada. Felcor, which is the nation's largest owner of all-suite hotels, owns 76 consolidated hotels in 22 states. Felcor is the largest owner of Embassy Suites Hotels and Doubletree Guest Suites hotels. Other hotels are flagged under global brands such as Embassy Suites Hotels, Doubletree, Hilton, Sheraton, Westin, and Holiday Inn. Significant equity holders include Vanguard Group (10%) and Apollo Management (6%), according to Bloomberg. Key Dates/Catalysts: - Revised 2011 guidance: Expect RevPAR increase of between 6%-7% (vs. 6%-7.5%), adjusted EBITDA of $207210 mn (vs. $207-213 mn), capex of $95 mn (vs. $85 mn), and interest expense of $141 mn. - 2Q2011: Sold three hotels for $54 million, out of the first group of 14 hotels brought to market in 4Q2010. - 3Q2011: Sold three hotels for proceeds of $46 million. Subsequent to 3Q2011, sold one hotel in Dallas and one hotel in Toronto. In the near future, management expects to begin marketing an additional 15 non-strategic hotels for sale. - October 2011: Amended a $178 million CMBS loan that was due to mature in November 2011. FCH extended the maturity by two years in exchange for a L+220 interest rate and a $20 million principal repayment.
Investment Strengths: - Well-diversified portfolio of properties and wellrecognized brand names. - Ample asset coverage. - Common dividends suspended in December 2008. - Share repurchases prohibited when leverage exceeds 4.85x. - CMBS and mortgage debt is non-recourse to FCH. - Leverage target of 4.0x-4.5x. Investment Risks: - Cyclical business that fluctuates with economic cycle when business / leisure travel slows. - Subject to falling real estate values. Current state of real estate and credit markets increases risk in terms of FCH's ability to refinance upcoming maturities successfully. - The transformative nature of its portfolio repositioning may cause FCH to lose momentum during the ongoing recovery in the lodging sector. - Six out of 60 owned hotels are unencumbered as of 2Q2011.
Financial Profile Revenue Adj EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt (incl converts)* Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA Adj. EBITDA/Interest Adj. EBITDA margin * excludes OID on 10% notes
2010A 933 188 143 0 39 6 1,601 201 1,401 8.5x 7.4x 1.3x 20.2%
1Q11A 235 44 34 0 15 (5) 1,517 91 1,426 7.8x 7.4x 1.3x 18.7%
2Q11A 257 64 35 0 23 6 1,649 231 1,418 8.2x 7.0x 1.8x 24.9%
3Q11A 246 52 34 0 23 (5) 1,587 117 1,470 7.7x 7.2x 1.5x 21.1%
4Q11E 234 48 36 0 34 (22) 1,567 88 1,479 7.5x 7.1x 1.3x 20.6%
2011E 972 208 138 0 95 (26) 1,567 88 1,479 7.5x 7.1x 1.5x 21.4% Comps FCH HST HOT GET RCL Qtr 3Q11 2Q11 1Q11 4Q10 3Q10* 2Q10* 1Q10 Leverage 7.7x 5.7x 3.3x 5.8x 5.3x Occupancy 75.9% 76.3% 69.6% 66.2% 74.7% 74.9% 67.9% $ $ $ $ $ $ $ ADR 103.43 129.68 127.88 120.47 126.21 125.45 123.02 Coverage 1.5x 3.9x 4.7x 2.7x 7.0x Ratings B2 / BBa1/BB+ Ba1/BB+ Caa2/B Ba2/BB RevPAR $99.04 $ $ $ $ $ $ 98.94 88.97 79.77 94.31 93.97 83.67
* 2Q/3Q typically seasonally stronger quarters. Capitalization Description Term loan (none) Senior secured revolver (L+450) due Aug 2014 Total Mortgage Debt 10% senior secured notes due Oct 2014 6.75% senior secured notes due June 2019 Total senior secured debt 3Q11 570 492 525 1,587 7.7x Cash Total Liquidity -0.5720346 EV / LTM EBITDA 12.0x 117 342 Debt to EBITDA Liquidity Line of credit Letters of Credit Borrowings Revolver Availability 3Q11 225 225 Enterprise Value Shares o/s (mm) Stock price Market cap Net debt Preferred equity Minority interest Enterprise value (EV) $ 124.6 3.94 491 1,470 479 28 2,468
Maturities: 800 600 400 200 0 2012 2013 2014 2015 2016+
71
January 26, 2012
High Yield
First Data Corp. (FDC)

IN-LINE
Bond Summary Size (MM) $784 $748 $2,500 Coupon (%) 9.875 10.550 11.250 Priority Senior Senior PIK Sr. Subs Maturity 24-Sep-15 24-Sep-15 31-Mar-16 Agency Ratings Caa1/BCaa1/BCaa2/CCC+
Updated 1/26/2012
212-902-7537 212-357-2769
Next Call Price 104.94 105.28 105.63 Date 2/27/2012 2/27/2012 2/27/2012
Bid Price 98.25 98.50 87.88
YTW (%) 10.5% 10.4% 15.3%
STW bp 1,016 1,052 1,498
Company Description
First Data Corporation is the largest third-party independent merchant acquiring company in the world. It provides electronic commerce and payment solutions for merchants, financial institutions, and card issuers. The company is organized into three primary segments through which it reports revenues and earnings: Retail & Alliance Services, Financial Services, and International. The Retail & Alliance Services segment consists of its businesses that facilitate a merchants ability to accept credit, debit, stored-value and loyalty cards, and checks. First Datas Financial Services segment provides debit network access as well as credit and retail card processing services to a broad range of financial institutions. The International segment operates in four primary geographic regions and provides services similar to the other two segments for both merchant and financial customers. The company was purchased through an LBO by KKR in 2007. Key Dates/Catalysts: - First Data is expected to report 4Q earnings in early February - The debit interchange fee limitation, a provision of the Durbin Amendment, took effect on October 1, 2011. The network exclusivity provision will take effect on April 1, 2012. We expect management to provide more commentary during earnings calls on industry participants' responses to these regulations. - We remain focused on the potential for First Data to refinance its senior unsecured notes due 2015 as part of another potential amend-to-extend offer to the lenders. Financial Profile Adjusted Revenues Adjusted EBITDA Cash Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA (OpCo) Net Debt/EBITDA (OpCo) EBITDA/Interest EBITDA margin Capitalization Description
Revolver due 9/24/13 (L+275) Revolver due 9/24/16 (L+400) Term Loan - B1 (L+275) due 9/24/14 Term Loan - Delayed Draw Term Loan - Euro (L+275) due 9/24/14 Term Loan - B2 (L+275) due 9/24/14 Term Loan - B3 (L+275) due 9/24/14 Term Loan - Ext (L+400) due 3/24/18 7.375% Secured Notes due 2019 8.875% Secured Notes due 2020 Foreign bank lines Capital Leases & Other 8.25% 2nd Lien Secured Notes due 2021 8.75%/10.0% 2nd Lien PIK Tog Nts due 2022 9.875% Senior Nts due 2015 10.55% Senior PIK Nts due 2015 12.625% Unsecured Notes due 2021 11.25% Sr Sub Nts due 2016
FY08 6,795 2,574 (1,480) 0 (512) (76) 22,573 406 22,166 8.8 x 8.6 x 1.3 x 37.9%
FY09 6,279 2,132 (1,416) 0 (379) 0 22,610 737 21,873 10.6 x 10.3 x 1.2 x 33.9% LTM 3Q11 Size 11 22 2,483 37 415 2,227 1,417 4,667 750 510 55 178 2,000 1,000 784 748 3,000 2,500 22,803 402 22,401
FY10 6,441 2,027 (1,396) 0 (370) 385 22,709 510 22,200 11.2 x 11.0 x 1.1 x 31.5%
LTM-3Q11 6,543 2,157 (1,555) 0 (384) 382 22,803 402 22,401 10.6 x 10.4 x 1.2 x 33.0% FY11E Size 0 0 2,483 37 415 2,227 1,417 4,667 750 510 55 178 2,000 1,000 784 748 3,000 2,500 22,770 686 22,084
FY11E 6,563 2,191 (1,434) 0 (195) 562 22,770 686 22,084 10.4 x 10.1 x 1.2 x 33.4%
FY12E 6,736 2,290 (1,832) 0 (235) (43) 22,870 643 22,227 10.0 x 9.7 x 1.2 x 34.0%
Investment Strengths: - Transaction mix improving: Transaction volume growth in 3Q2011 was driven by a recovery in credit card transactions, which carry higher margins for merchant acquirers like FDC. While the trend has moderated in 4Q2011, the most recent quarter's growth in credit transactions still exceeds that reported in 1Q2011 and 2Q2011. - BAMS alliance accretion: FDC expects BAMS to drive $125 million of incremental savings over the next few years as it further integrates the platform. - Extending a long runway: First Data has achieved success in extending future debt maturities and currently has no funded debt maturing until Sep-2014. We anticipate that the company will continue to focus on ways to further improve its ability to grow into its capital structure, including future A-to-E transactions and bond refinancings. - Leading market position: FDC continues to control close to a 50% share of US-based transaction volumes within the merchant acquiring market. Investment Risks: - Highly levered capital structure: FDC remained over 10x levered as of 3Q2011. We expect leverage to decline slowly over time, but FDC's debt service needs provide marginal room for error. - Competitive market environment: Competition is high in the merchant acquiring segment, and in the card account and network processing segment. - Weak free cash flow profile: We expect free cash flow to be marginal over the next few years as FDC spends much of its $2 billion of EBITDA on cash interest ($1.8 billion) and capex ($440 million).
Liquidity Revolver Size - Amt Drawn - LC's Amt Unutilized Cash Liquidity
(F11E) 1,518 11 45 1,462 402 1,865 267
Debt to EBITDA 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 5.9 x 7.3 x 7.3 x 9.4 x 9.4 x 9.4 x 10.6 x 10.6 x -10.4 x
Debt to EBITDA 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 5.8 x 7.2 x 7.2 x 9.3 x 9.3 x 9.3 x 10.4 x 10.4 x -10.1 x Maturities: $14,000.0 $12,000.0 $10,000.0 $8,000.0 $6,000.0 $4,000.0 $2,000.0 $0.0
Foreign lines of credit*
Total OpCo Debt Less cash Net Debt
2011
2013
2013
2014
2015
2016
After
72
January 26, 2012
High Yield
Ford Motor Company (F)

Ford Motor Credit Company (FMCC)
OUTPERFORM/OUTPERFORM
Bond Summary Company Ford Ford FMCC FMCC Size (MM) $361 $1,794 $1,500 $1,000 Coupon (%) 6.500 7.450 8.000 5.875 Priority Sr. Unsec Sr. Unsec Sr. Unsec Sr. Unsec Maturity 1-Aug-18 16-Jul-31 15-Dec-16 2-Aug-21
Updated 1/26/12
212-902-3258 212-855-8553
Agency Ratings Ba2/BB+ Ba2/BB+ Ba1/BB+ Ba1/BB+
Bid Price $108.00 $122.00 $117.50 $108.50
YTW (%) 5.0 5.6 4.0 4.8
T-sprd bp 425 246 322 276
5-year CDS 331 331 265 265 Investment Strengths: Ford has significantly reduced its automotive debt and has a stated goal of returning to investment grade. Ford has gained market share with its new small-car models such as the Fiesta and Focus, and its new 2013 Fusion sedan should generate further market share gains, in our view. FMCC is a key strategic asset for Ford, as it provides both retail and wholesale customer financing, and continues to pay dividends to Ford. Ford's current UAW contract provides the company with a competitive cost structure and we expect Ford's auto business to remain firmly profitable in 2012. Investment Risks: The economies in the US and Europe have been slowing, and further weakness could result in lower global vehicle sales.
Company Description
Ford Motor Company is a global automotive manufacturer that operates in 200 markets, spanning six continents. The company is headquartered in Dearborn, Michigan, and employed 166,000 workers at the end of 3Q2011. Based on our estimate, Ford sold approximately 5.7 million vehicles worldwide in 2011, up from 5.3 million vehicles in 2010. In its largest market, North America, Ford sold approximately 2.5 million units in 2011 versus 2.4 million units in 2010. Approximately 58% of Ford's auto revenues were in North America, and it held a 16.8% US market share in 2011 compared to 16.7% in 2010. Ford's remaining sales came from Europe (27% of total), South America (8%), and Asia/Pacific/Africa (7%). Over the past few years, the company has trimmed its brands to just two: Ford and Lincoln. In 2010, Ford ended production of its Mercury-branded vehicles and sold its former Volvo car business to China's Zhejiang Geely Holding Group for $1.8 billion. Ford holds a 3.5% stake in Mazda that was reduced from 11% in 4Q2010. In 2008, Ford divested its Jaguar and Land Rover operations to Tata Motors for approximately $2.3 billion. The companys CEO is Alan Mulally, and its core North American auto business is run by Mark Fields. Ford's wholly owned captive finance subsidiary, Ford Motor Credit Company (FMCC), provides vehicle financing to both retail and wholesale customers. FMCC ended 3Q2011 with total assets of $97.5 billion, cash and securities of $12.4 billion, managed receivables of $81.8 billion, and managed leverage of 8.0x. Ford expects FMCC's managed receivables to be approximately $82-87 billion by YE2011. Ford does not guarantee FMCC's debt, but it does have a support agreement with FMCC that requires Ford to make capital contributions to the finance company if FMCC's managed leverage exceeds 11.5x for a calendar quarter. Key Dates/Catalysts: 2H2012 - potential upgrade to investment grade by Moody's and Fitch in the fall of 2012.
Financial Profile* ($MN) Revenue EBITDA Interest Expense Consolidated Net Income Depreciation & Amortization Other oper cash flow incl pension Change in Working Capital Net Auto Operating Cash Flow CapEx Dividends Free Cash Flow (FCF) Assets Sold (Acquired) Debt Increase (Decrease) Stock Increase (Decrease) Cash (to)/from FMCC & Ford Hldgs Other Cash Flows Total Chg in Cash, Equivs & ST VEBA *FMCC accounted for on an equity basis Cash & Equivs + Short-term VEBA Total on-balance sheet Debt 1 Net Debt (Net Cash)
FY08 129,166 1,041 1,938 (14,672) 5,803 2,429 (6,000) (12,440) (6,620) 0 (19,060) 3,143 (287) 756 9 (5,807) (21,246) 13,391 25,846 12,455
FY09 103,868 3,033 1,477 2,717 3,743 (7,286) 3,700 2,874 (4,043) 0 (1,169) 8 9,496 2,450 1,000 (245) 11,540 24,931 33,610 8,679
FY10 119,280 9,963 1,807 6,561 3,876 (3,974) (100) 6,363 (4,066) 0 2,297 1,318 (12,107) 1,339 2,700 30 (4,423) 20,508 19,077 (1,431)
LTM3Q11 125,787 10,100 966 6,788 3,680 (2,447) 500 8,521 (4,255) 0 4,266 135 (12,191) 109 4,100 469 (3,112) 20,776 12,654 (8,122)
FY11E 129,079 10,244 815 7,910 3,606 (3,796) 475 8,195 (4,621) 0 3,574 135 (5,844) 0 3,000 (365) 500 21,008 13,154 (7,854)
FY12E 131,657 11,524 724 6,079 4,000 (1,750) (100) 8,229 (5,300) (760) 2,169 0 775 0 0 (650) 2,294 23,302 13,929 (9,373)
FY13E 139,542 12,982 675 7,203 4,025 (2,300) 350 9,278 (5,500) (912) 2,866 0 (1,050) 0 0 (600) 1,216 24,518 12,879 (11,639)
Ford carries a greater debt load than some of its competitors. Ford must further strengthen its competitive position in fuelefficient cars, as it tries to become less reliant on the SUV and full-size pickup truck segments. FMCC's noninvestment grade ratings cause it to face higher funding costs versus some of its competitors (e.g., banks), and its capital structure is heavily weighted towards secured funding (ABS). FMCC's 2012 pretax profits will likely be lower year over year due to reduced gains on off-lease vehicles and higher provisioning.
Key Credit Statistics LTM Secured Debt/EBITDA 6.6x 6.9x LTM Total Debt/EBITDA 24.8x 11.1x LTM FCF/Total Debt -73.7% -3.5% EBITDA/Interest Expense 0.5x 2.1x EBITDA margin 0.8% 2.9% 1 Includes NPV of New UAW Note A and New Note B in 2009 and in 1Q2010 Capitalization - Ford (auto) Description Revolver due Dec 2011 Revolver due Nov 2013 Term Loan B1 due 2013 DOE Loans, EXIM & EIB Total Sr Sec Debt 6.500% 8/1/2018 7.450% 7/16/2031 Convertible Debt Other Sr Unsec Debt Total Sr Unsec Debt Subordinated Convertible Debt Total Automotive Debt Pension deficit - tax adjusted Total adj automotive debt Market Cap Enterprise Value 9/30/2011 Size EBITDA (x) 0 0 0 5,301 5,301 361 1,794 700 4,499 7,353 0 12,654 9,117 21,771 49,355 50,349
0.9x 1.9x 12.0% 5.5x 8.4%
0.5x 1.3x 33.7% 10.5x 8.0%
0.6x 1.3x 27.2% 12.6x 7.9%
0.6x 1.2x 15.6% 15.9x 8.8%
0.4x 1.0x 22.3% 19.2x 9.3%
Debt-toEBITDA Comps EBITDA Interest cov Agency Ratings 3 Chrysler Group LLC 2.8x 3.7x B2/B General Motors Co.4 0.6x 13.0x Ba1/BB+ 3 Pro forma for May 2011 bank/bond financing; 2nd lien bond ratings 4 Excludes GM Finance debt; corporate family debt ratings Note: Chrysler and GM debt metrics exclude pension deficits
Ford (auto) Liquidity Revolvers Letters of Credit/Other Borrowings Revolver Availability
9/30/2011 10,192 0 0 10,192 20,776 30,968
1.3x 1.3x 2.0x 4.9x 5.0x
Debt Maturities: 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2012 2013 Ford Motor Co. Ford Motor Credit
($MN)
2014
2015
73
January 26, 2012
High Yield
Forest Oil (FST)

IN-LINE
Bond Summary Size (MM) $1,000 Coupon (%) 7.250% Priority Sr. Maturity 6/15/2019 Agency Ratings B1/B
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $100.25
YTW (%) 7.16%
STW bp 639 Investment Strengths: Recent transactions have improved the quality of the portfolio and facilitated deleveraging Compelling growth opportunities in the Granite Wash and Haynesville Ample liquidity following recent transactions Investment Risks: Reinvestment risk after the Permian and Canadian divestitures $1.1 bn special dividend to shareholders in March 2006 suggests managements equity friendly nature High natural gas exposure (72% of 2011E production) Key Dates/Catalysts: Bolt-on acquisitions or other uses of historically high cash balance Granite Wash drilling results Eagle Ford JV
Company Description
Forest is in the latter stages of a portfolio restructuring to focus on unconventional gas. Following the spin-off of Mariner (September 2005), Forest became smaller, longer-lived and more onshore focused. Then, in January 2007, FST announced the acquisition of The Houston Exploration Company for $1.5 bn, which added significant South Texas assets. In December 2009, the company sold its Permian Basin properties to SandRidge Energy for $838 mn. F&D costs have improved recently and are roughly in the middle of the peer group. Following significant portfolio changes, we expect FST to focus on its Granite Wash and Haynesville Shale properties. In the past four years FST has redefined itself with over $3 bn of asset purchases and the sale of Gulf of Mexico and Alaska (August 2007), Canadian (July 2009; December 2009), and Permian Basin (December 2009) properties. The risk profile has changed dramatically, as FST no longer faces the Gulf of Mexico decline curve. In September 2008, FST completed the acquisition of Greater Buffalo Wallow and East Texas assets from Cordillera Texas LP for $873 mn. Concurrent with the acquisition, the company announced an agreement to sell a package of Rockies assets, which closed in November 2008 for $200 mn. In December 2009, Forest sold its Permian basin assets for $838 mn. In December 2010, Forest announced its plan to spin off its Canadian operations and carry out an IPO. The IPO was completed in June 2011. Forest is actively pursuing a JV partner in the Eagle Ford shale.
2008A $1,592 $1,244 ($1,334) $2,404
2009A $1,167 $870 ($72) $669
2010A $952 $689 ($275) $808
2011E $834 $579 ($248) $754
2012E $889 $642 ($21) $575
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Debt + Preferred per Proved Boe Debt + Preferred per PDP Boe Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2011-19 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $1,872 $1,872 $1,872 $0 $1,175 $3,047 2.9x Size $270 $0 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,600 $2 $0 $1,598 $270 $1,868 2008A 2.2x 9.9x 62% $6.15 $9.78 2009A 2.3x 5.3x 65% $5.72 $9.13 2010A 2.7x 4.6x 58% $5.00 $8.33 2011E 2.8x 4.0x 57% $3.91 $6.52 2012E 3.0x 4.9x 58% $4.44 $7.40 FST CHK NFX PXD
Leverage ('11E) 2.8x 2.0x 1.8x 1.9x
Coverage ('11E) 4.0x 33.6x 10.3x 8.6x
Agency Ratings B1/B Ba3/BB+ Ba2/BB+ Ba1/BBB-
Maturities:
1200
1000 800 600 400 200 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
74
January 26, 2012
High Yield
Fortescue Metals Group Ltd (FMGAU)

OUTPERFORM
Bond Summary Size (MM) $2,040 Coupon (%) 7.000% Priority Sr Notes Maturity 1-Nov-15 Agency Ratings B1/B
Updated 1/20/12
212-357-6711 212-357-9774
Next Call Price 105.25 Date 1-Nov-15
Bid Price 103.06
YTW (%) 5.77
STW bp 540
Company Description
Fortescue is an Australian iron ore company. It mines ore exclusively in Australia, and the bulk of its exports go to China. Key Dates/Catalysts: - Current plans call for FMG to expand production from 40 million tons per year to 155 million tons.
Investment Strengths: - Growth: Current plans call for it to expand production from 40 million tons per year to 155 million tons. - Leverage: We foresee relatively low leverage of less than 2.0x for the next couple of years, even taking into account additional debt issuance to fund capex. - Size: We project $3.5 billion of EBITDA in FY2012 and $3.5 billion of EBITDA in FY2013, making FMG one of the largest companies in our coverage space. Its market capitalization is almost A$15 billion. Investment Risks: - Cost overruns: FMG's growth capex budget could be low, leading to cost overruns and possibly additional debt issuance. - Access to the capital markets: If costs are greater than we expect or prices do not meet our forecasts, FMG may need to issue additional debt to meet its capex needs. - Lower iron ore prices: This could reduce EBITDA and require additional capital raising (possibly another $750 million, according to our estimates) to fund capex.
Fiscal year end June 30 Financial Profile Revenue EBITDA Interest Expense Taxes CapEx Free Cash Flow
FY10A 3,220 1,223 (394) 2 (584) 1,049
6/30/11A 2,909 1,475 (216) (358) (917) 951
FY11A 5,442 2,765 (430) (313) (1,428) 1,351
12/31/11E 1,608 796 (64) (86) (1,600) (1,210)
FY12E 6,735 3,474 (317) (304) (5,700) (3,033)
FY13E 7,846 3,471 (376) (383) (2,247) 435 Agency Ratings BB+/Ba1 BB+/Ba2 BB/B1 B1/B
Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA EBITDA/Interest EBITDA margin
2,976 1,236 1,740 2.4X 3.1X 37.98%
4,662 2,663 2,000 3.2X 6.8X 50.70%
4,662 2,663 2,000 1.7X 6.4X 50.80%
6,063 2,538 3,525 7.6X 12.4X 49.50%
5,965 746 5,219 1.7X 11.0X 51.58%
5,761 789 4,971 1.7X 9.2X 44.25%
Comps Peabody Energy Steel Dynamics US Steel Corp. FMG
Coverage 11.4x 5.1x 5.0x 12.4x
Capitalization Description Preference Shares 2015 7% unsecured notes 2016 6.375% unsecured notes 2018 6.875% unsecured notes Add'l carrying value for unsecured notes Subordinated Loan Note (Leucadia) Total Debt exclude all but $100m of Leucadia note Total Debt ex-Leucadia NPV adjustment Market Cap Enterprise Value Size 153.9 2,040.0 600.0 900.0 24.6 943.9 4,662.4 (843.9) 3,818.5 14,977.0 16,976.7 4.9x 1.1x 1.3x FY12E Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total Liquidity 600.0 600.0 2,662.7 3,262.7
Maturities 5,000 4,000 3,000 2,000 1,000 0 2012 2013 Thereafter
75
January 26, 2012
High Yield
Freescale Semiconductor (FSL)

IN-LINE
Bond Summary Size (MM) $663 $250 $764 Coupon (%) 10.125 8.875 10.125 Priority Sr Sec Senior Snr Subord Maturity 15-Mar-18 15-Dec-14 15-Dec-16 Agency Ratings Ba3/B Caa1/CCC+ Caa2/CCC+
Updated 1/26/2012
212-902-7537 212-357-2769
Next Call Price 105.06 102.22 105.06 Date 3/15/2014 2/27/2012 2/27/2012
Bid Price 112.50 102.75 106.50
YTW (%) 6.0% 1.5% -9.1%
STW bp 582 142 (911) Investment Strengths: - Leading automotive semiconductor supplier: FSL is a leading semiconductor manufacturer, with 70% of its total sales generated by embedded chips. - Aggressive restructuring actions: FSL has been targeting to drive EBITDA margins toward 25%. - Adequate near-term liquidity: FSL completed a debt exchange in 2009 that reduced cash interest costs and total debt outstanding, but still left leverage at a very high level. Investment Risks: - Free cash flow remains weak: Free cash flow was negative in 1Q2011, 2Q2011, and 3Q2011. We remain concerned about escalating costs, which we believe should consume much of FSLs incremental cash flow, especially in light of recent macro headwinds - High leverage: Despite a 2011 LBO and successful debt exchanges, the FSL LBO pushed the limits in terms of the amount of leverage a semiconductor company can bear and the balance sheet remains highly levered. - Cellular wind-down remains a top-line headwind: Revenues at the cellular products business declined from a peak of $1.5 billion to less than $500 million LTM as of 3Q11.
Company Description
Freescale Semiconductor is a global semiconductor manufacturer with leading technology in embedded chips. Based on revenues, it is among the 10 largest semiconductor companies in the world and in the top five in the US. The company was spun out from Motorola in July 2004 and remained a public company until the LBO by a consortium of sponsors led by Blackstone late in 2006. Continental and Motorola are FSL's largest customers, contributing approximately 10% of revenues each. Freescale's primary business units include Microcontroller Solutions (35% of sales), Cellular Products (10%, but being wound down), Networking & Multimedia (26%), and Radio Frequency, Analog & Sensors (25%). Key Dates/Catalysts: - Freescale is expected to report 4Q2011 earnings on January 26. - September 1, 2014: If net leverage is greater than 4.0x and more than $500 million of the senior unsecured notes due 2014 remain outstanding, the extended term loans maturity (2016) accelerates to that date.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization (FY11E) Description Replacement Revolver due 2016
FY08 5,091 919 (710) 0 (239) 171 9,773 1,394 8,379 10.6 x 9.1 x 1.4 x 18.1%
FY09 3,508 304 (423) 0 (85) (9) 7,544 1,363 6,181 24.8 x 20.3 x 0.5 x 8.7%
FY10 4,458 956 (483) 0 (282) 112 7,616 1,043 6,573 8.0 x 6.9 x 1.6 x 21.4%
LTM-3Q11 4,741 1,130 (608) 0 (210) (94) 6,592 744 5,848 5.8 x 5.2 x 2.0 x 23.8%
FY11E 4,570 1,080 (544) 0 (192) 15 6,544 813 5,731 6.1 x 5.3 x 1.9 x 23.6%
FY12E 4,370 1,030 (518) 0 (175) 227 6,294 790 5,504
Comps AMD
Sr. Unsec Ratings Ba3/B+ Ba3/BB Caa1/B
6.1 x 5.3 x 2.0 x 23.6%
AMKR NXP
Size 0 2,215 663 1,380 3 250 57 473 739 764 6,544 813 -5,731 3,830 -9,562
Debt to EBITDA 3.9 x 3.9 x 3.9 x 3.9 x 3.9 x 5.4 x 5.4 x 5.4 x 5.4 x 6.1 x 6.1 x 5.3 x 8.9 x Maturities: 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0 2012
Liquidity Revolver Size Borrow Base - Amt Drawn - Letters of Credit - Unavailable Amt Unutilized Cash Liquidity
LTM 425 425 0 22 0 403 744 1,147
Extended Term Loan (L+425) due 2016 10.125% Senior Secured Notes due 2018 9.25% Senior Secured Notes due 2018 Capital Leases & Other 8.875% Senior Notes due 2014 Senior FRN Notes due 2014 (L+387.5) 10.75% Senior Notes due 2020 8.05% Senior Notes due 2020 10.125% Senior Sub Notes due 2016 Total Debt Less cash Net Debt Equity Market Cap Enterprise Value
2013
2014
2015
2016
Thereafter
76
January 26, 2012
High Yield
Frontier Communications Corporation (FTR)

UNDERPERFORM
Updated 1/20/12
212-902-2233 212-902-4427
Our Underperform ratings on the FTR bonds reflect our belief that top-line challenges will prove to be more persistent than the market expects. While we believe FTR will meet and ultimately beat its synergy targets, we think that revenue trend is a more important issue to focus on given the significant reverse operating leverage excluding synergies. Bond Summary Size (MM) $1,100 $945 Coupon (%) 8.500 9.000 Priority Sr Nts Sr Nts Maturity 15-Apr-20 15-Aug-31 Agency Ratings Ba2/BB Ba2/BB NC NC Next Call Price Date NC NC Bid Price 101.00 91.00 YTW (%) 8.33 10.06 STW bp 650 732 Investment Strengths: (1) Strong management team: FTR's team has a proven track record of integrating acquisitions. (2) Synergies: FTR expects to achieve $600 mn in run-rate synergies by the end of 2012 from its VZ access lines acquisition. (3) No meaningful secured debt: FTR's capital structure currently consists of mostly unsecured debt. Investment Risks: (1) Top-line pressure: Largely owing to continued heavy access line losses in the acquired VZ markets, FTR faces challenges in trying to stabilize its revenue trends. (2) Event risk from system conversions: FTR successfully converted four markets soon after it acquired the VZ properties. Over the next year, it will convert the remaining nine states' systems to FTR's platform. Financial Profile * Residential Lines ('000s) YoY % Change HSD Customers ('000s) YoY % Change Total Access Lines ('000s) YoY % Change Revenue EBITDA FCF After Dividends Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin Capitalization* Debt / Description Subsidiary Debt Total Subsidiary / Other Debt Unsecured RC ($750mm Facility) Unsecured TL Sr Nts & Debentures Total FTR Debt Net Debt Market Cap Enterprise Value Maturities:
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 95 639 659 859 6,099
Company Description
Frontier Communications Corporation is the largest pure rural telecommunications carrier and the fifth-largest Incumbent Local Exchange Carrier in the United States. Frontiers services include voice, high-speed Internet, satellite video (through agreements with DISH), wireless Internet data access, data security solutions, bundled offerings, specialized bundles for small businesses and home offices, and advanced business communications Access Solutions for medium and large businesses. Frontier operates in 27 states with over 15,000 employees. Key Dates/Catalysts: February 23, 2012: 4Q2011 earnings. Access line trends in acquired VZ markets. Update on systems conversion progress and outlook on the company's dividend.
FY09A 4,095 NA 1,695 7.5% 6,311 (10.1%) $6,071 2,968 174 $4,884 359 4,525 4.2x 3.9x 48.9%
FY10A 3,636 (11.2%) 1,697 0.1% 5,746 (9.0%) $5,652 2,645 115 $8,327 251 8,076 3.1x 3.0x 46.8%
2Q11A 3,429 (11.1%) 1,715 1.1% 5,490 (8.6%) $1,322 634 (60) $8,249 233 8,016 3.2x 3.1x 47.9%
3Q11A 3,345 (10.5%) 1,729 2.2% 5,374 (8.5%) $1,291 609 (44) $8,248 206 8,042 3.3x 3.2x 47.2%
4Q11E 3,271 (10.0%) 1,739 2.5% 5,283 (8.0%) $1,272 599 (32) $8,350 275 8,074 3.4x 3.3x 47.1%
FY11E 3,271 (10.0%) 1,739 2.5% 5,283 (8.0%) $5,232 2,469 (19)
(3) Regulatory changes: FTR derived 12% of its revenues from revenues tied to regulation (USF and ICC). Since status quo is probably the best-case scenario for FTR, we believe regulatory reforms would likely affect FTR's revenue and EBITDA negatively.
Agency $8,350 275 8,074 3.4x 3.3x 47.2% WIN Charter - CCOH CVC Corp Sprint 3.5x 4.3x 4.0x 3.3x 3.2x 2.8x 3.2x 4.0x Ba3/B+ B1/BBB1/B+ B3/B+ Comps Leverage Coverage Ratings
* Operating metrics, revenue, and EBITDA figures are pro forma for the VZ access lines acquisition.
Size $60 $60 575 7,715 $8,350 $8,144 6,080 14,224
EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $750 $750 $206 $956
3.4x 3.3x 5.7x
*Pro forma for the October 2011 refinancing transaction
2012
2013
2014
2015
2016+
77
January 26, 2012
High Yield
Gannett Co. (GCI)

OUTPERFORM
Updated 1/23/2012
Scott Wipperman Scott Marchakitus
212-357-9922 212-902-9760
Contact analyst or see latest research for updates to ratings, estimates, and other information. Our Outperform rating is driven by GCI's business diversity, free cash flow generation, and improved balance sheet. Bond Summary Size (MM) $250 $250 Coupon (%) 8.750 9.375 Priority Sr Guar Sr Guar Maturity 15-Nov-14 15-Nov-17 Agency Ratings Baa3/BB Baa3/BB 104.688 11/15/13 Price Next Call Date Bid Price 111.50 111.50 YTW (%) 4.324% 5.095%
STW bp 411 488
5-year CDS 265/285
Company Description
Gannett is a leading news information provider, with publishing, broadcasting, and digital operations. GCI publishes 82 daily newspapers and roughly 850 non-daily publications in the US. Its newspaper properties include USA Today, which is one of the largest papers in the US, with average daily circulation of roughly 1.8 million. In addition, Gannett owns the secondlargest publishing operation in the UK, Newsquest. Newsquest has 17 daily newspapers and over 200 non-daily newspapers, magazines, and trade publications. Its Broadcasting segment operates 23 local television stations in the US, with a market reach of more than 20.8 million households. Finally, Gannett owns an array of digital properties including a majority stake in Career Builder, ShopLocal, PointRoll, and Ripple6. Key Dates/Catalysts: - 4Q2011 earnings on January 30, 2012. - Company may look to term out revolver borrowings.
Investment Strengths: - Gannett has a strong portfolio of digital properties, including a majority stake in Career Builder, ShopLocal, and Ripple6. - Strong business diversity with significant broadcasting operations (23 local TV stations). - USA Today is one of the largest papers in the US, with average daily circulation of roughly 1.8 million. - GCI generates significant free cash flow. - GCI is at the forefront in terms of experimenting with creative news distribution, including its shift of the Detroit Free Press to a hybrid print/digital model and its focus on improving Sunday circulation at its 30 largest papers. - Broadcasting segment should benefit from political advertising and Olympics in 2012. Investment Risks: - Company could look to return more capital to shareholders in 2012. - GCI has indicated it could be more acquisitive in the digital space. - Local advertising market is growing more competitive. - Longer-term secular concerns with print advertising and Local Broadcasting market. - Sizable pension deficit at year-end 2010 of roughly $349 million (qualified plans). - Additional large-scale expense cuts will be difficult amid rising newsprint costs and tougher comps. - Double-dip recession or weaker economy could further weaken ad revenue.
Financial Profile Revenue Adjusted EBITDA Interest Expense Operating Cash Flow CapEx Dividends Free Cash Flow Total Debt Cash Net Debt
FY09 5,613 1,090 (176) 913 (68) (119) 726 3,062 99 2,963
FY10A 5,462 1,273 (173) 773 (69) (38) 666 2,352 183 2,169
FY11E 5,234 1,147 (166) 757 (71) (47) 639 1,778 124 1,654
FY12E 5,244 1,229 (138) 713 (90) (90) 533 1,478 175 1,303
Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver Borrowings Total Bank Debt 8.75% due Nov 15, 2014 10.0% due June 1, 2015 6.375% due Sept 1, 2015 10.0% due April 1, 2016 9.375% due Nov 15, 2017 7.125% due Sept 18, 2018 Total Sub Guarantee Debt 6.375% due April 1, 2012 Total Debt Market Cap Enterprise Value Maturities: 800 700 600 500 400 300 200 100 0 2012 2013 2014 Size 395 395 250 67 250 193 250 250 1,655 307 1,962 2,521 4,287 1.8x 1.8x Cash Total Liquidity Credit agreement maintenance covenants: Sr Leverage (as defined) 3.5x 196 1,431 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 395 1,235 2.8x 2.7x 6.2x 19.4% 1.8x 1.7x 7.4x 23.3% 1.6x 1.4x 6.9x 21.9% 1.2x 1.1x 8.9x 23.4%
Comps NYT MNI RRD
Gross Leverage 2.2x 4.7x 3.1x
Agency Ratings B1/B+ Caa1/BBa1/BB+
1,630 Matures September 30, 2014
78
January 26, 2012
High Yield
Gaylord Entertainment Company (GET)

IN-LINE:
in 2012 as group visitation rebounds. Bond Summary Size (MM) $152 Coupon (%) 6.75 Priority Sr Nts Maturity 15-Nov-14 Agency Ratings Caa2/B
Updated 1/23/12
212-357-9918 212-902-4751
We believe the bonds are fairly valued as yield-to-call paper and given the expectation that lodging room rates are expected to continue to rebound
Next Call Price 101.125 Date Current
Bid Price 100.375
YTW (%) 6.24
STW bp 614
Z-Spread bp 575
Company Description
Gaylord Entertainment Company (GET) is a lodging company that focuses on the large group meetings segment. GET's primary properties include Gaylord Opryland Resort & Convention Center in Nashville, Tennessee; the Gaylord Palms Resort & Convention Center near Orlando, Florida; the Gaylord Texan Resort & Convention Center near Dallas, Texas; and Gaylord National Resort & Convention Center near Washington DC (opened April 2008). These four properties are among the largest in the industry. GET also owns and operates the Grand Ole Opry. According to Bloomberg, significant equityholders include TRT Holdings (22%), Columbia Wanger (15%), GAMCO (9%), and Dimensional Fund Advisors (6%). Key Dates/Catalysts: - Revised 2011 guidance: Based on RevPAR increase of 3%-5% (vs. 5.5%-7.5%) and total RevPAR increase of 0.5%-2.5% (vs. 4%-6%), GET expects adjusted EBITDA (consolidated cash flow) of $164-168 million (vs. $170-177 million) for its Gaylord Palms, Texan, and National properties. Including results at Opryland and other, GET expects total adjusted EBITDA of $215-225 million (vs. $215-230 million) including a RevPAR increase of 17%-19% and a total RevPAR increase of 15%-17% at Gaylord Opryland. - 2012 guidance: Expects 2012 adjusted EBITDA of $228-243 million due to a RevPAR increase of 3%-6% and a total RevPAR increase of 2%-5%. - August 2011: Refinanced existing credit facility with new $925 facility consisting of a $525 mn revolver and a $400 mn term loan with initial pricing of L+225 bp. The credit facility includes a $475 mn accordion term loan. - August 2011: Extended its shareholder rights plan by one year to August 12, 2012, following volatility in the market and significant stock purchases by TRT Holdings. - November 2011: S&P upgraded corporate credit rating to B+ from B and senior unsecured rating to B from Boutlook is stable owing to improved credit metrics despite additional borrowing for its planned Denver project. - February 7, 2012: 4Q2011 earnings release. Financial Profile Revenue Adj EBITDA (CCF) Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt / Adj EBITDA Net Debt / Adj EBITDA Adj. EBITDA / Interest Adj. EBITDA margin 7.8x 6.9x 1.8x 19.3% 7.7x 7.1x 2.2x 20.9% 7.4x 6.7x 2.9x 26.5% 5.8x 5.7x 2.7x 21.7% 4.9x 4.8x 2.6x 22.3% 4.9x 4.8x 2.6x 22.9% FY10A 772 149 81 (65) 195 (62) 1,159 124 1,035 1Q11A 221 46 21 (0) 37 (12) 1,162 87 1,075 2Q11A 237 63 21 (8) 24 26 1,165 111 1,054 3Q11A 225 49 18 1 32 (3) 1,071 12 1,059 4Q11E 265 59 23 3 8 26 1,071 41 1,030 FY11E 947 217 83 (4) 102 36 1,071 41 1,030
Investment Strengths: - Strong brand name in meeting industry. - Higher visibility due to longer booking lead times generally associated with corporate clients. - All-in-one facilities allow for capturing of additional dollars spent by guests (e.g., restaurant and spa business). - GET repurchased $29 million of the 6.75% senior notes during 2010.
Investment Risks: - Relatively small portfolio of properties. - High concentration of large group meeting business. - Term loan has uncommitted accordion feature that can increase size of term loan by $475 million, which would prime the bonds. - Restricted payment capacity at the end of 2Q2011: $380 million. - Plans to build an $800 million hotel and entertainment complex on an 85-acre site near Denver International Airport. GET expects to open the 1,500 room complex in early 2016. Project risk includes uncertainty about groups' desire to hold meetings in Denver. - Washington D.C. property, Gaylord National, continues to feel pressure from reduced government and government-related business.
Comps FCH HST HOT GET RCL Qtr 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10
Leverage 7.7x 5.7x 3.3x 5.8x 5.3x Occupancy 73.6% 73.2% 69.3% 69.5% 74.7% 72.2%
Coverage 1.5x 3.9x 4.7x 2.7x 7.0x ADR $ $ $ $ $ $ 158.15 173.65 162.76 158.86 154.91 169.20
Ratings B2 / BBa1/BB+ Ba1/BB+ Caa2/B Ba2/BB RevPAR $ 117.25 $ 126.68 $ 113.21 $ 110.51 $ 117.68 $ 123.03
Capitalization Description Credit facility due 8/1/15 (L+225) Term loan due 8/1/15 Senior secured debt 6.75% senior notes due 2014 3.75% convertible notes due 2014 Nashville Predators promissory note Capital lease obligations & other Total debt (book value) 3Q11A 200 400 600 152 360 (41) 1,071 5.8x Cash Total liquidity Excludes $475 million accordion. 12 329 EV / LTM EBITDA EV / 2011E EBITDA EV / 2012E EBITDA 13.2x 11.3x 10.6x 3.2x Debt to EBITDA Liquidity Line of credit Letters of credit Borrowings Revolver availability 3Q11A 525 8 200 317 Enterprise Value Shares o/s (mm) Stock price Market cap Net debt Enterprise value (EV) $ 48.4 28.75 1,392 1,059 2,450
Maturities: 600 Property revenue Gaylord Opryland Gaylord Palms 400 Gaylord Texan Gaylord National Other 200 Total revenue $ 4Q10A 38 41 56 63 16 213 $ 1Q11A 60 45 50 52 12 221 $ 2Q11A 73 38 46 60 20 237 $ 3Q11A 72 27 48 58 21 225
0 2012 2013 2014 2015 2016+
79
January 26, 2012
High Yield
GenOn Energy Corp. (GEN)

OUTPERFORM/IN-LINE
Updated 1/25/2012
212-357-5764 212-902-9355
Our Outperform on the 2017 and 2018 reflect attractive relative value and the expectations of a strong liquidity profile and improving credit metrics owing to higher capacity prices in 2013. Bond Summary Size Issuer GEN GEN GEN GEN-AG (MM) $725 $675 $550 $450 Coupon (%) 7.875 9.500 9.875 8.500 Priority Sr Unsec'd Sr Unsec'd Sr Unsec'd Sr Unsec'd Maturity 15-Jun-17 15-Oct-18 15-Oct-20 1-Oct-21 Agency Ratings B3/B B3/B B3/B B3/BBNext Call Price MW+50 MW+50 MW+50 MW+37.5 Date ----Bid Price 90.75 93.00 94.50 90.50 YTW (%) 10.15 11.00 10.86 10.06 STW bp 935 1020 886 805
Company Description
GenOn Energy Inc. is engaged in the ownership, long-term leasing, and operation of power generation facilities in the Mid-Atlantic, Northeast, California, Southeast, and Midwest, with approximately 24.2GW of capacity. On December 3, 2010, RRI Energy Inc and Mirant Corp completed their merger that formed GenOn Energy. Through GenOn Holdings, GEN is the parent of GenOn Marsh Landing, GenOn Americas Generation LLC, and Reliant Energy Mid-Atlantic. In turn, GenOn Americas Generation is the indirect parent of GenOn Mid-Atlantic, which is a unit of GenOn North America. About half of GenOn's fleet (by capacity) is located in PJM. Based on capacity, coal-fired generation accounted for about 31% of the portfolio, but accounted for about 87% of output. Key Dates/Catalysts: - February 29, GEN is expected to report 4Q2011 earnings. Given the decline in gas prices, the comapny may make a notable revision in its adjusted EBITDA of $607 million for 2011, $496 million for 2012, and $761 million for 2013. - We expect a general business update and an update on its merger cost-savings target of $155 million. We will focus on the effects enviromental requirements will have on the company along with GEN's planned hedging strategy, as gas prices continue to fall. - Status of the Marsh Landing gas-fired plant construction that is expected to be completed in mid-2013. - May 2012, results of the PJM capacity auction for the planning year of 2015/2016.
Invest ment Strengths: - GenOn benefits from a large and diverse generation portfolio with the Mid-Atlantic fleet well positioned given the completion of its environmental spending requirements to comply with the Maryland Healthy Air Act. - Hedging profile is expected to improve. Currently, GEN is 90% hedged for 2012 and 50% hedged for 2013 baseload. - Capacity revenues will increase in 2013, which should translate into margin improvement and ensures EBITDA is hedged by more than 50% through 2014. - Strong liquidity profile, with $2.3 billion available liquidity, that includes $1.7 billion of cash. - Management indicated that it plans to maintain liquidity and hedges consistent with a 5% probability event for five years and still have $200 million in working capital, without drawing on the revolver. Investment Risks: - Energy margins face pressure given the decline in gas prices. - Leverage is expected to increase to peak in 2012, but should begin declining in 2013 with higher capacity revenues. - Power plant fleet generation is predominantly coal fired; this leaves GenOn highly vulnerable to climate regulations. - Multi-tiered capital structure results in structural subordination. - Aging fleet with most of the plants over 40 years old that relies on coal-fired generation. - Future environmental rules may require incremental expenditures of $565 million to $700 million.
Financial Profile Gross Margins EBITDA EBITDAR - ex M2M

Lease Adjusted Interest Expense
FY10 1,307 503 651 (376) 2 (304) 46 7,305 3,947 3,358 11.2x 5.2x 1.7x
FY11E 1,807 603 762 (492) 18 (571) (273) 5,291 1,536 3,755 6.9x 4.9x 1.5x
FY12E 1,618 449 601 (479) 86 (516) (351) 5,519 1,507 4,011 9.2x 6.7x 1.3x
FY13E 1,825 634 786 (485) 35 (290) 1 5,455 1,543 3,913 6.9x 5.0x 1.6x
LTM3Q11 1,523 518 666 (624) (1) (418) (141)
Income taxes CapEx Free Cash Flow Lease Adjusted Debt Cash Net Debt Key Credit Statistics Lease Adj Debt/EBITDAR
Net Lease Adj Debt/EBITDAR
Comps 5,207 1,746 3,461 7.8x 5.2x 1.1x AES Corp* Calpine Corp Dynegy Edison Mission GenOn CMS EBITDAR/Interest NRG
Note: FY2010 and FY2009 reflects GenOn GAAP, which is largely Mirant's financials. Capitalization Description Mirant lease debt* Reliant lease debt* Total Project-Level Debt Mirant Americas Gen 8.5% due 2021 Mirant Americas Gen 9.125% due 2031 Other and Operating Lease Adjustment* Total Project and GenOn Americas Generation debt GenOn secured revolver GenOn secured term loan GenOn 7.625% of 2014 GenOn 7.875% of 2017 GenOn 9.5% of 2018 GenOn 9.875% of 2020 GenOn 6.75% of 2036 PEDFA Notes Other Total Consoldiated Debt Consolidated debt net of cash Market Cap Enterprise Value net of cash *Includes Marsh Landing Maturities excluding lease maturiies 700 600 500 400 300 200 100 0 2012 2013 2014 2015 Size 754 387 1,141 450 400 65 2,056 686 575 725 675 550 (60) 5,207 3,487 1,659 5,146 7.7x 7.8x 5.2x 3.1x 1.7x Debt to EBITDAR Liquidity Revolver Size Term Loan Size Total Revolver/Term Loan LOC/Borrowings Outstanding Term Loan Revolver Availability Cash GenOn Cash* GenOn Mid-Atlantic REMA Cash for debt reduction Total cash TOTAL LIQUIDITY 1600 84 62 (13) 1733 2291 788 695 1483 239 686 558
80
January 26, 2012
High Yield
Goodyear Tire (GT)

UNDERPERFORM
Bond Summary Size (MM) $994 Coupon (%) 8.250% Priority Sr. Nts Maturity 15-Aug-20 Agency Ratings B1/B+
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 107.94
YTW (%) 671.8%
STW bp 596
Company Description
The Goodyear Tire & Rubber Company develops, manufactures, distributes, and sells tires for most applications. The company also manufactures and markets several lines of rubber and rubber-related chemicals, and provides automotive repair services. Goodyear also retreads truck, aircraft, and heavy equipment tires. The company provides its products and services worldwide. Key Dates/Catalysts: - Goodyear Tire is expected to report 4Q2011 earnings in February.
Investment Strengths: - Price/mix effectively offsetting raw material costs: At the Detroit Auto show in January, Goodyear indicated that although it expects raw material headwinds of $600 mn in 4Q11 and $500 mn in 1Q12 yoy, it believes improved price mix will offset the continued raw material cost increases. - Natural rubber headwinds are mitigating: Although still elevated, natural rubber prices have decreased in recent months. Investment Risks: - Pension funded status: As asset values and interest rates have decreased in 2011 (increasing the present value of pension liabilities) , we expect that GT's funded status has deteriorated materially since the company last reported details on its pension plan. - Raw materials will remain a headwind: Management estimates that about 50% of the companys COGS are derived from raw materials particularly natural rubber and oil. Although natural rubber prices have declined from their early 2011 levels, they remain moderately elevated. - Moderating North American replacement tire volumes: After a strong 2010 in which volumes increased about 7%, North America light vehicle replacement tire shipments were flat in 2011 and are expected to grow by a modest 2% in 2012.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
FY08 19,488.0 1,523.3 (306.5) (310.0) (1,049.0) (1,849.0) 4,979.0 1,894.0 3,085.0 3.3x 2.0x 4.8x 7.8%
FY09 16,301.0 916.0 (302.9) (310.0) (746.0) 551.0 4,520.0 1,922.0 2,598.0 4.9x 2.8x 2.9x 5.6%
FY10 18,832.0 1,395.0 (316.0) (167.0) (944.0) (20.0) 4,745.0 2,005.0 2,740.0 3.4x 2.0x 4.4x 7.4%
LTM-3Q11 22,156.0 2,045.0 (316.0) (175.3) (1,132.0) (1,270.0) 6,083.0 2,126.0 3,957.0 3.0x 1.9x 6.5x 9.2%
FY11E 22,604.4 2,117.7 (327.3) (183.5) (1,106.0) (817.7) 6,083.0 3,054.3 3,028.7 2.9x 1.4x 6.5x 9.4%
FY12E 23,258.1 2,116.1 (345.4) (250.0) (1,200.0) (210.3) 6,083.0 2,844.0 3,239.0 2.9x 1.5x 6.1x 9.1%
Leverage 2.8x 1.3x 3.0x 3.0x 2.2x 0.9x
Coverage 4.8x 8.4x 6.5x 3.6x 4.5x 13.6x
Capitalization - Pro forma (FY11E) Description First Lien Credit Facility due 2013 EUR 400 mn Credit Facility due 2016 Pan-European A/R Facility due 2015 Chinese Credit Facilities due 2016 Other credit facilities 2nd Lien Term Loan due 2014 6.75% Sr. Notes due 2019 10.5% Sr. Notes due 2016 8.75% Sr. Notes due 2020 8.25% Sr. Notes due 2020 7.0% Sr. Notes due 2028 Other (Notes payable & overdrafts) Total Debt Less cash Net Debt Market Cap Enterprise Value Maturities: 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 2017 After Size 200.0 524.0 537.0 370.0 538.0 1,200.0 336.0 630.0 264.0 994.0 149.0 341.0 6,083.0 3,054.3 3,028.7 3,293.9 6,322.6 Debt to EBITDA 1.0x 1.0x 1.0x 1.0x 1.0x 1.6x 2.9x 2.9x 2.9x 2.9x 2.9x 2.9x 2.9x -1.4x 4.5x Liquidity LTM Revolver (1st lien) - Amt Drawn - LCs Drawn Amt Unutilized Foreign credit facilities Cash Liquidity 1,500.0 200.0 415.0 885.0 1,702.0 2,126.0 4,713.0
81
January 26, 2012
High Yield
Graphic Packaging Corporation (GPK)

IN-LINE
Bond Summary Size (MM) $425 Coupon (%) 9.500 Priority Sr Nts Maturity 15-Jun-17 Agency Ratings B2/BB-
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Bid Price 109.500
YTW (%) 5.615
STW (bp) 545 Investment Strengths: - Competitive cost position and global presence: GPK maintains low-cost, high-quality converting plants and paperboard production facilities in North America, Central/South America, Europe, and Asia. - Strong focus on cutting costs and paying down debt: Management is focused on improving GPK's cost position and using free cash flow to pay down debt. - Strong, stable relationships with key customers: GPK benefits from long relationships with stable customers such as Anheuser-Busch, General Mills, Miller Brewing Company, Coors Brewing Company, and many CocaCola and Pepsi bottling companies. Investment Risks: - Higher-than-expected input costs: Costs for raw materials such as fiber and energy may be higher than we are currently expecting, which could cause GPK to materially underperform our expectations.
Company Description
Graphic Packaging Corporation manufactures paperboard and folding cartons used in beverage and consumer products packaging. The company also leases packaging machines to customers. GPK's primary products include folding cartons, coated unbleached kraft and coated recycled paperboard, and multiwall bags.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Revolving credit facilities Term loans 9.5% senior notes 7.875% senior notes Other debt Total debt Market capitalization Enterprise value 9/30/2011 Size 1,677.7 423.3 246.3 16.4 2,363.7 1,884.2 4,105.7
12/31/2009 FY:09 4,095.8 556.4 196.8 129.9 2,800.2 149.8 2,650.4
12/31/2010 FY:10 4,095.0 573.9 174.5 122.8 2,579.1 138.7 2,440.4
9/30/2010 3Q:10 1,042.8 151.3 44.0 34.2 2,725.7 166.3 2,559.4
6/30/2011 2Q:11 1,080.7 150.1 36.6 34.0 2,437.8 191.2 2,246.6
9/30/2011 3Q:11 1,073.3 152.0 34.8 37.6 2,363.7 157.1 2,206.6
5.0x 4.8x 2.8x 13.6%
4.5x 4.3x 3.3x 14.0%
4.8x 4.5x 3.4x 14.5%
4.2x 3.9x 4.1x 13.9%
4.1x 3.8x 4.4x 14.2%
Debt to EBITDA 2.9x 2.9x 4.1x 4.1x 4.1x
Liquidity Revolver size Letters of credit Borrowings Revolver availability International availability Cash Total liquidity
9/30/2011 400.0 32.2 367.8 4.3 157.1 529.2
Maturities: 1,800 1,600 1,400 1,200 1,000 800 600 400 200 2012 2013 2014 2015+
82
January 26, 2012
High Yield
Great Canadian Gaming Corp. (GCCN)
Updated 1/23/12
212-357-9918 212-902-4751
IN-LINE: While GCCN management has historically acted extremely conservatively with its balance sheet, our concerns have risen for bondholders
following (1) the significant recent management reshuffling and (2) a shift in capital allocation including the recent increase in its share buyback program. Size (US$ MM) $170 Coupon (%) 7.250 Priority Sr. Sub Maturity 15-Feb-15 Agency Ratings B2/BBPrice 101.813 Next Call Date Current Bid Price 101.000 YTW (%) 6.24 STW (bp) 614 Z-spd (bp) 574
Company Description
Founded in 1982, Great Canadian Gaming (GRTCAN) is a leading multi-jurisdictional gaming and entertainment operator in Canada, with a dominant market share in its key jurisdictions. GCCN has operations in British Columbia, Ontario, Nova Scotia, and Washington state. The company's principal Canadian facilities consist of 10 casinos, three standardbred racetracks (all of which offer slot machines), one thoroughbred racetrack, a hotel and conference center, a bingo hall, and two community gaming centers. GCCN operates casinos that primarily cater to regional customers, offering multiple entertainment venues for different budgets. Key Dates/Catalysts: - September 2011: Founder, CEO, and Chairman Ross McLeod passed away at the age of 58. The board of directors appointed President Rod Baker as interim CEO. - September 2011: Increased share repurchase program to a total of 5,844,359 shares, or 10% of the public float. - November 2011: Announced a C$60 million expansion project for its Boulevard Casino that will add a 181-room hotel tower, meeting facilities, and food and beverage options. Construction is expected to begin in 1Q2012 and will be complete in 4Q2013. - November 2011: Appointed three new directors to its board of directors, including Neil Baker, the second largest equity holder of GCCN and the father of the current CEO, Rod Baker.
Investment Strengths: - Long-term contracts: Gross revenues split with provinces of 5-20 years. - Regulators manage industry growth, avoiding harmful competition. - Provinces share in costs of growth, with reimbursement of capex over time. - Though capex is reimbursed, GCD maintains ownership of assets. - Political preference toward not increasing the number of casinos. - River Rock continues to improve as renovations are completed and construction disruptions are over, as well as owing to the opening of the Canada Line transit system. - No near-term maturities. Investment Risks: - 35% of revenues derived from the River Rock property during LTM period ending 3Q2011. - Boulevard Casino is losing market share due to disruption from highway construction, which is expected to continue until 2013. - Stock repurchase program expires on January 26, 2012. Since January 27, 2011, it has repurchased 1,479,600 shares at a weighted average price of C$7.16, leaving capacity under the program to repurchase an additional 4,364,759 shares.
Based upon Canadian GAAP (C$, millions) Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt (incl. derivatives) Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver - 7/21/16 Term Loan B - 2/14/14 Total Sr Sec debt 7.25% Sub Notes - 2/15/15 Interest derivative liability Other Total debt 3Q11A 169.0 169.0 176.2 57.3 402.5 2.8x CPLTD Cash Total Liquidity 2.0 116.7 432.4 1.2x Debt to EBITDA 2.9x 2.1x 4.9x 35.6% 2.9x 2.0x 4.7x 34.2% 2.8x 2.0x 5.3x 38.0% 2.8x 2.0x 4.8x 37.8% Liquidity Source Revolver Size Letters of Credit Borrowings Revolver Availability 3Q11A 350.0 32.3 317.7 2.8x 2.0x 4.6x 35.0% 2.8x 2.0x 4.8x 36.3% FY10A 383.5 136.4 28.0 4.1 26.1 78.2 396.5 105.5 291.0 1Q11A 92.0 31.5 6.7 7.9 5.8 11.1 390.9 115.3 275.6 2Q11A 99.5 37.8 7.2 2.2 17.6 10.8 394.5 119.3 275.2 3Q11A 101.0 38.2 7.9 1.9 10.9 17.5 402.5 116.7 285.8 4Q11E 101.8 35.6 7.8 3.5 12.0 12.3 402.0 118.2 283.8 FY11E 394.3 143.1 29.6 15.5 46.3 51.7 402.0 118.2 283.8
Comps PENN ISLE PNK GCCN
Ratings B1/BB Caa1/B B2/BB-
2.4x Caa1/CCC+
Enterprise Value Source Shares OS (mm) Stock Price Market Cap Net Debt Enterprise Value LTM EBITDA EV/ EBITDA EV/2012E EBITDA Size 82.1 C$ 8.58 704.5 285.8 990.3 142.5 6.9x 6.7x
Maturities: Credit facility covenants 250 200 150 100 50 0 2012 2013 2014 2015 2016+ Comps Senior leverage Total leverage Interest coverage Current 3.50x 5.00x 2.25x
83
January 26, 2012
High Yield
Greektown Superholdings, Inc. (GREEK)

Updated 1/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $385 Coupon (%) 13.000 Priority Sr Secured Maturity 01-Jul-15 Agency Ratings NR/NR Next Call Price 106.500 Date 01-Jan-13 Bid Price 106.500 YTW (%) 10.35 STW bp 1,005 Z-spread bp 978
Bonds have mandatory redemption at 103 if company generates excess free cash flow. Company Description
NOT COVERED Greektown Superholdings (GREEK) was formed to hold, directly and indirectly through Greektown Newco
Sub, Inc., which owns and operates Greektown Casino. Greektown Casino opened in November 2000 and is one of three casinos operating in downtown Detroit. The property includes a 100,000 square foot casino with 2,600 slot machines and 63 table games. The property also has an approximately 400-room hotel tower, 4,500 parking spaces, 10,000 square feet of meeting space, four restaurants, seven bars, and two entertainment venues. For the 12 months ended 3Q11, 90% of its revenue was generated from its gaming activities and, of this, approximately 88% of its gaming revenue is generated from slots. Key Dates/Catalysts: - 3Q2011: GREEK expects fiscal 2011 capex to be $18 mn including investment in the new Asteria casino bar/lounge, which is expected to open by the end of 2011. - November 2011: For the two months ended November 2011, Greektown gaming revenue isup 3.3% yoy. - 1Q2012: management intends to build out a new parking garage for $30 mn. The company believes this project can be completed in 1Q2012, subject to regulatory approval and financing. - 2012: capital expenditures are expected to be $18 million, excluding the potential investment in the parking garage.
Company Strengths: - Located in a three casino market with no new supply expected to open in downtown Detroit. - new "super pit" provides better gaming atmosphere while helping create operating efficiencies with personnel and security. - plans to build a new $30 mn parking garage to ease access to the property. Construction is subject to regulatory approvals and financing. - Greater Detroit area continues to improve from an economic standpoint, albeit it is still a laggard compared to the rest of the US. - Tighter border controls make it more cumbersome for Detroit visitors to head to Windsor, Canada to visit the Caesars casino. - Secured gaming paper with minimal priority debt ahead of the bonds. Company Risks: - The failure to resolve the Trappers Lease dispute by June 30, 2012, will result in a default under the credit facility unless otherwise waived. - Lower tier property among the three properties in the market.
Financial Profile Revenue Adjusted EBITDA Interest Paid Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description
3Q10A 83 20 0 1 4 15 385 36 349 4.2x 3.8x 1.5x 24.2%
4Q10A 78 20 0 0 5 15 385 35 350 4.7x 4.2x 1.6x 25.4%
FY10A 330 82 14 2 15 52 385 35 350 4.7x 4.2x 1.3x 25.0%
1Q11A 84 19 25 0 2 (8) 385 34 351 4.9x 4.5x 1.5x 23.0%
2Q11A 82 20 0 0 3 16 385 45 340 4.9x 4.3x 1.6x 23.8%
3Q11A 80 18 25 0 5 (12) 385 46 339 5.0x 4.4x 1.2x 22.2% Liquidity
Comps GREEK BORGAT CCTRH 1st
Ratings NR/NR B2/BBB1/B
Maintenance covenants Fixed charge coverage
1.05x
Required under the credit facility and by the Michigan Gaming Control Board.
Debt to EBITDA 280.2 104.8 2.5 387.5 5.1x 0.0x
Source Revolver due 2013 Letters of Credit & other Borrowings Revolver Availability 29 30 1
Revolving term loan due 12/30/13 Total first lien debt 13% sr sec (2nd lien) nts due 2015 13% sr sec (2nd lien) nts due 2015 Other (capital leases, etc.) Total debt
Cash Total Liquidity Revolver availability subject to the resolution of the Maturities: Trappes Mortgage Release. See filings for more details.
46 75
450 400 350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017+
84
January 26, 2012
High Yield
Gymboree Corp. (GYMB)

Updated: 1/26/12
212-902-6957 212-357-7875
NOT COVERED
Bond Summary Size (MM) $400 Coupon (%) 9.125 Priority Sr Notes Maturity 1-Dec-18 Agency Ratings Caa1/CCC+ Next Call Price $104.56 Date 12/1/2014 Bid Price 88.00 YTW (%) 11.72% STW bp 723
Company Description
Gymboree is a designer and retailer of children's apparel, which it sells through its large store network and online. In addition to its flagship Gymboree stores (over 600 locations), the company has two related concepts: Janie and Jack (more upscale product offering, sold through more than 100 locations) and Crazy 8 (more affordable products, sold through over 80 stores).
Company Strengths: - Historically strong EBITDA growth - Children's apparel is a relatively high-margin and low-fashion-risk segment - Well-recognized brand and large footprint - Potential for growth ex-US Company Risks: - Some cannibalization of flagship stores by Crazy 8 growth - Very high inventory levels coming out of 1Q11 and 2Q11 - Exposure to cotton inflation - Intense competition from concepts with lower price points including CRI and PLCE
Key Dates/Catalysts: Late-April, fourth quarter earnings release
FY08A 1,000.7 203.0 0.0 56.2 56.2 90.7 0.0 140.5 0.0x -0.7x NA 20.29%
FY09A 1,014.9 219.4 0.0 62.8 39.6 117.0 0.0 257.7 0.0x -1.2x NA 21.62% LTM
FY10A 1,074.4 236.9 17.6 26.4 47.5 145.3 1,216.0 32.1 5.1x 5.0x 13.4x 22.05%
LTM 1,150.4 215.7 85.6 (28.5) 36.1 122.5 1,251.9 45.7 5.8x 5.6x 2.5x 18.75% Comps Gymboree J Crew Burlington Yield 11.72% 8.70% 11.09% Leverage 5.9x 5.4x 4.3x Coverage Ratings 2.3x Caa1/CCC+ 3.2x Caa1/CCC+ 2.7x Caa1/ CCC
Description ABL ($225mm) L+275 Term Loan (L+350, 1.5 floor) due 2017 Total Secured Debt
Size 40.0 811.9 851.9
Debt to EBITDA
Estimated Liquidity Revolver Size Letters of Credit
3Q11A 225.0 65.1 40.0 119.9 NA 0 NA 45.7 165.6
3.9x
9.125% Senior Notes due 12/1/18 Total Subordinated Debt
400.0 400.0 5.8x
Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities: 1,400 1,200 1,000 800 600 400 200 0 2012 2013
1251.9 n/a n/a
5.8x
2014+
85
January 26, 2012
High Yield
Updated 1/23/2012 Kevin Coyne 212-357-9918 Contact analyst or see latest research for updates to ratings, estimates, and other information. 212-902-4751 Celeste Everett UNDERPERFORM: While we believe HBI is one of the best-operated global apparel companies, we think this benefit is more than priced into the bonds. The increased cost of cotton will continue to be a headwind for HBI, considering that 60% of its revenue is generated by cotton products. Bond Summary Next Call Size Coupon Agency Bid YTW STW Z-Spread (MM) (%) Priority Maturity Ratings Price Date Price (%) bp bp $1,000 6.375 Sr Notes 15-Dec-20 B1/BB103.190 15-Dec-15 103.500 5.750 442 430 Other provisions: 35% equity claw at 106.375 through 12/15/13. Company Description Investment Strengths: - Stable innerwear business (45% of sales): high volume / frequently Hanesbrands, Inc. designs, manufactures, sources, and sells apparel items for men, women, and children. It replenished apparel essentials; the average US consumer makes 3.5 trips to operates in four segments: Innerwear, Outerwear, Hosiery, International, and Direct to Consumer. Its product retailers to purchase mens underwear and 4.5 trips to purchase womens portfolio includes t-shirts, bras, panties, men's underwear, kids' underwear, socks, hosiery, casualwear, underwear annually; US mass business is dominated by Hanes and Fruit of thermals, sleepwear, fleece, and activewear. The company offers products under the Hanes, Champion, the Loom Playtex, Bali, Just My Size, barely there, L'eggs, and Wonderbra brand names. The company sells its - Strong FCF generation; margin enhancement opportunities with ongoing products through multiple distribution channels, including mass market retailers, department stores, national offshoring of manufacturing chain stores, specialty retailers, wholesale clubs, and sporting goods stores. According to Bloomberg, - Well-known brands: HBI's 2010 Form 10-K states, "According to NPD significant equity holders include Wellington Mgmt (9%) and Shapiro Capital Mgmt (5%). Group/Consumer Tracking Service, our brands held either the number one or number two U.S. market position by units sold in most product categories in Key Dates/Catalysts: which we compete, for the 12-month period ended December 31, 2010." - November 2010: Acquired GearCo, Inc. for $227 million in cash and assumed debt. - Strong distribution network with established global retailers- HBI has at least - February 2011: Amended senior secured credit facility, extended maturity by two years to 2015, increased a 10-year relationship with all of its top-10 customers (65% of FY2010 flexibility under both the covenants and the use of excess free cash flow. revenues). - March 2011: Amended A/R securitization facility. Size increased to $225k from $150k, and termination date - Product development is driving increased market share. Some recent extended one year to March 2012. innovations include Hanes Comfort Flex Underwear, Champion 360 Max - October 2011: Names Richard Moss as Chief Financial Officer. Moss served as treasurer since January Support sports bra and Wonderbra Secret Agent No Slip Fit bras. 2006. - Focus on supply chain and vertical integration has given HBI more foresight into escalating cotton prices.
Financial Profile Revenue Adj. EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Senior secured revolver due Dec 2015 A/R securitization facility due March 2012 Total Secured FRN (L+337) senior notes due Dec 2014 8% senior notes due Dec 2016 6.375% senior notes due Dec 2020 Other Total debt $ 3Q11 15 175 190 491 500 1,000 34 2,215 Lvg Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total Liquidity Maturities: 1,200 Operating statistics 4Q10 Revenue: Innerwear Outerwear Hosiery Direct to consumer International Total revenue Segment EBITDA: Innerwear Outerwear Hosiery Direct to consumer International Total segment EBITDA 490 365 50 99 145 1,150 51 27 14 9 22 123 1Q11 451 331 45 83 127 1,036 69 31 17 2 25 143 2Q11 605 331 34 97 158 1,225 102 42 10 11 23 187 3Q11 515 433 34 98 150 1,230 89 62 9 14 21 194 $ 3Q11 600 13 15 572 225 175 50 48 670 Enterprise value Shares O/S (mm) Share price Market cap Net debt Enterprise value (EV) EV / LTM EBITDA EV / 2011E EBITDA EV / 2012E EBITDA FY2010 4,327 491 150 23 106 211 2,131 44 2,088 4.3x 4.3x 3.3x 11.3% 1Q11 1,036 123 41 10 25 47 2,268 65 2,203 4.5x 4.4x 3.0x 11.9% 2Q11 1,225 170 39 21 22 88 2,240 45 2,196 4.3x 4.2x 4.3x 13.9% 3Q11 1,230 175 38 23 21 93 2,181 48 2,133 3.9x 3.8x 4.6x 14.2% 4Q11E 1,225 135 38 11 24 62 2,215 86 2,128 3.7x 3.5x 3.5x 11.0% 2011E 4,717 603 157 65 93 289 2,215 86 2,128 3.7x 3.5x 3.8x 12.8% LTM Comps JAH 7.5s LEVI 7.625s SBH 10.5s Leverage 4.1x 4.2x 2.9x Coverage 4.2x 3.7x 4.5x Ratings B2/B B2/B+ B1/BB+ Investment Risks: - Vulnerability to cotton price fluctuation- over 60% of its revenue is driven by cotton-related products. - Relatively low growth historically, with many commodity-like products (and some fashion-exposed segments); HBI story hinges on management's ability to improve cost structure and reinvest behind brands - Operates in highly competitive categories, such as intimates and outerwear, with numerous strong branded competitors. - Customer concentration: Top 10 customers account for 65% of sales; could be affected by inventory management, merchandising, and pricing strategies - Sales channel is concentrated in US customers, with 88% of sales from USbased customers in 2010. - Structural risk: Non-guarantors of the notes generate 74% of revenue and hold 44% of assets as of 2Q2011. - Stock repurchase program: up to 10 million shares over next three years (to date, 2.8 mn repurchased for $75 million as of 2Q2011).
Hanesbrands Inc. (HBI)
0.3x
97.2 24.68 2,398 2,167 4,565 8.0x 7.6x 8.1x
3.9x
800
400
0 2012 2013 2014 2015 2016 2017+
86
January 26, 2012
High Yield
HCA, Inc. (HCA)
Updated 01/25/12
212-855-7718 212-902-9758
OUTPERFORM (1st liens and Holdco)/IN-LINE (unsecureds)

We remain Outperform on the 1st liens as we think they should trade inside the UHS secureds. We are In-Line on the unsecureds in recognition of the relatively high leverage and middle-of-thegroup spreads. We rate the HCA Holdco notes Outperform based on relative value. Fundamentally, we see HCA as the best-in-class hospital operator. Bond Summary Size (MM) $3,000 $2,000 $1,525 Coupon (%) 6.50 7.50 7.75 Priority First Lien Snr. Uns. Holdco Maturity 15-Feb-20 15-Feb-22 15-May-21 Agency Ratings Ba3/BB B3/BB3/BNext Call Price T+50 T+50 103.875 Date MW MW 11/15/2015 Bid Price $105.750 $106.750 $104.875 YTW (%) 5.601% 6.570% 6.838% STW bp 421 517 604 Investment Strengths: - Best-in-class of hospital companies with the largest portfolio, stronger-than-average markets, and highest margins. - Focus on core markets and higher profitability services along with cost-cutting has raised margins. - Manageable debt maturity schedule since the company has proactively reduced its term loan balance. The pre-2013 unsecured bonds are carved out in credit agreement and likely to be refinanced prior to maturity, in our view. CDS Levels Sr 5-Year 485 / 505
Company Description
HCA is the largest of the hospital companies, with 164 hospitals and 101 ambulatory surgery centers. Its facilities are located in urban and suburban markets, with Florida and Texas accounting for about 50% of beds. HCA started the for-profit hospital industry when it was founded by the Frist family in 1968 following the introduction of Medicare in 1965. The company spun out Triad and Lifepoint in 1999. An LBO was carried out by KKR, Bain, and ML Capital Partners in November 2006. In March 2011, HCA completed its initial public offering at $30 per share and received $2.5 bn of net proceeds, which were used to reduce amounts outstanding under its revolving credit facilities. HCA also announced the redemption in full of the 9.125% 2nd liens of 2014 as well as clawing a portion of the 9.875% 2nd liens of 2017.The company later issued $3 bn of first liens and $2 bn of unsecureds to refinance the two 2016 2nd lien tranches. In June 2011, HCA proposed the acquisition of interest in HCA-HealthONE for $1.45 bn. HCA issued another $500 mn of unsecureds to help finance this transaction, which closed October 2011. We estimate HealthONE will add roughly $250 mn of EBITDA as it was previously unconsolidated. In September 2011, HCA announced a $1.5 bn share repurchase from Bank of America, funded out of cash and credit facility. In September 2011, HCA provided more details surrounding its 2Q2011 miss. HCA expects full year 2011 EBITDA to be 0-2% above 2010, post the deferred revenue recognition of certain HIT revenues. Key Dates/Catalysts: - Quarterly earnings announcements (commercial volumes have been weak industry-wide, although bad debt expense has been relatively stable) - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals.
Investment Risks: - Medicare and Medicaid reimbursement could be reduced.
Volumes have been weak across the industry and are expected to remain so for the near term.
- Weak Medicare case mix due to a shift from surgical to medical as a result of a decline in cardio surgeries could continue to pressure earnings.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin PF Capitalization* Description Revolving Credit Facility due 2015* Term Loan A due 2012 Extended TL A-1 due May 2016 Term Loan B due 2013 Euro Term Loan B due 2013 ABL Facility due 9/30/2016* Extended TL B-2 due March 2017 Extended TL B-3 due May 2018 Other secured debt/mortgages First lien bonds Total 1st Lien sec debt 9.875% 2nd lien Notes due 2017 Total Secured bonds Snr Uns. Bonds Total Senior debt 7.75% Holdco notes due Nov 2021 Total Holdco debt Total Debt Market Cap Enterprise Value Maturities: 25,000 20,000 15,000 10,000 5,000 0 2012
2009 $30,052 5,472 $1,987 633 1,317 1,430 $25,730 312 25,418 4.7x 4.6x 2.8x 18.2%
2010 $30,683 5,868 $2,097 658 1,325 1,874 $28,318 411 27,907 4.8x 4.8x 2.8x 19.1%
2011E $32,646 5,936 $2,052 542 1,570 1,789 $27,585 350 27,235 4.6x 4.6x 2.9x 18.2%
4Q10A $7,736 1,447 $526 170 465 123 $28,318 411 27,907
3Q11A $8,050 1,412 $519 (23) 394 486 $26,755 359 26,396
4Q11E $8,478 1,514 $480 235 400 413 $27,585 350 27,235 LTM Comps HCA 1st Lien HCA Sr Uns HCA Holdco THC Leverage 2.8x 4.2x 4.5x 3.9x 4.8x 3.0x Coverage NA NA 3.2x 2.7x 2.8x NA Agency Ratings Ba3/BB B3/BB3/BCaa1/CCC+ B3/B --/BB-
2.8x 18.7%
2.7x 17.5%
3.2x 17.9%
CYH HMA Sec
Size $460 $494 $579 $1,689 $419 $1,730 $2,000 $2,373 $314 $7,150 $17,208 $196 $196 $8,326 $8,326 $1,525 $1,525 $27,255 11,612 $38,508
Debt to LTM PF EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash $2,000 0 460 1,540 $2,500 1,730 770 $359 $2,669
2.8x
2.9x
Total Liquidity
2.8x
2.9x
4.2x
4.3x
4.5x 4.5x
4.6x 4.6x
*PF for $500 million unsecured deal, and HealthOne acquisition.
2013
2014
2015+
87
January 26, 2012
High Yield
Health Management Associates, Inc. (HMA)

Updated 01/25/12
212-855-7718 212-902-9758
UNDERPERFORM (secured/unsecured)
We rate both the HMA secured and unsecured notes Underperform due to (1) HMA's relatively high total leverage of 4.2x, but yields at the low end of the peer group, (2) our concerns that a more active acquisition plan will cause leverage to creep higher, and (3) tail risk associated with a company-wide investigation related to physician relationships at the 22 JV-ed hospitals. Bond Summary Size (MM) $400 $875 Coupon (%) 6.125 7.375 Priority Snr 1st Lien Snr Maturity 15-Apr-16 15-Jan-20 Agency Ratings --/BBB3/BNext Call Price T+20 103.688 Date MW 15-Jan-16 Bid Price $102.500 $102.500 YTW (%) 5.450% 6.849% STW bp 512 605 Investment Strengths: - Exclusively rural facilities require less capex investment and are less competitive than suburban or urban facilities. - Market share and physician recruitment initiatives could drive top-line growth, and focus on supply cost-cutting could drive EBITDA gains. Investment Risks: - Medicare and Medicaid reimbursement could be reduced. - Volumes have been weak across the industry and are expected to remain so for the near term. - Potential new bond issuance to fund acquisitions as management has commented that its pipeline remains robust. - Tail risk of various investigations at the company. CDS Levels HMA Snr HMA Sub 5-Year 531 / 568 564 / 601
Compan y Description
Pure-play rural, mid-sized hospital operator with 58 facilities that are concentrated in the Southeast, particularly Florida and Mississippi. HMA executed a levered recap in 1Q2007, increasing leverage by 3x, to pay a special dividend. During a November 2011 business update call, HMA commented that "today [it] is a growth company." HMA acquired Mercy Health Partners in Tennessee from Catholic Health Partners for $525 mn on September 30, 2011. The company put in place a $360mn term loan in order to fund the acquisition of Mercy. HMA CDS was added to the new HY CDX S17 index September 2011. In November 2011, HMA refinanced its existing credit facility and Knoxville TL and unwound an unfavorable swap with a new $725 mn of TL A, $1.4 bn of TLB, and $875 mn of senior bonds. In January 2012, the local Florida press reported that a former employee has sued the company for wrongful termination after he allegedly reported Medicare overbilling practices at four HMA hospitals. In the same week, HMA also announced that its general counsel was retiring. The company states that the general counsel's resignation and the lawsuit are unrelated. Key Dates/Catalysts: - Quarterly earnings announcements (commercial volumes have been weak industry-wide, although bad debt expense has been relatively stable). - Possibility of additional acquisitions in light of management comments concerning a strong pipeline. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals. Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
Debt to LTM PF EBITDA**
2009A $4,664 685 $218 76 200 249 $3,059 106 2,953
2010A $5,156 737 $212 101 209 231 $3,034 102 2,932
2011E $5,816 833 $215 120 263 337 $3,589 78 3,511
4Q10A $1,352 187 $53 26 62 19 $3,034 102 2,932
3Q11A $1,400 196 $50 22 70 114 $3,421 88 3,333
4Q11E $1,587 219 $63 31 60 85 $3,589 78 3,511 Comps Leverage 3.0x 3.1x 4.8x 4.2x Coverage NA 5.2x 2.8x NA Agency Ratings --/BBBa1/BBB3/B B3/B-
4.5x 4.3x 3.1x 14.7%
4.1x 4.0x 3.5x 14.3%
4.3x 4.2x 3.9x 14.3% 3.5x 13.8% 3.9x 14.0% 3.5x 13.8%
HMA 1st Lien LPNT CYH HCA sr uns
Description Revolving credit facility due 11/18/2016 Term Loan A due 11/1/2016 Term Loan B due 11/1/2018 6.125% Sec Notes due 4/15/16* Total Sr Sec debt 7.375% of 2020 unsecured notes Total Senior debt 3.75% Convert sub note due 5/1/2028 Total Sub debt Capital leases/Other Total debt Market Cap Enterprise Value
Size 0 725 1,400 400 $2,525 875 $875 91 $91 $98 $3,589 1,675 $5,176
Liquidity Revolver Letters of Credit Borrowings Revolver Availability $500 49 0 451 $88 $539
3.0x Cash Total Liquidity 4.0x
4.1x
4.2x
6.1x
* Credit facility and 6.125% bonds of 2016 notes are pari passu. ** PF EBITDA includes approximately $53mn contribution from Mercy Health.
Maturities: 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015+
88
January 26, 2012
High Yield
HealthSouth (HLS)
UNDERPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate HLS Underperform on reimbursement risk as over 70% of its revenue is from traditional Medicare. While the Super Committee did not reach negotiated cuts, we believe the 2% sequester cut could be revisited by Congress. HLS bonds now trade only modestly wide to the core hospital group, but we still see the risk/reward tradeoff as unattractive. Bond Summary Size Coupon (MM) $290 (%) 8.125 Priority Sr Maturity 15-Feb-20 Agency Ratings B2/B+ Next Call Price $104.063 Date 2/15/2015 Bid Price $104.750 YTW (%) 7.142% STW (bp) 634 CDS Levels 106 5-Year 0
HLS is a pure-play post-acute care company focused on Inpatient Rehabilitation Facilities (IRF) and outpatient rehab clinics. HLS is the largest provider of inpatient rehabilitation in the US. The company operates 97 IRFs and 28 Outpatient satellites. Roughly 70% of its revenue is from traditional Medicare. HLS grew rapidly in the mid1990s through acquisitions. In March 2011, HLS completed a $120 mn add-on deal split between the 2018s and 2022s, the proceeds of which are for the paydown of its revolver and 2016 bond maturity. In August 2011, HLS completed the sale of 5 of its LTACHs to LifeCare for $117.5 mn of proceeds, which the company used, together with its revolver capacity, to call its remaining 10.75% notes.
Company Description
Investment Strengths: - Solid and consistent operating performance with low single-digit same-facility discharge growth and improving margins. - Very strong free cash flow (13% of rent-adjusted debt on an LTM basis) and commitment to de-levering.
Investment Risks: - Over 70% of revenues come from traditional Medicare. HLS's high Medicare exposure puts it more at risk for reimbursement cuts than other providers. - Unclear long-term growth strategy as previous plan to expand into other post-acute modalities seems to have fallen by the wayside given the exit from the LTACH business.
Key Dates/Catalysts: - Quarterly earnings announcements where we see discharge growth and cost discipline as key. - Outcome of the Ernst & Young arbitration case.
Financial Profile Revenue EBITDA Rent Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt+6*rent/EBITDAR Net Debt+6*rent/EBITDAR EBITDA/Interest EBITDA margin PF Capitalization
2009A $1,918 399 48 $126 (3) 73 308 $1,663 81 1,582
2010A $1,999 427 48 $126 (737) 105 200 $1,511 48 1,463
2011E $2,063 460 50 $118 26 105 173 $1,297 52 1,245
4Q10A $521 117 13 $35 (736) 21 34 $1,511 48 1,463
3Q11A $498 111 13 $26 18 26 21 $1,328 48 1,280
4Q11E $522 111 13 $22 2 43 44 $1,297 52 1,245 LTM Comps HLS Leverage 3.2x 3.2x 4.3x 4.8x 4.2x Coverage 4.3x 5.7x 2.9x 2.8x NA Agency Ratings B2/B+ B2/B B3/BB3/B B3/B-
4.4x 4.2x 3.2x 20.8%
3.8x 3.7x 3.4x 21.4%
3.1x 3.0x 3.9x 22.3% 3.4x 22.4% 4.2x 22.2% 5.1x 21.3%
DVA VANGUA CYH HCA sr uns
Description Revolving credit facility Term Loan A of 2016 Rent adjustment (6x) Total Sr Sec debt 10.75% Senior Notes 2016 8.125% Senior Notes due 2020 7.25% Senior Notes due 2018 7.75% Senior Notes due 2022 Total Sr debt Capital Leases Other Debt Total Debt incl rent adjustment 6.5% preferred equity Market Cap Enterprise Value
Size $178 $99 297 574 0 286 337 312 $935 79 $37 $1,625 $387 1,899 $3,864
Debt to LTM EBITDAR
Debt to 2011E EBITDAR
1.1x
1.1x
3.0x
3.0x
3.2x
3.2x
7.7x
7.6x
Maturities 2,000 1,500 1,000 500 0 2012 2013 2014 2015+
89
January 26, 2012
High Yield
Hornbeck Offshore Services (HOS)

OUTPERFORM
Bond Summary Size (MM) $300 Coupon (%) 6.125% Priority Sr. Maturity 12/1/2014 Agency Ratings Ba3/BB-
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $100.50
YTW (%) 5.49%
STW bp 539 Investment Strengths: Good diversification, reflecting cyclical leverage in OSV segment and stability in tank barge business Youngest offshore fleet in the industry, with high exposure to deepwater drilling and production Growing international diversification Amended covenants to provide additional cushion Investment Risks: Slowness of drilling in the GOM, following the moratorium, is a significant negative for the company's business High leverage OSV dayrates are highly leveraged to the oil services cycle Small size for the ratings category; ratings upgrade unlikely TTB segment has been weak Historically aggressive builder of new OSVs on spec; any incremental spec newbuild programs likely to be viewed negatively by rating agencies Key Dates/Catalysts: Increase in activity in the Gulf of Mexico Potential for additional non-energy industry applications for HOSs next generation OSVs to offset weakness in the US Gulf of Mexico Continued diversification away from the US Gulf by moving OSVs internationally Progress of recently announced newbuild program
Company Description
HOS has a two-segment strategy in the offshore transportation business: a US GOM-centric "new generation" OSV business and a Tug and Tank Barge business providing logistics solutions to northeastern US and Puerto Rico. As a result of HOS's leverage to demand for deepwater drilling activity, we expect the company to be an above-average performer in the context of a challenging environment for oil services companies. However, we believe OSV dayrates are likely to remain volatile in the near term, particularly in the shallow US Gulf. HOS currently has a fleet of 51 OSVs excluding newbuilds. Hornbeck was established in 1997 with a focus on servicing the deepwater segment of the offshore market. The company also has a tug and tank barge business, which it considers to be complementary to its OSV business. Hornbeck has added to its OSV and TTB fleets via newbuild expansion and acquisition. The company's operations are primarily domestic and are focused in the Gulf of Mexico, with some smaller exposure to Mexico and Trinidad. In August 2007, the company acquired 20 OSVs from Nabors Industries for $186 mn. In June 2008, HOS announced that it had hired an advisor to review strategic alternatives for the TTB segment. The review is ongoing. Following the Macondo incident, Hornbeck continues look to supplement its GOM activity with international operations.
2008A $441 $237 ($295) $494
2009A $396 $194 ($90) $274
2010A $421 $187 $69 $62
2011E $371 $121 $23 $31
2012E $484 $214 ($253) $449
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2014-26 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $767 $767 $767 $0 $829 $1,597 Size $132 $0
2008A 2.8x 37.4x 49%
2009A 3.8x 9.2x 48%
2010A 4.1x 3.4x 47%
2011E 6.3x 2.4x 41%
2012E 3.6x 9.6x 40%
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $250 $1 $0 $249 $132 $381
Comps HOS BAS PKD
Coverage ('11E) 2.4x 12.8x 13.4x
Agency Ratings Ba3/BBB3/B B1/B+
6.6x
Total Liquidity
Maturities:
350 300
250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
90
January 26, 2012
High Yield
Host Hotels & Resorts LP (HST)
Updated
1/23/2012
212-357-9918 212-902-4751
OUTPERFORM
Our OP rating reflects HSTs low leverage and strong asset coverage. HST continues to balance its funding through the issuance of debt and equity. We continue to prefer HST to other crossover lodging and cruising credits. We believe HST can achieve investment grade ratings in the next 12-24 months. Bond Summary Size (MM) $500 $500 Coupon (%) 6.875 6.000 Priority Sr. Notes Sr. Notes Maturity 1-Nov-14 1-Nov-20 Agency Ratings Ba1/BB+ Ba1/BB+ Next Call Price 101.719 103.000 Date current 1-Nov-15 Bid Price 101.750 106.000 YTW (%) 4.47% 4.94% STW bp 440 412 Z-spread bp 398 369 5-yr CDS 255 255
Company Description
Host Hotels & Resorts LP (LP), along with its operating partner Host Hotels & Resorts Inc. (HST), operates as a self-managed REIT of hotel properties. HST's lodging portfolio primarily consists of 121 owned properties, which had a total of approximately 57,203 rooms as of 3Q2011. The company is geographically diverse, with hotels in most of the major metropolitan areas in 26 US states, Canada, Mexico, and Chile under the Marriott, Ritz-Carlton, Sheraton, Hyatt, Fairmount, Hilton, Four Seasons, and Swissotel brands. Locations include central business districts of major cities, areas near airports, and resort/convention destinations that typically benefit from high barriers to entry vis--vis competitors. HST owns 98% of LP. Significant HST equity holders include Vanguard (11%), APG Investments (5%), Morgan Stanley Investment Mgmt. (5%), according to Bloomberg. Key Dates/Catalysts: - 2011 guidance: Adjusted EBITDA of $1,015-1,025 mn and diluted EPS of -$0.03 to -$0.01 per share based on an increase in RevPAR of 6.25-6.75%. Maintenance capex expected to be $300-320 mn. - May 2011: Announced intent to redeem $150 mn of the 3.25% convertible notes due 2025 at par. HST expects holders to convert into equity. - June 2011: Moody's placed Host's Ba1 rating on positive outlook. - September 2011: Increased quarterly dividend to $0.04 from $0.03. - December 2011: Terminated an agreement to acquire the 888-room Grand Hyatt Washington D.C. for $442 million, or approximately $498,000 per key. - December 2011: Increased quarterly dividend to $0.05 from $0.04. - February 14, 2012: 4Q2011 earnings release.
Investment Strengths: - Strong brand names. - Generates solid free cash flow. - Strong liquidity position and manageable leverage. - Solid asset coverage. Despite $1.1 billion of mortgage debt as of 3Q2011, 107 of 123 properties remain unencumbered by liens. - During 2010, issued 27 million shares of common stock under its continuous equity offering program for net proceeds of $406 million. In April, entered into a new program that allows for up to $400 million of common stock. YTD 3Q2011 issued 16.7 million common shares for net proceeds of $289 million. Investment Risks: - Paying quarterly dividend of $0.05 per common share. - 37% of business was driven by group travel during fiscal 2010. - Under bond indentures, HST may incur up to $400 million of secured debt if interest coverage is at least 2.0x. - Permitted to release security in subsidiary stock if leverage is below 6.0x (not released to date). - Sizable restricted payment basket ($10.3 billion as of 2Q2011).
Financial Profile Revenue Adj EBITDA Cash interest Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due Sep 2012 Term loan due Sep 2012
FY10A 4,437 831 347 4 309 171 5,477 1,113 4,364 6.6x 5.3x 2.4x 18.7%
1Q11A 903 144 64 1 94 (15) 5,538 154 5,384 6.5x 6.3x 2.3x 15.9%
2Q11A 1,296 313 80 3 146 84 5,888 634 5,254 6.5x 5.8x 3.9x 24.2%
3Q11A 1,142 212 55 1 95 61 5,488 524 4,964 5.7x 5.2x 3.9x 18.6%
4Q11E 1,615 350 75 2 195 78 5,456 207 5,250 5.4x 5.1x 4.6x 21.7%
FY11E 4,956 1,019 274 7 530 208 5,456 207 5,250 Comps 5.4x 5.1x 3.7x 20.6% HOT FCH Leverage 3.3x 7.7x Coverage 4.7x 1.5x Ratings Ba1/BB+ B2 / BCredit facility maintenance covenants Covenants 2011 2012 Leverage 7.25x 7.25x Coverage 1.75x 1.75x Fixed Chr 1.15x 1.15x
3Q11A 119 1,016 1,135 1-Nov-14 15-Mar-15 1-Jun-16 15-May-17 15-Jun-19 1-Nov-20 15-Apr-24 15-Apr-27 498 650 800 390 500 500 175 413 427 5,488
Debt to EBITDA
3Q11A $600 119 481
Enterprise Stock price Market cap
value 706.2 $ 16.62 11,738 153 4,964 16,855
Shares o/s (mm)
Mortgage Notes (various on 16 props.) Total Sr Sec (1st lien) debt 6.875% Senior Notes 6.375% Senior Notes 6.75% Senior Notes 9% Senior Notes 5.875% Senior Notes 6% Senior Notes 3.25% Sr Converts 2.625% Sr. Converts Other debt Total Debt
1.2x
Minority interest Net Debt Enterprise value (EV)
$524 1,005
LTM Adj. EBITDA EV / Adj. EBITDA EV / 2011E EBITDA
961 17.5x 16.5x
5.7x
Maturities: 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 2017+ 3Q11 2Q11 1Q11 4Q10 3Q10 Occupancy 76% 75% 66% 68% 74% $ $ $ $ $ ADR 169 184 174 180 163 RevPAR $ $ $ $ $ 128 139 116 122 120
91
January 26, 2012
High Yield
Huntsman Corp. (HUN)

IN-LINE
Bond Summary GS Rating IL IL Size (MM) 600 530 Coupon (%) 5.500 8.625 Priority Sr. Unsec Sr. Sub. Maturity 30-Jun-16 15-Mar-21
Updated
1/26/2012
212-357-6157 212-902-0459
Agency Ratings B1/NR B3/B
Next Call Price MW 104.3 9/15/2015 Date
Bid Price 98.25 109.50
YTW (%) 5.95% 6.70%
OAS bp 524 518
Company Description
Huntsman is a leading producer of differentiated chemicals. Its largest business is Polyurethanes, and the company also competes in Advanced Materials, Textile and Effects, Performance Products, and Pigments (titanium dioxide). At the end of 2007, Huntsman divested its polymer and base chemicals assets in North America to a subsidiary of Koch Industries. Following court proceedings, the company terminated its agreement to merge with Hexion. In the settlement, Huntsman received $1 billion from Apollo (Hexion's parent) and Apollo's affiliates. Key Dates/Catalysts: 4Q2011 earnings release Huntsman has substantial cash on its balance sheet and could look to make acquisitions; conversely, the company could use cash to reduce outstanding indebtedness
Investment Strengths: - Leading position in MDI, which is a high-growth business, particularly in Asia. - Huntsman is focused on restructuring the Textiles and Effects business to improve margins. - The company has a large amount of cash on its balance sheet. Investment Risks: - Huntsman has significant cash on the balance sheet and could look to make acquisitions.
Financial Profile ($, mn) Revenues Total EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Equivalents Net Debt Key Credit Statistics Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin PF Capitalization ($, mm) Description Revolver Term Loan B Term Loan B - Extended Term Loan C A/R Facility (on balance sheet) Total Huntsman International Senior Secured Australia credit facilities HPS (China) debt Senior Unsecured Notes Variable interest entities--AAC Other Debt Total Huntsman International Senior Debt Senior Subordinated Notes ( 400 mn) Senior Subordinated Notes ( 135 mn) Senior Subordinated Notes Senior Subordinated Notes Senior Subordinated Notes Total Huntsman International Debt Minority Interest Share Price Market Capitalization Enterprise Value
FY:09 7,665 534 (238) (155) (189) (48) 4,436 1,745 2,941 8.5x 5.1x 2.2x 7%
FY:10 9,250 850 (229) (6) (236) 379 4,321 966 3,355 5.1x 3.9x 3.7x 9%
FY:11E 11,284 1,260 (246) (118) (347) 549 4,137 436 3,701 3.3x 2.9x 5.1x 11%
Q4:10 2,412 217 (61) 13 (104) 65 4,321 966 3,355 5.1x 3.9x 3.7x 9%
Q3:11 2,976 345 (63) (49) (93) 140 4,231 453 3,778 3.5x 3.2x 4.8x 11%
Q4:11E 2,695 285 (59) (34) (130) 62 4,137 436 3,701 Comps 3.3x 2.9x 5.1x 11% Huntsman MSC MPM Leverage 3.5x 5.5x 6.8x Coverage 4.8x 2.5x 1.7x Ratings B1/BBB3/CCC+ B3/B-
Size 652 650 427 245 1,974 27 167 600 306 95 3,169 88 530 350 4,137 134 11.5 2,768 6,679
Debt to EBITDA
Liquidity Revolver Borrowings Letters of credit Revolver Availability 300 25 275
1.7x US A/R facility European A/R Borrowing base Amount Drawn 2.7x Availability Cash at Huntsman Corp Liquidity 250 310 541 245 296 360 931
3.5x
5.6x
Maturities: 1000 900 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015
92
January 26, 2012
High Yield
IASIS Healthcare (IAS)

OUTPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate IAS Outperform. We view the high leverage and the headwind from the health plan as more than priced-in. Also, we see upside if IAS uses its $230 mn of holdco cash to complete an acquisition, which we estimate could reduce leverage by 0.5x to 5.6x. We believe most investors are assuming the holdco cash would go to sponsors and leverage would remain at 6.1x. Bond Summary Size (MM) $850 Coupon (%) 8.375 Priority Sr. Maturity 15-May-19 Agency Ratings Caa1/CCC+ Price $106.281 Next Call Date 5/15/2014 Bid Price $94.750 YTW (%) 9.381% STW bp 858 Investment Strengths: - High market concentration in high-population growth markets and markets likely to outperform in a recession (Salt Lake City). - Historically strong track record of organic growth: Markets have experienced less of an increase in unemployment than the national average. Investment Risks: - Medicare and Medicaid reimbursement could be reduced. - Small number of facilities heightens operating risk, as a disruption at one will likely have a significant impact on financial results. - Volumes have been weak across the industry and are expected to remain so for the near term. - The health plan is likely to post declining revenue in the near term due to reduced enrollment. We have modeled FY2012 health plan revenue down 13% yoy.
Company Description
Small hospital operator with 17 facilities located in three high-growth markets (Salt Lake City, Phoenix, Tampa), plus Texas and Louisiana. Markets are urban and suburban. Focused on building market concentration to facilitate physician recruitment and negotiation with managed care payers. Around 20% of EBITDA comes from Medicaid health plan in Arizona. The company has been owned by TPG since 2004. On October 1, 2010, IASIS announced the completion of its acquisition of Brim Holdings, Inc, which consists of two hospitals (Wadley Regional Medical Center 370 beds; Pikes Peak Regional Hospital 15 beds) for a total cash-forstock transaction valued at $95 mn. In May 2011, Iasis completed the acquisition of a 79.1% equity ownership interest in St. Joseph Medical Center (SJMC) in downtown Houston for a cash consideration of $157 mn. The company recapitalized in the same quarter in order to raise funds for the SJMC acquisition and put $230 mn of cash at the holdco level, the proceeds of which could be used for an acquisition or a dividend to the sponsor. Key Dates/Catalysts: - Quarterly earnings announcements (commercial volumes have been weak industry-wide, although bad debt expense has been relatively stable.) - Possible acquisition announcement using the $230 mn of holdco cash that was raised during the April refinancing. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Pro forma Capitalization Description
FY2010A
FY2011A
FY2012E
Dec 1QF11A
Sep 4QF11A
Dec 1QF12E
$2,521 287 $93 45 81 176 $1,442 145 1,297 0.0x 4.5x 3.1x 11.4%
$2,787 299 $110 27 98 39 $1,879 147 1,732 0.0x 5.8x 2.7x 10.7%
$2,931 307 $122 10 160 37 $1,869 169 1,700 0.0x 5.5x 2.5x 10.5%
$673 70 $23 9 15 (9) $1,453 129 1,324
$717 72 $35 3 34 7 $1,879 147 1,732
$739 77 $31 3 40 9 $1,876 153 1,724 LTM Comps IAS VANGUA CYH Leverage 6.0x 4.3x 4.8x 3.9x Coverage 2.1x 2.9x 2.8x 2.7x Agency Ratings Caa1/CCC+ B3/BB3/B Caa1/CCC+
3.0x 10.3%
2.1x 10.1%
2.5x 10.4%
THC
Size $0 1,025 1,025 $850 850 $6 $1,881 NA NA
Debt to FY12E EBITDA
Liquidity Revolver Size Letters of Credit $300 85 0 215 $147 $362
Revolving Credit Facility due 5/3/2016 Term loan B due 5/3/2018 Total Sr Sec debt 8.375% Sr notes due 5/5/19 Total Sr debt Other--Capital Lease Obligations Total Debt Market Cap Enterprise Value
3.3x
3.3x
6.0x
6.1x
*Cash balance shown here is at Opco and does not include the $230mn
6.0x
6.1x
of cash at Holdco.
*LTM EBITDA is PF for acquisition of St Joseph Medical Center
Maturities: 2,000 1,600 1,200 800 400 0 2012 2013 2014 2015+
93
January 26, 2012
High Yield
IMS Health (RX)

Updated 01/25/12
212-855-7718 212-902-9758
NOT COVERED
Bond Summary Size (MM) $1,000 Coupon (%) 12.5 Priority Snr Maturity 01-Mar-18 Agency Ratings B3/B Next Call Price $110.000 Date 01-Mar-14 Bid Price $117.000 YTW (%) 8.098% STW bp 777 Company Strengths: - Solid cash flow. LTM free cash flow was 6% of debt. - Commanding market share. IMS has 50%+ market share. We view this position as defensible due to the difficulty of a competitor building a network of data suppliers. One of the three big drug distributors (ABC, MCK, CAH) could provide some market data, but the data would not be as comprehensive as IMS's. - High level of importance to customers, coupled with low cost relative to SG&A budgets, results in high 20% margins. For example, top customer pays IMS about $140 mn out of an SG&A budget of what we would estimate to be $20 bn. - Pharma industry is a good customer group over long term large, highly profitable industry. Company Risks: - Dislocation in the pharma industry in the near term. Customers are cutting costs/merging in reaction to patent cliff, recession, and concerns about the impact of health reform. - Customer concentration (top 10 are 40% of revenue). - 144A for life.
4Q10A 1Q11A 2Q11A 3Q11A
Company Description
IMS Health (RX) purchases prescription data from pharmacists and drug distributors, repackages the data, and sells it to pharmaceutical companies in over 100 countries. Pharmaceutical companies use the data to determine sales force compensation, and to plan drug launches and marketing spend. The data is necessary because the sales force targets physicians; however, physicians are not the ultimate purchasers and it is otherwise very difficult to measure salesforce effectiveness. Though it has competitors in specific drug categories and specific locations, IMS is the only company providing this data on a global basis. More than 60% of revenue is generated outside of the US. IMS was spun off from Nielsen Research (formerly Cognizant Corp.) in 1998 and was taken private by TPG, CPP Investment Board, and Leonard Green in February 2010 for $5.96 bn, or 9.9x LTM EBITDA. Sponsors contributed $2.8 bn of equity. In March 2011, IMS amended its credit agreement and increased revolver size by $100 mn, to $375 mn of availability, and extended the maturity by one year. In June 2011, the Supreme Court ruled in favor of IMS that a VT statute limiting the commercial use of doctor-level prescription data violates the First Amendment. IMS has noted that it believes the existing laws in NH and ME are likely to be declared unconstitutional or repealed in light of this decision in the coming months. In October 2011, IMS closed the acquisition of SDI, which is expected to add roughly $65 mn of EBITDA. In January 2012, IMS announced that it has sold the SDI promotional and Medical Audit businesses to Inventiv Health as per FTC regulation; financial terms were not disclosed. The divested assets represents less than $15 mn or approximately 10% of SDI's 2011 revenue. Key Dates/Catalysts: - Quarterly earnings results - Integration of the SDI acquisition, which closed October 31, 2011. Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
2009A was pre LBO. 2009A 2010A
$2,190 594 $33 105 117 425 1245 380 864
$2,222 612 $241 (97) 104 131 2984 496 2488
$587 175 $61 (2) 32 45 2949 496 2453
$558 151 $65 (18) 21 (24) 3083 546 2537
$591 173 $73 (26) 22 57 3077 579 2498
$589 191 $73 13 22 89 3047 649 2398 Comps Leverage 4.2x 6.3x 5.6x Coverage 2.5x 1.9x NA Agency Ratings B3/B Caa1/CCC+ Caa1/B
2.1x 1.5x 18.0x 27.1%
4.9x 4.1x 2.5x 27.6% 2.9x 29.8% 2.3x 27.0%
LTM:
4.4x
IMS Health (RX) Multiplan (MLTPLN) Catalent (PTSAC) snr
2.4x 29.3%
2.6x 32.4%
Capitalization Debt to LTM EBITDA
Description Revolver ($375mm) 2/26/2016* Term Loan (US$) 8/26/2017 Term Loan () 8/26/2017 Total Sr Sec debt 12.5% notes due 3/1/2018 Total Sr debt
Size 58 1283 764 $2,105 1000 $1,000
Liquidity Revolver Size Letters of Credit Borrowings $375 0 0 375 0 0 0 309 $684
2.8x
Revolver Availability A/R facility
4.2x
Borrowings A/R Availability
Total Debt Market Cap Enterprise Value Maturities: 3500 3000 2500 2000 1500 1000 500 0 2012
$3,105 NA NA
4.2x
*Per 3Q 10Q and conf call, company drew down $90mn after quarter end and expect to pay down $32mn by year-end. *3Q11 cash less $340mn purchase of SDI after quarter end.
2013
2014
2015+
94
January 26, 2012
High Yield
Isle of Capri Casinos (ISLE)

Updated 1/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $300 $357 Coupon (%) 7.75 7.00 Priority Sr Nts Sr Sub Nts (a) Maturity 15-Mar-19 1-Mar-14 Agency Ratings B3/BCaa1/CCC+ Next Call Price 103.875 101.167 Date 15-Mar-15 Current Bid Price 94.250 98.500 YTW (%) 8.85 7.79 STW (bp) 747 756 Z-Spd (bp) 734 724
(a) Call price steps down to par on 3/1/2012.
Company Description
Isle of Capri (ISLE) owns and operates 14 casinos and racetracks in the US, located in Mississippi, Louisiana, Iowa, Missouri, Colorado, and Florida. As of April 2011, ISLE operated 14,947 slot machines and 375 table games and managed 3,078 hotel rooms. As of April 2011, members of the Goldstein family, including Vice Chairman Robert Goldstein, collectively owned and controlled approximately 42.6% of the common stock. Key Dates/Catalysts: - April 2011: Receives Category 3 gaming license in PA. The casino will be part of Nemacolin Woodlands Resorts in southwest PA, which includes 335 guestrooms and various resort amenities. ISLE expects to invest $50 mn to build a gaming facility, and to operate 600 slot machines and 28 table games as well as a restaurant and lounge. The project is pending an appeal by a third party challenging the granting of the license to ISLE. - August 2011: Lowered fiscal 2012 capex budget to $90 million from $140-150 million. ISLE removed the planned Nemacolin capex as a third party appeals the granting of the license to ISLE. - December 2011: Has begun rolling out an enhanced customer loyalty program at its Pompano property and expects to implement the program across its portfolio by the end of 2013. - December 2012: Expected opening of its Cape Girardeau facility in Missouri.
Company Strengths: - Diversified asset mix, with no exposure to Las Vegas or Atlantic City. - Solid liquidity position. - Modest maintenance capex ($25 million per year). - Solid management team working on new brand strategy. - Florida legislature passed legislation lowering state gaming tax to 35% from 50%. - Further portfolio diversification with the Cape Girardeau facility in Missouri. The $125 million facility is expected to open by the end of 2012. Company Risks: - High leverage compared with its regional gaming operator peer group. - Low EBITDA margins compared with peer group. - Continued pressure on consumer spending. - Increasing competitive pressure from new gaming supply and increased promotional activities. - Florida property facing increasing competition from Native American casino, which has introduced table gaming. - Continues to be affected by a sluggish economy and high unemployment. - Elevated fuel prices could reduce visitation and spend per visit.
Fiscal year ended April 30th Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash (incl restricted) Net Debt Key Credit Statistics Total Debt/LTM EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Sr sec revolver due November 2013 (b) Sr sec term loan due November 2013 (b) Other Total senior secured debt 7.75% senior notes due March 2019 Total senior debt 7% senior sub debt due March 2014 Other Total debt Total debt 2QFY12 28 498 526 298 823 357 4 1,185 6.3x #REF! Cash Total Liquidity 93 251 Restricted cash 12 4.4x 2.8x Debt to EBITDA 2QFY11 247 45 30 1 13 1 1,260 100 1,160 7.0x 6.4x 2.0x 18.2% 3QFY11 232 40 15 (6) 20 10 1,252 104 1,148 6.7x 6.1x 2.2x 17.0% 4QFY11 274 65 23 0 12 30 1,193 110 1,082 6.1x 5.5x 1.4x 23.9% FY11 1,005 197 85 (6) 59 60 1,193 110 1,082 6.1x 5.5x 1.4x 19.6% 1QFY12 246 41 9 (0) 15 17 1,178 108 1,070 6.2x 5.6x 2.5x 16.5% Liquidity Source Revolver Size Letters of Credit Borrowings Revolver Availability Less: Limitations due to covenant restrictions Net revolver Available (103) 145 2QFY12 300 24 28 248 2QFY12 247 43 33 0 20 (10)
Comps 1,185 106 1,079 6.3x 5.7x 2.4x 17.5% ISLE HET MNTG PNK
Ratings Caa1/CCC+ Ca/CCC B3/BCaa1/B
Enterprise Value Source Shares O/S (mm) Share price Market cap Net debt Enterprise Value (EV) EV / LTM EBITDA 39.0 $4.99 195 1,092 1,286 6.8x
(b) Revolver and term loan maturity dates extend to 2016 and 2017, respectively, if the 7% senior subs are refinanced prior to that date.
Maturities: Revenue Summary 1,000.0 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 FY2012 FY2013 FY2014 FY2015 FY2016+ Mississippi Louisiana Missouri Iowa Colorado Florida Other Total net revenue 3QFY11 44 31 43 53 26 35 0 232 4QFY11 55 35 52 62 30 42 0 274 1QFY12 38 36 47 58 31 35 0 246 2QFY12 45 33 47 58 32 33 0 247
95
January 26, 2012
High Yield
iStar Financial (SFI)

UNDERPERFORM
Updated 1/25/2012
Amanda Lynam
(212) 902-9238
Bond Summary Ticker SFI Size (MM) $448 Coupon (%) 5.95 Maturity 15-Oct-13 Agency Ratings Caa1/B+/BYield (%) 12.3 UST Spread 1,206 Price ($) bid 90.50 5 Yr CDS pts + 500bp 8.75/9.75 Investment Strengths: - As of September 30, 2011, SFI held $4.83 billion of unencumbered assets ($4.1 billion net of accumulated depreciation and loan loss reserves). - In March 2011, demonstrated an ability to successfully refinance near-term maturities, and entered into a new $2.95 billion secured credit facility. - SFI's REHI and OREO portfolios may generate value, to the extent that certain properties are sold at values near or above their current marks (assets were impaired before they were transferred into these portfolios). In October 2011, SFI said it expects these assets to begin contributing income in 2014. Investment Risks: - Despite the March 2011 refinancing, SFI still has a challenging near-term maturity schedule, with $1.7 billion of debt maturities and term loan payments due in 2012. - SFI's capital structure contains a large amount of secured debt (44% of debt is secured), which reduces the value that unsecured holders may be able to extract in a hypothetical recovery scenario. - SFIs ability to increase debt levels is limited by a fixed charge coverage covenant (though it can incur new debt for the purposes of refinancing existing debt). - SFI is solely focused on the real estate market, so vulnerable to downturns in real estate cycles.
Company Description
iStar Financial (SFI) is a fully-integrated finance and investment company focused on the commercial real estate industry. The company maintains significant concentrations in certain property types (apartments and land) and geographies (particularly in the western US). SFIs credit metrics, financial flexibility, and debt ratings deteriorated during the credit crisis, as non-performing loans and loan provisions increased materially. The companys constrained financial flexibility has restricted SFIs ability to carry out new investment activities. Since the beginning of the credit crisis, SFI has significantly curtailed asset originations, and has focused primarily on resolving problem assets and generating liquidity to satisfy the companys debt repayments. In March 2011, SFI entered into a $2.95 billion senior secured credit facility and used the proceeds to repay $2.62 billion of outstanding borrowings under existing secured credit facilities. The borrowings under the March 2011 facility are collateralized by a first lien on a fixed pool of assets, initally composed of $3.69 billion in assets (56% performing loans, 22% net lease assets, and 22% non-performing loans/REOs). Pro-forma for the sale of its interest in Oak Hill, SFI held $350 million of cash at the end of October 2011.
Financial Profile Revenue EBITDA (defined by SFI) Provision for losses Charge offs Repayments/principal collections Proceeds- sales of loans/NLAs/OREOs Total Debt* Secured Debt Unsecured Debt Unencumbered Assets Total Assets Total Equity Total reserve for loan losses As a % of total loans (before reserves) Key unsecured covenant statistics
FY08 $1,354 $1,698 $1,029 ($270) $1,823 $1,141 12/31/2008 $12,486 $1,913 $10,512 $12,597 $15,297 $2,447 $977 7.8%
FY09 $893 $704 $1,255 ($814) $951 $1,056 12/31/2009 $10,895 $5,594 $5,015 $5,571 $12,811 $1,656 $1,418 15.3%
FY10 $575 $778 $331 ($935) $1,520 $2,523 12/31/2010 $7,345 $3,123 $4,043 $5,060 $9,175 $1,695 $815 15.1%
9M2010 $443 $672 $277 ($671) $1,209 $2,152 9/30/2010 $8,517 $4,127 $4,306 $4,970 $10,465 $1,761 $1,025 16.1%
9M2011 $338 $494 $30 ($135) $1,069 $229 9/30/2011 $5,995 $2,831 $3,207 $4,087 $7,754 $1,605 $710 17.9%
LTM 9/30 $476 $600 $85 ($399) $1,379 $600
Comps SFI
Agency Ratings Caa1/B+/B-
UA/UD 1.3x 1.4x 1.4x 1.4x 1.5x 2.7x 2.4x 1.6x 1.9x not given Fixed Charge Cover Ratio Note: The fixed charge covenant ratio is calculated by SFI on a trailing twelve-month basis. The company has not disclosed thisratio since year-end 2010. * Total debt includes debt premiums/(discounts) and may not equal the sum of secured debt and unsecured debt line items shown above Capitalization Description ($mn) 9/30/2011 Key covenants Tranche A-1 facility Tranche A-2 facility Line of credit Secured term loans Unsecured notes Preferreds Total debt Market Cap (at 1/20/2012) Cash (unrestricted) Enterprise value $1,071 $1,450 $244 $310 $2,863 $100 $6,038 $578 $217 $6,398
Due to SFI's unique business model, we believe there are limited business comps available.
Secured credit facility Colateral coverage of 1.25x of outstanding borrowings (maintenance) Unsecured debt securities Unencumbered assets to unsecured indebtedness (UA/UD) must exceed 120% (maintenance) Fixed charge coverage ratio must exceed 1.5x (incurrence)
Remaining consolidated unsecured maturities (as of 9/30/2011): $2,500 $2,000
$ in millions
$1,500 $1,000 $500 $0 2012 2013 2014 2015 Thereafter
96
January 26, 2012
High Yield
J. Crew Group Inc. (JCG)

OUTPERFORM
Bond Summary Size (MM)
$400
Updated: 1/26/12
212-902-6957 202-357-7875
Coupon (%)
8.125
Agency Priority
Sr Nts
Next Call Price

$104.06
Bid Price
97.00
YTW (%)
8.70%
STW bp
723
Maturity
1-Mar-19
Ratings
Caa1/CCC+
Date
1-Mar-14
Company Description
J. Crew is a specialty retailer of women's, men's, and children's apparel through a network of more than 300 retail stores and through its direct (online and catalog) segment. In addition to the core J Crew concept, the company has several related concepts, including crewcuts (children's), Factory, and Madewell, which is a recently launched brand for young women.
Investment Strengths: - Strong brand name - Track record of high-teens EBITDA growth under current management - High online penetration (28% of revenues) Investment Risks: - Trading at a large premium to apparel retail peers considering leverage - Fashion missteps have hurt recent results - Traffic remains challenging - Macro shock could slow business
Key Dates/Catalysts: Mid- to late March, fourth quarter earnings release
Financial Profile
Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash
FY10A
1,578.0 275.8 5.4 82.5 44.7 143.2 49.2 298.1 0.2x -0.9x 51.2x 17.48%
FY11A
1,722.2 283.7 3.9 83.5 52.4 144.0 1,600.0 381.4 5.6x 4.3x 72.5x 16.47%
FY12E
1,844.4 295.3 87.4 12.6 95.0 100.3 1,591.0 204.9 5.4x 4.7x 3.4x 16.01%
4Q11A
471.5 43.9 0.5 5.8 21.3 16.3 1,600.0 381.4 36.5x 27.8x 83.1x 9.31%
4Q12E
517.5 62.5 23.0 6.8 23.0 9.7 1,594.0 191.8 25.5x 22.4x 2.7x 12.08%
Comps
J. Crew Burlington Gymboree
Yield
8.70% 11.09% 11.72%
Leverage
5.4x 4.3x 5.9x
Coverage
2.7x
Ratings
Caa1/ CCC
3.2x Caa1/CCC+ 2.3x Caa1/CCC+
Key Credit Statistics

Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
Capitalization
2012E Debt to EBITDA Estimated Liquidity

Revolver Size Letters of Credit
Description
ABL ($250mm, L+250) due 2016 Term Loan (L+350, 1.25% floor) due 2018
Size
0.0 1194.0
3Q12A
250.0 7.7 0.0 242.3 NA 0 NA 142.7 385.0
Total Secured Debt
1194.0
4.0x
Senior Notes due 2018
400.0
A/R facility
Total Subordinated Debt Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities:
1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013
400.0 1594.0
n/a n/a
5.4x 5.4x
Borrowings A/R Availability Cash Total Liquidity
2014+
97
January 26, 2012
High Yield
J.C. Penney Company (JCP)

NOT RATED
Bond Summary Size Ticker
JCP JCP
Updated 1/25/2012
Gregory Chwatko Annalee Bloomfield
212-902-0673 212-902-8028
Coupon (%)
5.65 6.38
Agency Maturity
01-Jun-20 15-Oct-36
UST Price $98

$84
Z Spread (bp) 423

533
5 Yr CDS
323/333 323/333
(MM)
$400 $400
Ratings
Ba1/BB+/BBBBa1/BB+/BBB-
Spread
400 473
Company Description
J.C. Penney is one of America's largest retailers, operating throughout the United States and Puerto Rico. JCP has one of the largest apparel and home furnishing sites on the internet, jcp.com, and the nation's largest general merchandise catalog business. Across its integrated enterprise, J.C. Penney offers a wide array of national, private, and exclusive brands that reflect the company's commitment to providing customers with style and quality at smart prices. JCP is executing a strategic Long Range Plan that consists of four integrated strategies aimed at building a deeper, more enduring relationship with customers, increasing the engagement and retention of associates, and delivering industry-leading financial performance to shareholders.
Key Dates/Catalysts: Earnings releases, same-store sales announcements Outisde investor positions
Company Strengths: - JCP has maintained healthy liquidity ($1.6 billion in cash and equivalents as of 3Q2011). - In addition, JCP extends its financial flexibility owing to its non-burdensome debt maturity schedule. - JCP management's approach to the company's credit profile and capital structure has been conservative. - JCP is one upgrade away from a return to IG rating status at two of three agencies. - Ron Johnson, previously with Apple's retail operations, succeeding Mike Ullman as CEO may provide a catalyst for operational improvements. Company Risks: - In order to maintain its position in the hyper-competitive department store sector, JCP must constantly make innovations in its private brands and introduce new brands and merchandise to suit emerging middle-market consumer trends and interests. - Weak consumer spending levels may weigh on sales and margin improvements. - Pershing Square's and Vornado's stakes in the company could lead to deployment of cash for shareholder enhancement,or a public proxy battle, which could weaken the company's credit profile. For example, the company completed a $900 million share repurchase program in 1H2011.
Financial Profile
Revenue EBITDA Operating Income Interest Expense (net) Operating Cash Flow CapEx Dividends Free Cash Flow
2009
17,556 1,158 663 260 1,577 (600) (183) 794
2010
17,759 1,336 825 231 592 (499) (189) (96)
3Q11A
3,906 209 81 57 120 (178) (45) (103)
Total Debt Cash Net Debt (Cash)
3,392 3,011 381 2.9x 4.0x 0.3x 4.5x 6.6%
3,099 2,622 477 2.3x 3.4x 0.4x 5.8x 7.5%
3,099 1,551 1,548 2.3x 3.3x 1.2x 3.7x 5.4%
Comps
LTD M RSH
Adjusted Leverage
3.5x 2.4x 4.5x
Coverage
8.3x 7.5x 7.2x
Agency Ratings
Ba2/BB+/BB+ Baa3/BBB-/BBBBa3/BB-/B+

Total Debt/EBITDA Adjusted Debt/EBITDAR Net Debt/EBITDA EBITDA/Interest EBITDA margin
Capitalization Description
9.0% Notes, due 2012 6.875 MTN, series A, due 2015 7.65% Debentures, due 2016 7.95% Debentures, due 2017 5.75% Notes, due 2018 5.65% notes due 2020 7.125% Debentures, due 2023 6.9% notes due 2026 6.375% Notes, due 2036 7.4% Debentures, due 2037 7.625% Notes, due 2097 Capital lease obligations/Other
Size
230 200 200 285 300 400 255 2 400 326 500 1 3,099 8,730 10,747
Debt to EBITDA
Liquidity
Revolver Size Letters of Credit Borrowings Revolver Availability 1,250 157 0 1,093
1,085 2,178
Total Debt Market Cap Enterprise Value Maturities:

$3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2012 2013
2.3x
2014
2015
2016+
98
January 26, 2012
High Yield
Jarden Corporation (JAH)

Updated 1/23/2012
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $300 $300 $650 Coupon (%) 8.000 6.125 7.500 Priority Sr Nts Sr Nts Sr Sub Maturity 01-May-16 15-Nov-22 01-May-17 Agency Ratings Ba3/BBBa3/BBB2/B Next Call Price 104.000 103.750 103.060 Date 01-May-13 01-May-12 15-Nov-15 Bid Price 109.250 103.625 106.500 YTW (%) 3.522 5.477 6.034 STW bp 334 415 529 Z-Spread bp 304 405 497
Company Description
Jarden is a diversified consumer products company operating in four segments: Branded Consumables (playing cards, home canning, baby care, home care, etc.), Consumer Solutions (small electric appliances: Sunbeam, Oster, Holmes, etc.), Outdoor Solutions (Coleman, K2, Rawlings, Stearns, Shakespeare, Berkeley), and Process Solutions. Jarden's trademarks include Crock-Pot, FoodSaver, Harmony, Holmes, Oster, Mr. Coffee, Sunbeam, SEAL-a-Meal, and FoodSaver, among many others. Jarden also offers various consumer and medical plastic products, including jar closures, contact lens packaging, plastic cutlery, refrigerator door liners, medical disposables, and rigid packaging, as well as zinc strip and fabricated zinc products, such as coinage blanks. Jarden Corporation sell its products through various retail formats, including club stores, drugstores, grocery retailers, mass merchants, department stores, value retailers, home improvement stores, and craft stores. The company was founded in 1991 and is headquartered in Rye, New York. According to Bloomberg, significant equityholders include TIAA CREF (9%), Horizon Asset Mgmt (6%) and JP Morgan Chase (5%). Key Dates/Catalysts: - June 2011: CEO stated that 2.5x is the ideal leverage for the company. - August 2011: Board of directors approved a new $500 million stock repurchase plan.
Company Strengths: - Diverse, known brand portfolio with dominant/niche market positions; Jarden owns over 100 active brands and has 12 domestic brands that have been in use for more than a century. - Management is experienced and has proven ability to integrate acquisitions and realize cost-saving synergies. - Acquisitions have generally been low-multiple, non-auction situations, and management has generally kept leverage in the 3-4x range. - Company has global sales footprint, with approximately 40% of sales generated outside the US on a pro forma basis. - Modest dividend policy ($8 mn / quarter). - At December 31, 2010, JAH had $1 billion of domestic tax NOLs. - Long-term goal to reach $5.00 in adjusted EPS by 2014. Company Risks: - The company has a history of being very acquisitive. - Large restricted payments basket ($800 million). - Recent acquisitions have limited synergies with other business lines. - During 3Q2011, completed $150 mn stock repurchase program. - Pension plan: At year-end 2010, the pension and OPEB plans were underfunded by $135 million. During 2011, JAH expects to contribute $15 million of cash to its pension plans. - At 3Q2011, there were $1.4 billion of liabilities at non-guarantor subsidiaries.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt (excl A/R facility) Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
3Q10A 1,602 214 46 49 31 88 2,956 456 2,500 4.2x 3.6x 4.2x 13.4%
4Q10A 1,684 204 48 46 42 68 3,241 695 2,545 4.5x 3.5x 4.1x 12.1%
FY10A 6,023 720 178 123 138 282 3,241 695 2,545 4.5x 3.5x 4.1x 12.0%
1Q11A 1,483 125 45 12 27 41 3,195 406 2,789 4.3x 3.8x 4.0x 8.4%
2Q11A 1,674 206 46 45 24 91 3,198 495 2,703 4.3x 3.6x 4.1x 12.3%
3Q11A 1,785 239 44 50 28 117
LTM Comps 3,180 446 2,733 4.1x 3.5x Maintenance Covenants 4.2x 13.4% Current 1Q2013 1Q2015 & thereafter Debt to LTM EBITDA 0 509 500 337 1,347 294 300 1,941 657 475 107 $3,180 4.1x 2.5x A/R Facility Borrowings A/R Availability Cash Total Liquidity 300 300 446 $655 1.7x JAH 7.5s HBI 6.375s ZQK 6.875s LEVI 7.625s
Ratings B2/B B1/BBB2/B+
2.7x Caa1/CCC+
Net Leverage 4.00x 4.00x 4.00x
Description Senior secured revolver due Mar 2016 Senior secured TL A due Mar 2016 Senior secured TL B due Jan 2017 Securitization & other secured debt Total senior secured debt 8% senior notes due May 2016 6.125% senior notes due Nov 2022 Total senior debt 7.5% senior sub notes due May 2017 7.5% senior sub notes due Jan 2020 Other debt Total Debt
3Q11A
Liquidity Revolver (USD) due 2016 Revolver (Other curr.) Letters of Credit Borrowings Revolver Availability
3Q11A 175 75 41 209
Enterprise value (EV) Shares O/S (mm) Share price Market cap Net debt Enterprise value $ 90.8 34.76 3,156 2,733 5,889
EV / LTM EBITDA
7.6x
(*) Total debt excludes securitization facility.
Maturities: 2000 1600 1200 800 400 0 2012 2013 2014 2015 2016+
99
January 26, 2012
High Yield
JDA Software Group

IN-LINE
Bond Summary Size (MM) $273 Coupon (%) 8.0 Priority Senior Maturity 15-Dec-14 Agency Ratings B1/BB-
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 107.88
YTW (%) 3.3%
STW bp 321 Investment Strengths: - Strong cash flow profile: JDAS generated cumulative free cash flow of $150 million over the past 2 years. We believe it will remain strong in 2011 at over $150 million for the full year. - Conservative capital structure: JDASs conservative capital structure consists of only one bond (the $275 million of 8% senior notes due 2014) and a $100 million revolver. We think net leverage could approach 0.0x by YE2011. - Recurring revenue base: Approximately 45% of the combined companys revenue is derived from maintenance contracts and subscription-based licenses. Investment Risks: - Pullback in demand from retail customers: JDAS preannounced 4Q2011 earnings on January 12 to highlight a shortfall in license sales during the last 2 weeks of December which management attributed to a reduction in retail customer budgets. At that time, management indicated that closing rates for new licenses had not rebounded. We remain focused on whether this trend will continue. - Competitive marketplace: The supply chain management market is highly competitive. Oracle (22% share) and SAP (16% share) control the tier 1 position while JDAS holds a No. 3 position with a 6% share. - History of acquisitions: Management has made 10 acquisitions in the last 11 years, and its recently signed $100 million revolver could provide liquidity for another deal as the i2 integration unfolds.
Company Description
JDA Software Group is a leading provider of global supply-chain planning software, which includes end-to-end solutions from raw materials to freight, assembly, distribution, warehouse, store, and consumer. JDA was founded in 1985. In 2000, it expanded into the manufacturing and wholesale-distribution markets through strategic acquisitions. JDAs enterprise software solutions are specifically designed to enable planning, optimization, and execution of supply chain processes for manufacturers, wholesale/distributors, and retailers, as well as for government and aerospace defense contractors. Key Dates/Catalysts: - JDAS is expected to report 4Q2011 earnings on January 31. The company preannounced 4Q2011 earnings on January 12 to highlight a shortfall in license sales during the last 2 weeks of December. Management may use the January 31 call to provide an update as to whether that trend has continued into 2012. - On March 22, 2011, JDAS announced that it had entered into an agreement for a $100 million senior secured revolving credit facility at L+100 bp. The facility will mature in September 2014.
Financial Profile Revenue EBITDA Cash Interest Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description 8.0% Senior Notes due 2014 Total Debt Market Cap Enterprise Value
FY08 646 132 (12) (7) (10) 152 65 271 (206) 0.5 x -1.6 x 9.5 x 20.4%
FY09 554 117 (2) (7) (8) 116 272 261 11 2.1 x 0.1 x N/A 21.2%
FY10 617 116 (22) (15) (17) 48 273 172 101 1.7 x 0.6 x 7.1 x 18.8%
LTM-3Q11 666 156 (22) (15) (10) 149 273 290 (17) 1.9 x -0.1 x 7.1 x 23.4%
FY11E 677 194 (25) (14) (15) 168 273 276 (3) 1.4 x 0.0 x 9.0 x 28.6%
FY12E 725 191 (22) (18) (33) 117 273 393 (120) 1.4 x -0.6 x
Comps 9.6 x 26.3% SGS
Leverage 3.0x
Coverage 2.8x
Sr. Unsec Ratings B1/B+
Size 273 273 1,267 1,251
Debt to EBITDA 1.7 x 1.7 x 8.0 x Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 100 0 0 100 290 390
Maturities: 300 250 200 150 100 50 0 2012 2013 2014 Thereafter
100
January 26, 2012
High Yield
JetBlue Airways Corp. (JBLU)

IN-LINE
Bond Summary Size (MM) $39 Coupon (%) L+37.5 Priority EETC Maturity 15-Dec-13 Agency Ratings Ba3/BBBNC
Updated 1/24/2012
212-357-6711 212-357-9774
Next Call Price Date NC
Bid Price 90.00
YTW (%) 6.50%
STW bp 593
Company Description
JetBlue is a low-cost airline, serving primarily point-to-point routes. It maintains a fleet of A320 and Embraer 190 aircraft. JetBlue is based out of New York's JFK Airport, with Boston, Fort Lauderdale, Orlando, Long Beach, and Washington Dulles as additional focus cities. The carrier is not a member of any international alliance, although Lufthansa is a significant equity holder in the company. JetBlue recently signed an interline cooperation agreement with AMR. Key Dates/Catalysts: JetBlue is expected to report earnings on January 26.
Investment Strengths: - Brand: JetBlue has a strong brand and loyal customer base. It offers live inflight television on its flights through wholly owned subsidiary LiveTV. - Fleet: JetBlue operates an exclusively A320 and Embraer E190 fleet. By limiting the number of plane types it flies, JetBlue reduces training costs and gains leverage with the manufacturers by buying in bulk. - Non-union workforce: None of JetBlue's employees are currently unionized. This gives the company more flexibility to adjust work rules and other policies. - Airline partnerships: While JetBlue is not a member of any of the international alliances, it has signed interline agreements and partnerships with a number of airlines, most notably Lufthansa (which owns a large equity stake) and AMR. Investment Risks: - High labor costs: JetBlue employees are not unionized, and it has maintained a "no furlough" policy in the past to retain employee loyalty. As a result when demand for air travel dropped, JetBlue was not able to reduce labor costs as quickly as competitors did, and it saw its labor costs per ASM increase. - Small size and largely domestic focused: JetBlue is concentrated in a few key markets (New York, Florida), which makes it more susceptible to fluctuations in regional demand. - Over-expansion: JetBlue is one of the few airlines with plans to significantly expand capacity this year. It could have difficulty filling these new seats if the recovery is not as strong as it expects. Comps UAL DAL LUV JBLU LCC Leverage 2.6x 3.9x 2.1x 4.5x 3.6x Coverage 5.4x 4.1x 9.9x 4.6x 3.9x Ratings B2/B B2/B Baa3/BBBB3/BCaa1/B-
FY10 3,779 679 (176) (64) (249) 210 3,033 963 2,070 3.9 x 4.5 x 18.0%
2Q11 1,151 180 (43) (18) (81) 12 3,083 1,173 1,910 4.2 x 15.6%
3Q11 1,209 189 (36) (3) (133) (14) 3,247 1,239 2,008 5.3 x 15.7%
4Q11E 1,254 190 (37) (3) (133) (14) 3,030 1,144 1,886 5.2 x 15.2%
FY11E 4,680 674 (145) (9) (530) (138) 3,030 1,144 1,886 4.6 x 4.5 x 14.4%
FY12E 4,680 674 (145) (9) (530) (138) 3,147 1,123 2,024 4.6 x 4.7 x 14.4%
Capitalization Debt to EBITDAR
Description Capital Leases Floating rate equipment notes due through 2020 Class G-1 EETC, due 2016 Class G-2 EETC due 2014 and 2016 Class B-1 EETC due 2014 Fixed rate equipment notes due through 2025 Special Facility Bonds (JFK and Orlando) Other Total debt Market Cap Enterprise Value
Size 131 750 222 373 49 1,157 83 482 3,247 1,724 3,732
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 0 0 0 0
4.8 x Cash 5.5 x Total Liquidity 1,239 1,239
Maturities: 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015 Thereafter
101
January 26, 2012
High Yield
KB Home (KBH)
UNDERPERFORM
Bond Summary GS Rating U Size (MM)
300
Updated
1/26/2012
212-357-6157 212-902-0459
Coupon (%) 7.25 Priority Sr. Nts Maturity 15-Jun-18
Agency Ratings B2/B+
Next Call Price

NC
Bid Date Price

95
YTW (%)
8.27%
OAS bp
710
Company Description
KB Home is the fourth-largest homebuilder in the United States based on LTM closings and revenues. The company began operating in 1957 through various subsidiaries of Kaufman and Broad, Inc. In 1986, Kaufman and Broad transferred all of its homebuilding and mortgage banking operations to the company, which subsequently completed an IPO under the name Kaufman and Broad Home Corporation. The business was spun off from Kaufman and Broad, Inc., in 1989, becoming an independent company operating predominantly in California and France. In 2001, the company changed its name to KB Home. Over the next several years, KB significantly expanded its presence throughout the United States, and in 2007, it divested its French operations. Today the company operates in 10 states (CA, AZ, NV, CO, TX, FL, MD, NC, SC, VA) and 30 major markets.
Investment Strengths: - Good geographic diversity. - Primarily targets finished lots. Investment Risks: - Build-to-order model could hinder sales pace. - Margins have been relatively weak in recent periods despite the company's build-to-order strategy. - SG&A as a percentage of sales remains very high. - Relatively weak liquidity position.
Key Dates/Catalysts: 1QFY12 earning release Potential capital raise in FY2012
Financial Profile ($, mn)*

Total Revenues Total Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt Outstanding Total Cash and Cash Equivalents
FY:09
1,825 70 (120) 209 (1) 363 2,007 1,292 74% 54% 0.7x 24%
FY:10
1,590 118 (122) 7 (0) (114) 1,956 1,024 76% 62% 0.9x 24%
FY:11E
1,316 44 (116) (0) (204) 1,584 480 78% 73% NA 21%
4Q:10
451 61 (30) 2 0 35 1,956 1,024 76% 62% 0.9x 25%
3Q:11
367 27 (29) 0 (45) 1,813 593 81% 76% 1.0x 23%
4Q:11E
480 27 (28) (0) 112 1,584 480 78% 73% 1.1x 21%
Debt-toComps
KB Home Beazer Standard Pacific
Inventoryto-Debt
1.0x 0.9x 1.1x
Cap
81% 86% 69%
Ratings
B2/B+ Caa3/CCC B3/B

Homebuilding Debt / Capitalization Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) Homebuilding Gross Margin (1)
PF Capitalization ($, mn) Description Size

28 250 300 450 265 300
Liquidity
Homebuilding cash Financial services cash Restricted cash 477 3 113
Mortgages/land contracts/other loans Senior notes due 2014 Senior notes due 2015 Senior notes due 2015 Senior notes due 2017(1) Senior notes due 2018 Total Balance Sheet Debt LTV maintenance requirements Several guarantees Total Debt Outstanding
Total Cash
593
1,593
226
Maturities:
800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016
1,820
Share price
9.3
Market Capitalization Enterprise Value
719 1,945
102
January 26, 2012
High Yield
Kindred Healthcare (KND)

IN-LINE
Updated 01/25/12
212-855-7718 212-902-9758
We rate Kindred In-Line. While bonds trade at among the highest yield of our provider group, we remain concerned about reimbursement cuts such as (1) a revisiting of the sequester 2% Medicare cut; (2) for LTACs, the expiration of the moratorium; and (3) state Medicaid rate cuts. In addition, we see limited opportunity for de-levering given the 2012 SNF rate cuts. Bond Summary Size (MM) $550 Coupon (%) 8.25 Priority Sr Maturity 1-Jun-19 Agency Ratings B3/BNext Call Price 106.188 Date 6/1/2014 Bid Price $90.000 YTW (%) 10.216% STW bp 942 Investment Strengths: - Stated leverage target. The company plans to delever to prior levels, so roughly half a turn from 4.7x to 4.4x. - KND's cluster market strategy is enhanced by the RHB acquisition. These cluster markets present opportunities for KND hospitals, SNFs, and rehab centers to reduce costs and offer better continuum of care. Investment Risks: - Ability to manage through the 11.1% SNF Medicare cut and therapy changes. - Growth prospects for the LTACHs may be unclear if the moratorium is not lifted and if patient and facility criteria are not defined. - State Medicaid rates could be reduced more than expectations (management expects 0 to +1%)
Kindred is the largest operator of long-term acute care hospitals, LTACHs (45% of pro forma revenues), and the fourth-largest operator of skilled nursing facilities, SNFs (35%) pro forma for its acquisition of RehabCare (RHB). The company also has a contract rehabilitation services business (17% of pro forma revenues) as well as hospital rehabilitation services, HRS (3%). Pro forma for the RHB acquisition, KND will have 123 hospitals (LTACHs and rehab hospitals), 226 skilled nursing facilities, and seven assisted living facilities in 46 states. In June 2011, KND completed the acquisition of RHB for $1.7 bn. The company expects run-rate synergies of approximately $40 mn, with about $25 mn of it being achieved in 2011. KND also recently acquired Vista Healthcare (five LTACHs) in November 2010 for $179 mn in cash, which was funded through the revolver. In 3Q11, KND acquired a home health provider, Professional Healthcare, for $51 mn, funded through the revolver. At a recent conference, the company described homecare as a "fourth segment [it is] incubating." Key Dates/Catalysts: - Quarterly earnings, including any updated guidance on the expected impact of the July 29 SNF rule changes. - Patient and facility criteria for LTACHs and the potential end to the moratorium (legislation has been introduced in the Senate).
Financial Profile Revenue EBITDA EBITDAR Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA Total Rent adj Debt/EBITDAR EBITDA/Interest EBITDA margin
**2011E is not pro forma
2010A $4,360 225 582 $7 34 (177) 33 $366 17 348
PF LTM* $6,049 459 876 $103 0 (232) (7) $1,500 34 1,466
2011E** $5,561 377 776 $78 23 (215) (26) $1,479 34 1,445
4Q10A $1,135 69 160 $3 13 (67) (8) $366 17 348
3Q11A $1,514 104 210 $26 (2) (81) (14) $1,500 34 1,466
4Q11E $1,562 108 214 $23 13 (50) 21 $1,479 34 1,445
Agency Comps KND IAS EMS Leverage 4.6x 6.0x 7.3x Coverage 4.4x 2.1x 1.9x Ratings B3/BCaa1/CCC+ Caa1/B-
1.6x 1.6x 4.3x 31.7x 5.2%
3.3x 3.2x 4.6x 4.4x 7.6%
3.9x 3.8x 5.0x 4.8x 6.8% 24.3x 6.1% 4.0x 6.9% 4.6x 6.9%
* PF LTM includes the acquisition of RehabCare as well as a full year of other KND acquisitions but does not include expected synergies.
Pro forma Capitalization

Debt to LTM PF EBITDAR
Description Asset backed revolver due 6/1/2016 Term Loan due 6/1/2018 Rent adjustment (6x)* Total Sr Sec debt 8.25% Senior notes 6/1/2019 Total Sr debt Other Total Debt Market Cap Enterprise Value Maturities: 1600 1400 1200 1000 800 600 400 200 0 2012 2013
Size $249 $698 $2,502 $3,449 $550 $550 $3 $4,002 634 $4,602
Liquidity Revolver Size Letters of Credit Borrowings $650 $0 $249 401 $34 435
3.9x
Revolver Availability Cash
4.6x
Total Liquidity
4.6x 5.3x
2014
2015+
103
January 26, 2012
High Yield
Koppers (KOP)
IN-LINE
Bond Summary GS Rating IL Size (MM) 300 Coupon (%) 7.875 Priority Sr. Nts Maturity 1-Dec-19
Updated
1/26/2012
212-357-6157 212-902-0459
Next Call Price 103.9 Date 1-Dec-14
Bid Price 105.75
YTW (%) 6.67%
OAS bp 525
Company Description
Koppers is a global integrated provider of carbon compounds and commercial wood treatment products and services. The company's products are sold into a wide range of end markets, including the aluminum, railroad, specialty chemical, utility, rubber, concrete, and steel industries. Koppers is organized into two primary business segments: Carbon Materials & Chemicals and Railroad & Utility Products. Key Dates/Catalysts: 4Q2011 earning release Potential leveraging acquisition
Investment Strengths: - Koppers has leading market positions in several of its key businesses, including its core North American carbon pitch and railroad crosstie operations. - Long-standing relationships with large, blue-chip customers. - Limited threat of substitutes for key products. Investment Risks: - North American and Western European carbon pitch demand may continue to be weak given anemic aluminum production due to excess capacity. - Koppers is dependent on a single raw material, coal tar, which has recently been in short supply in some markets. - Significant customer concentration, with top 10 accounting for 50% of total revenue. - Relatively weak EBITDA margins.
Financial Profile ($, mn)* Net Sales EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Equivalents Key Credit Statistics Debt/EBITDA Net Debt/EBITDA EBITDA/Interest Expense LTM EBITDA Margin
FY:09 1,124 120 (20) 9 (18) 67 361 58 2.9x 2.4x 6.2x 11%
FY:10 1,246 127 (25) (24) (30) 53 320 35 2.5x 2.2x 5.1x 10%
FY:11E 1,496 154 (26) (21) (32) 36 315 82 2.1x 1.5x 5.9x 10%
4Q:10 308 24 (6) (3) (16) 19 320 35 2.5x 2.2x 5.1x 10%
3Q:11 401 47 (6) (9) (7) 9 315 59 2.2x 1.8x 5.7x 10%
4Q:11E 343 35 (7) 2 (12) 23 315 82 2.1x 1.5x 5.9x 10%
Comps Koppers Ashland Olin
Ratings B1/B+ Ba1/BB Ba1/BB
PF Capitalization ($, mn) Description Revolving Credit Facility Capital leases and other secured debt Senior Secured Debt Senior Unsecured Notes TKK guarantee Total Debt Minority Interest Share Price Market Capitalization Enterprise Value Size 15 15 300 315 12 36.9 764 1,032 7.1x 2.2x 0.1x Debt to EBITDA Liquidity Revolver Size Borrowings Letters of Credit Revolver Availability Other credit facilities 300 15 14 268 15
Cash Liquidity
59 342
Maturities: 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 2010 2012 2011 2012 2013 2013 2014 2014+
104
January 26, 2012
High Yield
L-3 Communications Holdings, Inc. (LLL)

Updated 1/26/2012
212-902-3258 212-855-8553
OUTPERFORM/IN-LINE
Our Outperform on the 6.375% sub notes of 2015 reflects their attractive yield-to-call within the next year. Bond Summary Size Ticker LLL (MM) $1,000 Coupon (%) 6.375 4.750 Priority Sr. Sub Sr. Unsec Maturity 15-Oct-15 15-Jul-20 Agency Ratings Ba1/BB+ Baa3/BBB101.063 NC Next Call Next Call Date 15-Oct-12 Bid Price 102.50 100.38 YTW (%) 1.3 4.7 T-sprd bp 129 270 5 Yr CDS1 185 185
LLL $800 1 5-year CDS is sub CDS
Company Description
L-3 Communications (LLL) is a major US defense company, providing high technology products, systems, and subsystems. The company is a prime contractor in command, control, communications, intelligence, surveillance, and reconnaissance systems (C3ISR), government services, and aircraft modernization and maintenance. Electronic Systems (36% of 3Q11 LTM revenues) provides a broad range of products, including components, systems, and subsystems such as Electro-Optic/Infrared and Power & Control Systems, and services to military and commercial customers in several niche markets. C3ISR (23% of revenues) provides manned and unmanned surveillance, sensors, manpacks, and logistics support. Aircraft Modernization and Maintenance (16% of revenues) provides modernization, upgrades, maintenance, and logistics support and services for various government aircraft and other platforms to the DoD and allied governments. In July 2011, LLL announced that it would spin off approximately 55% of the Government Services business ($2bn in revenue and $193mn in EBITDA) in a tax free distribution. LLL expects the transaction to be completed in 1H2012 and the new company will be named Engility. The Government Services segment provides a broad range of engineering, technical, analytical, information technology, advisory, training, logistics and support services to the DoD, DoS, DoJ, US government intelligence agencies, and allied foreign governments. Key Dates/Catalysts: 1H2012 spin-off of Engility and additional clarity on US Department of Defense Budget
Financial Profile ($mn) Total Revenue EBITDA Gross Operating Cash Flow Working Capital Net Operating Cash Flow Capital Expenditures Dividends Free Cash Flow Total Debt (on bal sheet) Cash Net Debt Key Credit Statistics Lease Adj Debt/EBITDA Lease Adj Net Debt/EBITDA Lease Adj Debt/Capital LTM FCF/Debt EBITDA/Interest expense EBITDA Margin 2.66x 2.21x 46.8% 22.7% 6.1x 11.8% 2.31x 1.81x 41.8% 25.7% 6.7x 12.0% 2.42x 2.09x 43.0% 26.1% 7.8x 13.0% 2.18x 1.90x 41.1% 26.5% 7.4x 12.6% 2.28x 2.01x 41.2% 25.3% 8.1x 12.3% 2.28x 2.15x 40.5% 25.6% 7.9x 12.2% 2.68x 2.42x 39.5% 22.2% 6.8x 12.1% FY08 14,901 1,765 1,386 1 1,387 (218) (147) 1,022 4,493 867 3,626 FY09 15,615 1,874 1,564 (157) 1,407 (186) (165) 1,056 4,112 1,016 3,096 3Q10 3,835 499 327 68 395 (34) (46) 315 4,132 650 3,482 FY10 15,680 1,981 1,480 (19) 1,461 (181) (184) 1,096 4,137 607 3,530 3Q11 3,787 464 365 100 465 (51) (46) 368 4,126 538 3,588 FY11E 15,390 1,873 1,516 (80) 1,436 (189) (192) 1,055 4,126 273 3,853 FY12E 13,581 1,639 1,319 30 1,349 (200) (190) 959 4,326 473 3,853
Investment Strengths: - LLL is a leading defense company, with strong FCF and a diverse program base. - Excellent business position in C3ISR and electronics, which are well positioned in the US defense budget. - Solid liquidity position, with $538 million in cash at 3Q11 and $1 billion in annual FCF. Investment Risks: - Management traditionally favors shareholderfriendly uses of free cash flow versus debt reduction (e.g., buying back stock, making acquisitions). - The US defense budget is facing significant cutbacks in coming years. - Risk of new supply: LLL has issued senior debt to call its higher-coupon subordinated debt, and could continue this trend to reduce the remainder of its $500mn in subordinated debt.
Capitalization Description Revolvers LLL 5.2% of 2019 LLL 4.75% of 2020 LLL 4.95% of 2021 Other Sr. Debt Total Sr debt LLL 6.375% subs of 2015 3% CODES of 2035 Unamortized discount Total Sub debt Total debt (on bal sheet) NPV of oper. leases Total adj. debt Market Cap Enterprise Value Enterprise Value (op. lease adj.)
9/30/2011 Size 0 1,000 800 650 500 2,950 500 689 (13) 1,176 4,126 574 4,700 7,089 10,677 11,251
9/30/2011 EBITDA Liquidity Revolver (mat. Oct. 2012) Letters of Credit Borrowings Revolver Availability 1.6x Cash+Available Revolver 1,528 1,000 (10) 0 990
Comps Bombardier Northrop Grumman1 Lockheed Martin Raytheon 1 NOC ratings for Hold Co.
EBITDA Coverage 11.9x 16.8x 13.4x 20.4x
Agency Ratings Ba2/BB+ Baa2/BBB Baa1/AA3/A-
2.2x 2.3x 3.8x 5.7x 5.8x
Maturities:
800 700 600
($, mn)
500 400 300 200 100 0 2012* 2013 2014 2015**
*2012 debt maturity reflects $700mn in CODES 2015 debt that is puttable anytime after 2/1/2011 **2015 debt maturity reflects 6.375% subs of 2015 which are currently callable
105
January 26, 2012
High Yield
Las Vegas Sands Corp. (LVS)

Updated 1/23/12
(212) 257-9918 (212) 902-4751
NOT COVERED
Bond Summary Size (MM) $189 Coupon (%) 6.375 Priority Sr Sec Nts Maturity 15-Feb-15 Agency Ratings Ba2/BB Price 101.063 Next Call Date current Bid Price 101.00 YTW (%) 5.37 STW bp 505 Z-spread bp 487
Company Description
Las Vegas Sands Corp. (LVS) is a hotel, gaming, and resort development company headquartered in Las Vegas. LVS owns The Venetian Resort Hotel Casino, the Sands Expo and Convention Center, and Venetian Macao Limited, which is a developer of multiple casino hotel resort properties in The Peoples Republic of Chinas Special Administrative Region of Macao. Macao properties include the Sands Macao and the Venetian Macao. In April 2010, LVS opened Marina Bay Sands, a $6 billion casino resort in Singapore. The majority owner is Sheldon Adelson, who controls 44% of the voting stock, according to Bloomberg. Key Dates/Catalysts: - 1Q2011: Told Las Vegas Review-Journal that LVS could invest $1-2 billion in Florida to build five Las Vegas-style casinos, including one in Miami. - September 2011: Macau subsidiary entered into a new US$3.7 billion credit facility. - November 15, 2011: LVS to redeem all of 10% cumulative preferred stock. LVS expects to save $76 million in annual dividend payments - December 2011: CEO Adelson tells the Las Vegas Review-Journal that he is opposed to online poker. - December 2011: Plans to build $2 billion tourism complex in Vietnam
Company Strengths: - Bonds are secured and rank pari passu with $3 bn credit agreement, which has first-lien security interest in substantially all of Las Vegas Sands LLC and the guarantors' assets. - Strong support from majority owner: CEO Adelson is well known in the gaming industry and continues to support the company. - Secured $1.75 bn in project finance for development of its resort on the Cotai Strip in Macau. - LVS expects recovery of group bookings throughout 2010. - May 2010: Management stated that every $10 of additional ADR translates to $20-25 mn of incremental EBITDA in Las Vegas. - Strong operating performance from its Macau and Singapore subsidiaries. - According to the company, of the $2 billion of cash held by unrestricted foreign subsidiaries, $1.15 billion is "available to be repatriated to the US with virtually no tax consequences due to the company's significant foreign taxes paid." Company Risks: - Small bond issue size. - Las Vegas Strip recovery proceeding slowly. Management believes competitive pressure is keeping convention & group booking rates flat year over year. - Covenant concerns in 2010 as maintenance covenants step down in both the US credit facility and the Macau credit facility; management expects to use equity cures and excess cash to remain in compliance.
Financial Profile ($mm) Net revenue Adjusted EBITDA Net revenue Adjusted EBITDA Interest paid, net of cap int. Cash taxes paid (refund) CapEx Free Cash Flow Total Debt Cash (unrestricted) Net Debt Key Credit Statistics Total Debt / Adj EBITDA Net Debt / Adj EBITDA Adj EBITDA / Interest Adj EBITDA margin $ $
4Q10A 394 100 2,015 698 32 1 374 291 10,141 3,037 7,104 4.9x 3.4x 8.8x 34.6% $ $
FY10A 1,505 369 6,853 2,078 237 1 2,024 (185) 10,141 3,037 7,104 4.9x 3.4x 8.8x 30.3% $ $
1Q11A 396 87 2,112 695 81 (6) 333 287 10,103 3,134 6,969 4.1x 2.9x 9.9x 32.9% Debt to EBITDA $ $
2Q11A 430 114 2,345 849 68 0 388 393 10,059 3,479 6,580 3.5x 2.3x 11.3x 36.2% $ $
3Q11A 454 120 2,409 860 54 0 367 439 9,739 3,952 5,788
US Properties only (excludes Macao and Singapore)
Consolidated Las Vegas Sands (includes Macao and Singapore)
Comps MGM (senior) WYNN (consolidated) HET (sr unsecured)
Ratings B3/BBa2 / BBBCa/CCC
US credit agreement covenants (effective date) 3.1x 1.9x 13.2x 35.7% Leverage 4Q11 6.00x 1Q12 5.50x 3Q12 5.00x 4Q12+ 5.00x
LVS can cure covenant breach with $50mn of cash per quarter
Description Corporate and US-related: Sr sec credit facility - Term B & Del Draw Sr sec credit facility - Revolver 6.375% senior notes due Feb 2015 Airplane financings FF&E credit facility Total Corporate & US Debt Total Macao-related corporate debt Total Singapore-related debt Total Consolidated Debt
3Q11A 2,856 189 76 25 3,146 2,915 3,678 9,739
Liquidity Revolver due May 2012/2014 Letters of Credit Borrowings Revolver Availability (US) Macau revolver Singapore availability Cash & S/T invest.
3Q11A 750 25 725 1,000 79 3,952 5,756
Enterprise Value (Consolidated) Shares O/S (mm) Stock price Market cap Net debt Preferred stock Minority interest Restricted cash Enterprise value (EV) $ 732.7 49.74 36,445 5,788 680 1,496 184 44,225 14.3x 3,102
3.1x
Total Liquidity
EV / EBITDA LTM EBITDA
Note: Leverage excludes benefit of equity cure, and capital contribution, etc. Maturities:
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -
4,165 3,268
1,322 455 2012 529
2013
2014
2015
2016
106
January 26, 2012
High Yield
Leap Wireless International, Inc. (LEAP)

OUTPERFORM/IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
We rate the LEAP secured 2016s Outperform owing to their strong asset coverage through the bonds, including LEAP's spectrum ownership. We rate the LEAP unsecured 2020s In-Line given intense competition in the prepaid wireless market and the still-challenging macro environment. Bond Summary Size (MM) $1,100 $1,600 Coupon (%) 7.750 7.750 Priority Sr Sec Nts Sr Nts Maturity 15-May-16 15-Oct-20 Agency Ratings Ba2/B+ B3/CCC+ Next Call Price 105.813 103.875 Date 15-May-12 15-Oct-15 Bid Price 106.00 96.00 YTW (%) 5.72 8.40 STW bp 335 647
Company Description
Leap Wireless International, under its Cricket brand, offers wireless voice and data service in the US. Its offerings provide unlimited nationwide services for a flat rate without a contract or a credit check. As of September 30, 2011, LEAP offered its Cricket service in 47 states and the District of Columbia and had over 5.7 million subscribers. The companys network footprint in its operating markets covered approximately 95.3 million POPs. Key Dates/Catalysts: February 2012: 4Q2011 earnings. Margin impact from MVNO agreement: LEAP's MVNO agreement with Sprint will become a bigger factor in overall margins as LEAP adds more out-of-market subscribers.
Investment Strengths: (1) Positioned to benefit from proliferation of lower priced smartphones as a low-cost, value-driven operator. (2) Potential to participate in M&A as a possible candidate for higher quality strategic players. (3) Solid liquidity: We expect LEAP to end 20111 with $655 mn of liquidity. The company also has no meaningful maturities until 2014. Investment Risks: (1) Fierce competition from national postpaid carriers as well as other prepaid brands like Boost (from Sprint) and Straight Talk (from America Movil's TracFone and Wal-Mart). A further deterioration in competitive dynamics would pressure LEAP's ARPU and subscriber metrics. (2) Macro pressure: LEAP's subscriber base tends toward consumers with less discretionary income; therefore, weak economic conditions and high gas/food prices have a disproportionately large impact on their spending. (3) Lack of spectrum depth: LEAP has an average of 20MHz of spectrum across its footprint, which is significantly less than that of its larger competitors.
Financial Profile Subscribers ('000s) ARPU Churn CPGA CPU Revenue EBITDA Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin Capitalization
FY09A 4,954 $40.31 4.5% $196 $18.27 $2,410 486 (415) $2,768 564 2,204 5.7x 4.5x
FY10A 5,518 $37.76 4.7% $199 $19.22 $2,697 525 (87) $2,896 419 2,476 5.5x 4.7x
2Q11A 5,746 $40.15 4.2% $251 $21.83 $761 161 (64) $3,280 724 2,556 6.5x 5.1x
3Q11A 5,755 $41.25 3.8% $238 $23.09 $763 154 63 $3,280 800 2,480 6.1x 4.6x
4Q11E 5,930 $41.89 3.8% $225 $23.30 $820 137 (136) $3,272 655 2,617 5.8x 4.6x
FY11E 5,930 $40.86 3.7% $224 $22.92 $3,124 564 (157)
Agency $3,272 655 2,617 5.8x 4.6x MetroPCS Sprint 3.7x 3.3x 5.0x 4.0x B2/B B3/B+ Comps Leverage Coverage Ratings
20.1%
19.5%
21.1%
20.2%
16.7%
18.1%
Debt / Description 1st Lien Promissory Note due 2015 7.75% Sr Secured Nts due 2016 Total Secured Debt 10.000% Sr Nts due 2015 7.750% Sr Nts due 2020 Total Opco Debt 4.5% Holdco Convertible Nts due 2014 Total LEAP Debt Net Debt Market Cap Enterprise Value Maturities:
3,000 2,500 2,000 1,500 1,000 500 9 0 9 255 300 2,709
Size $30 1,100 $1,130 300 1,600 $3,030 250 $3,280 $2,480 544 3,024
EBITDA
Liquidity Revolver Size Letters of Credit $0 $0 $800 $800
2.1x
5.7x 6.1x 4.6x 5.7x
2012
2013
2014
2015
2016+
107
January 26, 2012
High Yield
Lennar Corp. (LEN)

OUTPERFORM
Updated
1/26/2012
212-357-6157 212-902-0459
We rate the Lennar 6.95% senior unsecured notes of 2018 Outperform. In our view, Lennar bonds look cheap at current spread levels, as they trade wide to peers despite similar or even lower leverage. We believe that Lennar's performance will outpace that of most other builders over the next several quarters, leading to stronger credti metrics and even more favorable relative value comparisons.
Bond Summary GS Rating OP Size (MM)

250
Coupon (%) 6.95 Priority Sr. Nts Maturity 1-Jun-18
Next Call Price

MW
Bid Date Price

102.00
YTW (%)
6.56%
OAS bp
539
Company Description
Lennar Corp. is the second-largest builder in the United States based on market cap and the third-largest builder based on LTM closings. The company sells single-family attached and detached homes under the Lennar brand name. It primarily targets first-time buyers, followed by move-up and active adult buyers. Lennar also operates a business that invests in distressed real estate assets, Rialto Investments
Key Dates/Catalysts: 1QFY12 earning release Possible reversal of the company's deferred tax valuation allowance.
Investment Strengths: - Broad geographic footprint. - Ample liquidity. - High margins due to product re-engineering and cost reductions. - Financially savvy management team - Rialto provides access to attractive distressed land deals. Investment Risks: - Rialto could cause company to divert capital away from core homebuilding operations. - Leverage remains relatively high.

Total Revenues Total Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Homebuilding Debt Total Cash and Cash Equivalents
FY:09
3,119 10 (172) 314 0 342 2,956 1,467 55% 38% 1.2x 18%
FY:10
3,074 261 (182) 26 (5) 150 3,242 1,402 55% 41% 1.1x 24%
FY:11E
3,095 217 (201) 9 (3) (208) 3,464 1,222 56% 45% NA 24%
4Q:10
860 75 (45) 4 (4) 41 3,242 1,402 55% 41% 1.1x 24%
3Q:11
820 76 (51) 2 (2) (145) 3,227 936 55% 46% 1.2x 25%
4Q:11E
953 79 (50) 49 3,464 1,222 56% 45% #VALUE! 24%
Debt-toComps
Lennar Ryland
Inventoryto-Debt
1.2x 0.9x
Cap
55% 64%
Ratings
B3/B+ B1/BB-

PF Capitalization ($, mn) Description Size

113 267 249 501 250 394 248 277 385 445
Liquidity
5.95% senior notes 5.95% senior notes 5.5% senior notes 5.6% senior notes 6.5% senior notes 12.25% senior notes 6.95% senior notes 2% convertible senior notes 2.75% convertible senior notes Mortgage notes on land and other debt Total Senior Mortgage Warehouse Repurchase Facility Total Balance Sheet Debt Joint Venture Recourse Debt & Guarantees Total Debt Outstanding Minority Interest Share Price Market Capitalization ENTERPRISE VALUE
Homebuilding Cash Financial Services Cash Rialto Cash Restricted Cash Total Liquidity
800 57 70 9
936
Maturities:
3,128
189
600 500 400 300 200 100 0 2011 2012 2013 2014 2015
3,317
99
3,416
610 22.2
4,323 7,413
108
January 26, 2012
High Yield
Levi Strauss & Co. (LEVI)
Updated 1/23/2012
212-357-9918 212-902-4751
OUTPERFORM: We expect continued benefits from exposure to fast-growing countries in Asia and from new innovative products like the new line of Curve ID fitted jeans and the
lower-cost Denizen brand. While we recognize that we may be a little early with this call due to near-term margin pressure, we think long-term investors may find this entry point attractive. Bond Summary Size (MM) $524 Coupon (%) 7.625 Priority Sr Notes Maturity 15-May-20 Agency Ratings B2/B+ Price 103.813 Next Call Date 15-May-15 Bid Price 104.500 YTW (%) 6.732 STW bp 547 Z-Spread bp 543 5-yr CDS (pts) 3+500
Company Description
Levi Strauss designs and markets jeans and jeans-related pants, casual and dress pants, tops, jackets, and related accessories for men, women, and children under the Levis, Dockers, and Levi Strauss Signature brands in markets around the world. Products are distributed primarily through chain retailers and department stores in the United States, and mainly through department stores, specialty retailers, and franchised stores abroad. Levi Strauss also distributes Levis, Dockers, and Levi Strauss Signature products through 498 company-operated retail stores in 31 countries, including the United States. Levi Strauss's common stock is majority owned by the Haas family, descendants of its founder, Levi Strauss. Key Dates/Catalysts: - 2011 Guidance: Expect gross margins in the "high 40's to low 50's." Expecting capex of $145 million. - October 2011: Refinanced its asset-based revolving loan and increased capacity by $100 million to $850 million. The new facility matures September 30, 2016, and carries interest of L+150-275 bp, depending on borrowing base availability.
Investment Strengths: - Iconic, worldwide jeans brand. The company has been making blue jeans for over 150 years in the US. - Jeans are viewed as more of a consumer staple, so they carry less fashion risk than other garments. - Diversified distribution, with roughly 43% of LTM sales generated outside North America as of 2Q2011. Derives sales from over 55,000 retail locations in 110 countries. - Strong performance in emerging markets, particularly India and China. - New design concepts are improving consumer experience: "Curve ID" allows women to select jeans not just by cut, rise, waist size, and length, but also by body shape, and its Denizen brand is a more affordable jean for sale in low-cost geographies in Asia (and was introduced to the US this past July). - No near-term maturities and solid liquidity position. Investment Risks: - Highly competitive marketplace, including private-label brands of leading retailers, designer brands, and large apparel companies such as VF and Polo. - Highly exposed to cotton prices. Management stated on its 2Q11 conference call that it expects "the higher cost of cotton [to] continue to negatively impact margins and working capital through the remainder of 2011." LEVI may be able to pass on part of the costs through higher pricing. - Sizable pension ($332 mn) and post-retirement liabilities ($141 mn). - Dividend frequency steadily increasing: made a $20 million dividend payment in 1Q11, its second $20 million dividend in the trailing-12-month period.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow
2010 4,411 493 136 86 155 116
1Q11 1,121 127 35 19 40 33
2Q11 1,093 94 34 10 35 15
3Q11 1,204 111 30 14 30 37
4Q11E 1,341 137 35 23 47 32
2011E 4,758 469 134 66 153 117
Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
1,867 274 1,593 3.8x 3.2x 3.6x 11%
1,879 258 1,621 3.9x 3.3x 3.7x 11%
1,900 262 1,638 3.9x 3.4x 2.8x 9%
1,990 238 1,752 4.2x 3.7x 3.7x 9%
1,987 309 1,678 4.2x 3.6x 3.9x 10%
1,987 309 1,678 4.2x 3.6x 3.5x 10%
LTM Comps LEVI 8.875s HBI 6.375s JAH 7.5s ZQK 6.875s
Agency Ratings B2/B+ B1/BBB2/B Caa1/CCC+
Note: Fiscal year ends the last Sunday in November.
Capitalization Debt to LTM EBITDA 0.2x
Description ABL facility due Sep 2016 (L+150) Total Secured Senior unsecured term loan due Apr 2014 8.875% senior notes due Nov 2016 4.25% senior notes due Nov 2016 (20 bn) 7.75% senior notes due May 2018 (300 mn) 7.625% senior notes due 2020 Other, including capital leases Total debt
3Q11 108 108 324 350 118 431 525 134 1,990
Liquidity Revolver Size Letters of Credit Borrowings Covenant limitations Revolver Availability Cash
3Q11 850 84 108 321 337 238 575
4.2x
Total liquidity
Operating statistics 4Q10 Maturities: 2,000 1,500 1,000 500 2012 2013 2014 2015 2016+ Revenue: Americas Europe Asia Pacific Total revenue Operating income: Americas Europe Asia Pacific Corporate Total operating income 139 31 23 (74) 119 75 71 37 (85) 99 83 38 25 (81) 65 111 31 26 (88) 81 772 300 218 1,290 592 312 217 1,121 599 281 213 1,093 718 275 211 1,204 1Q11 2Q11 3Q11
109
January 26, 2012
High Yield
Liberty Interactive (LINTA/QVC)
Updated 1/20/12
212-902-2233 212-902-4427
QVC 7.375s of 2020: OUTPERFORM; LIBERT 8.25s of 2030: In-Line.

QVC: We believe the QVC 2020s offer value as crossover bonds as they trade wide to similarly rated retail names despite QVC's superior margins, a proven track track record of sales, and record of sales trends that have outperformed peers in good times and bad. Liberty Interactive LLC: We find the relationship between the QVC 2020s and the LIBERT 2030s fair at current levels. Bond Summary Size (MM) $500 $504 Coupon (%) 7.375 8.250 Issuing Entity / Priority QVC Sr Sec Nts LI LLC Sr Debs * Maturity 10/15/2020 2/1/2030 Agency Ratings Ba2/BBBB3/BB Next Call Price 103.688 NC Date 4/15/2015 NC Bid Price 109.42 98.00 YTW (%) 5.21 8.47 STW bp 463 597
* LI LLC = Liberty Interactive LLC.
Company Description
Liberty Media is a holding company that is primarily engaged in the video and online commerce, media, communications, and entertainment industries in North America, Europe, and Asia. Following the split-off transaction of the Liberty Starz and Liberty Capital tracking stock groups in September 2011, Liberty Media essentially reflects the Liberty Interactive (LINTA) tracking stock group. LINTA's main businesses are video and online commerce through its main operating unit QVC and various e-commerce businesses. LINTA also holds several equity stakes in other companies. Key Dates/Catalysts: February 2012: 4Q2011 earnings.
Investment Strengths: (1) Strong operational fundamentals: QVC's efficient business model allows for superior margins compared with those of its retail peers. In addition, QVC has proven to be more resilient during the economic downturn in terms of its top-line trends. (2) Good liquidity/maturity profile: QVC has no debt maturities until 2015, and Liberty's maturities are also very manageable. Investment Risks: (1) Mature markets: QVC's existing markets are becoming increasingly mature, and incremental growth is tougher to achieve. The company is increasingly dependent on new markets for growth, which exposes it to execution risk. (2) Financially aggressive management team: Liberty's chairman, John Malone, has a long history of using leverage to enhance equity returns. (3) Acquisitions: We expect Liberty to remain active in acquiring ecommerce or other related businesses.
Financial Profile QVC Revenue QVC Adj. EBITDA QVC EBITDA Margin LINTA Revenue LINTA Adj. EBITDA LINTA EBITDA Margin Key Credit Statistics QVC Debt/QVC EBITDA LINTA Debt/LINTA EBITDA Capitalization
FY09A $7,374 $1,565 21.2% $8,305 $1,654 19.9%
FY10A $7,813 $1,671 21.4% $8,938 $1,752 19.6%
2Q11A $1,898 $418 22.0% $2,245 $450 20.0%
3Q11A $1,886 $373 19.8% $2,133 $377 17.7%
4Q11E $2,654 $547 20.6% $3,073 $606 19.7%
FY11E $8,273 $1,701 20.6% $9,610 $1,811 18.8% HSN Inc. Macy's 1.2x 2.0x 2.3x 2.1x 7.0x 7.5x 5.8x 8.3x Ba2/BB Baa3/BBBBa1/BB+ Ba2/BB+ Comps Leverage Coverage Agency Ratings
2.6x 3.8x
1.7x 3.4x
1.6x 3.9x
1.5x 3.7x
1.4x 3.7x
1.4x 3.7x
JC Penney Limited Brands
Debt to Description QVC Revolver ($2.0 bn Facility) QVC Sr Sec Nts Total QVC Secured Debt LI LLC Debt Other Debt Total Debt Net Debt Market Cap (LINTA) Enterprise Value Maturities: $8,000 $6,000 $4,000 $2,000 $0 2012 2013 2014 2015 2016+ $5,843 Size 459 2,000 2,459 $4,067 85 $6,611 $5,715 $8,797 $14,512 8.2x 3.7x Cash: Attributed to LINTA Total LINTA Liquidity $896 $2,437 1.5x EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $2,000 (459) $1,541
110
January 26, 2012
High Yield
LifePoint Hospitals (LPNT)

IN-LINE
Updated 01/25/12
212-855-7718 212-902-9758
We rate LPNT In-Line. We like its exclusively rural asset base, which (1) contributes to high EBITDA margins (15%-16%) as a result of stronger managed care pricing and greater outpatient businesses and (2) results in high FCF (13% of debt) due to more modest capex requirements. However, we now see these factors as priced in. Bond Summary Size (MM) $400 Coupon (%) 6.625 Priority Sr Maturity 1-Oct-20 Agency Ratings Ba1/BBNext Call Price 103.313 Date 10/1/2015 Bid Price $104.250 YTW (%) 5.844% STW bp 505
Mid-sized hospital operator with 52 hospitals almost exclusively located in rural areas and concentrated in Tennessee, Kentucky, Alabama, Louisiana, and West Virginia. The LPNT hospitals are the sole provider in 46 of 52 markets. LPNT was spun out from HCA in 1999. LPNT has higher-than-average EBITDA margins owing to favorable pricing from managed care due to its low-competition markets. LPNT acquired the four-hospital Sumner Regional Health System in September 2010 for $145 million and Clark Regional in May 2010. Proceeds of the $400 million September 2010 bond issue were used to refinance the $250 million term loan and for general corporate purposes. In 3Q11, LPNT announced three acquisitions with its Duke partner that together represents $180 mn of revenue. In January 2012, LPNT announced a new JV with Duke in Virginia. LPNT stated that its acquisition pipeline remains active, and it continues to work on a number of potential arrangements similar to the Duke/LPNT partnership. Key Dates/Catalysts: - Quarterly earnings announcements (commercial volumes have been weak industry-wide, although bad debt expense has been relatively stable). - Potential acquisitions or partnerships based on management comments. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals.
Investment Strengths: - Lowest leverage of the hospital peer group. LTM leverage of 3.1x. - Rural asset base provides less competition for doctors and patients, and contributes to higher margins. Investment Risks: - Medicare and Medicaid reimbursement could be reduced. - Shareholder friendly: In September 2011, LPNT announced a $250 mn share repurchase program. - Acquisitive: LPNT has commented that it is still aggressively looking for acquisitions, but will be a disciplined buyer in locations where there is better volume growth, a diversified employer base, and payer mix. - Volumes have been weak across the industry and are expected to remain so for the near term.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver Term Loan B due 2015 Total Sr Sec debt 6.625% Sr Notes due 2020 Total Sr debt 3.5% Conv Sub Notes due 2014 3.25% Conv Sub Notes due 2025 Total Sub debt Capital Leases Total Debt Market Cap Enterprise Value Maturities:
2009A $2,963 467 $103 80 167 17 $1,502 187 1,315
2010A $3,262 497 $108 82 169 37 $1,652 207 1,444
2011E $3,546 534 $106 101 219 (26) $1,651 227 1,424
4Q10A $853 123 $31 17 47 0 $1,652 207 1,444
3Q11A $877 127 $24 23 49 11 $1,651 199 1,452
4Q11E $903 130 $25 25 65 (37)
Agency Comps Leverage 1.6x 3.0x 3.2x 2.8x 4.2x Coverage NA NA 0.2x NA NA Ratings Ba1/BB--/BBB1/B+ Ba3/BB B3/BLPNT HMA 1st Lien UHS uns HCA 1st ln HCA sr uns
$1,651 227 1,423
3.2x 2.8x 4.5x 15.8%
3.3x 2.9x 4.6x 15.2%
3.1x 2.7x 5.0x 15.1% 4.0x 14.5% 5.2x 14.4% 5.3x 14.4%
Size 0 444 444 400 400 575 225 800 7 $1,651 1,935 $3,059
Debt to LTM EBITDA
Liquidity Revolver Size Letters of Credit $350 31 0 319 $199 518
0.8x
0.8x
1.6x
1.6x
3.1x
3.1x
3.1x 5.8x
3.1x 5.7x
1200 1000 800 600 400 200 0 2012 2013 2014 2015+
111
January 26, 2012
High Yield
Limited Brands, Inc. (LTD)

UNDERPERFORM
Bond Summary Size Ticker LTD LTD (MM) $1,000 $300 Coupon (%) 6.63 7.60 Maturity 01-Apr-21 15-Jul-37 Agency Ratings Ba2/BB+/BB+ Ba2/BB+/BB+
Updated 1/25/2012
212-902-0673 212-902-8028
UST Price $109 $100 Spread 344 450
Z Spread (bp) 357 513
5 Yr CDS 185/195 185/195 Investment Strengths: - The company holds a leading market position in intimate apparel and personal care products. - Revenue benefits from geographic diversification - Improved same-store sales trends. - Next debt maturity is not until December 2012, in the amount of $58 million outstanding. Investment Risks: - Challenging consumer conditions and competition affect profitability. - Shareholder focus remains, as illustrated by the special dividends and share repurchases announced in March and November 2010. - Management has stated that returning to IG status is not a priority for the company.
Company Description
Limited Brands is a specialty retailer of womens intimate apparel and other apparel as well as beauty and personal care products and accessories under various trade names. The company sells its merchandise through its retail stores in the United States and Canada, which are primarily mall based, and through its web sites and catalogues. Limited Brands conducts its business in two primary segments: Victorias Secret and Bath & Body Works.
Key Dates/Catalysts: Earnings announcements Share repurchases and special dividend announcements
Financial Profile Revenue EBITDA Operating Income Interest Expense (net) Operating Cash Flow CapEx Dividends Free Cash Flow
FY09 8,632 1,219 862 237 1,193 (202) (193) 798
FY10 9,613 1,642 1,283 208 1,284 (274) (1,488) (478)
FY11E 10,358 1,748 1,384 247 1,209 (388) (528) 293
4Q10A 3,456 807 714 48 1,203 (77) (1,017) 109
4Q11E 3,509 887 787 64 1,116 (50) (37) 1,029 Adjusted Leverage 3.3x 2.4x 4.5x
Total Debt Cash Net Debt (Cash) Key Credit Statistics Total Debt/EBITDA Adjusted Debt/EBITDAR Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Term Loan due August 2012 6.125% Notes due December 2012 5.25% Notes due November 2014 6.9% Notes due July 2017 8.5% Senior unsecured Notes due June 2019 7% senior guaranteed notes due May 2020 6.625% senior guaranteed notes due April 2021 6.95% Debentures due March 2033 7.6% Note due July 2037 Credit facility due July 2016 Total Debt Market Cap Enterprise Value Maturities:
2,723 1,804 919 2.2x 3.9x 0.8x 5.1x 14.1%
2,507 1,130 1,376 1.5x 3.1x 0.8x 7.9x 17.1%
3,536 1,787 1,749 2.0x 3.3x 1.0x 7.1x 16.9%
2,507 1,130 1,376 1.5x 3.1x 0.8x 16.7x 23.3%
3,536 1,787 1,749 2.0x 3.3x 1.0x 13.9x 25.3%
Comps JCP M RSH
Agency Ratings Ba1/BB+/BBBBaa3/BBB-/BBBBa3/BB-/B+
Size 0 58 221 721 487 400 1,000 350 299 0 3,536 12,242 15,281
Debt to EBITDA
Liquidity Revolver Size Letters of credit Borrowings Revolver availability 1,000 32 0 968
498 1,466
2.1x
$3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2012 2013 2014 2015 2016+
112
January 26, 2012
High Yield
Liz Claiborne (LIZ)

Updated 01/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $220 222 Coupon (%) 10.50% 5.000% Priority Sr Sec Sr Notes Maturity 15-Apr-19 08-Jul-13 Agency Ratings B2/BCaa1/CCC Price $105.250 MW Next Call Date 15-Apr-14 T+15 Bid Price 108.000 96.625 YTW (%) 8.556 7.536 STW bp 825 739 Z-Spread bp 794 632 5-yr CDS 405 405
Company Description
Liz Claiborne (LIZ) owns recognizable apparel brands such asWellington Mgmt. (10%), Juicy Couture, Lucky jeans, and kate spade. LIZ sells its apparel and other branded merchandise through a combination of specialty stores, department stores, outlet stores. Approx. 34% of 2010 sales were in international markets. According to Bloomberg, significant equity holders include Whitebox Advisors (9%), Wellington Mgmt. (9%), Tremblant Capital (8%), Invesco (8%), BONY (8%), Tiger Consumer Mgmt (7%), Alyeska Investments (7%), Vanguard (6%), and Brigade Capital (5%). Key Dates/Catalysts: - October 12, 2011: Enters into agreement to sell its Liz Claiborne, Monet, and Kensie brands, and completed sale of Dana Buchman brand for total proceeds of$328 mn ($308 mn in cash). According to the company, sale proceeds represent approximately 8x 2011 forecasted EBITDA. - January 2012: Announced name change to Fifth & Pacific; new ticker will be FNP, effective May 2012. - January 2012: Provided SSS data for November and December. In light of some margin pressure in Juicy Couture, 4Q2012 EBITDA expected to come in at low end of previously released range of $80-90 mn. LIZ lowered its 2012 EBITDA guidance to $125-140 mn from $130-150 mn due to LIZ now expects net debt at the end of 4Q12 to be $265270 mn (down from $270-290 mn), which based on the midpoint of 2012 EBITDA guidance equates to net leverage of 2.0x. In other news, LIZ CFO Andrew Warren resigned and is going to become CFO of Discovery Communications.
Company Strengths: - Well recognized global brand names. - Management making decisions to streamline operations - Strong brand recognition and growth profile for kate spade. - Good geographic diversification (34% of 2010 sales were international). - Management focused on reducing debt. - Lucky Brand revenue rebounding in 2011.
Company Risks: - Rising input costs (cotton). - Fashion trend risk as certain brands like Juicy Couture and Lucky Brand lose momentum in the marketplace. - Significant leverage
3Q10 437 31 11 1 20 (1) 737 16 720
4Q10 704 39 13 2 29 (5) 578 23 555
2010 2,500 50 59 8 77 (95) 578 23 555 11.6x 11.1x
1Q11 513 (13) 13 (1) 16 (40) 714 16 698 14.6x 14.2x -1.0x -2.5%
2Q11 556 6 17 4 39 (55) 769 27 742 12.1x 11.7x 0.3x 1.1%
3Q11 398 40 16 3 4 17 748 12 736 nm nm 2.5x 10.0%

NM - Not meaningful
Agency LTM Comps LIZ LEVI HBI ZQK JNY Leverage

NM
Coverage 2.5x 3.7x 4.6x 2.7x 4.5x
Ratings Caa1/CCC B2/B+ B1/BBCaa1/CCC+ Ba3/B+
4.2x 3.9x 3.7x 3.8x
2.7x 7.2%
3.0x 5.5%
0.8x 2.0%
Description Senior secured revolver due August 2014 Capital lease obligations Total first lien debt 10.5% senior secured notes due April 2019 Total senior secured debt 5% Euro notes due July 2013 6% convertible sr nts due June 2014 (a) Other Total debt
3Q11 (b) 189 10 199 220 419 296 77 792
Debt to LTM EBITDA
Liquidity ABL Size Letters of Credit Borrowings Less: borrowing base limitations Revolver Availability Less: minimum required availability 45 82 0 127 350 34 189
Enterprise value (EV) Shares O/S (mm) Stock price Market cap Net debt Enterprise value (EV) EV/ LTM EBITDA $ 94.6 9.59 907.2 780.6 1,687.8 23.6x
nm
Net revolver available
Note: If Euro notes are not refinanced by July 2013, the credit facility maturity date is accelerated to July 2013. (a) If stock trades above $4.29 for 20 of a 30 day period, the converts can be converted and redeemed for stock and/or cash. During 2Q11 and 3Q11, the security met the test and is convertible. (b) Excludes impact of the sale of Liz Claiborne and other brands.

LIZ is required to maintain $45 mn of availability on its revolver
12 $93
Maturities:
$350 $300 $250 $200 $150 $100 $50 $0 2012 2013 2014 2015 2016+
Monthly same store sales by brand (yoy % change) Jul-11 kate spade Lucky Brand Juicy Couture 65% 10% -8% Aug-11 54% 13% -11% Sep-11 114% 24% -5% Oct-11 54% 23% -13% Nov-11 81% 16% -7% Dec-11 39% 21% -5%
113
January 26, 2012
High Yield
Louisiana-Pacific Corporation (LPX)

UNDERPERFORM
Bond Summary Size (MM) $244 Coupon (%) 13.000 Priority Sr Sec Nts Maturity 15-Mar-17 Agency Ratings Ba3/BBBPrice 106.500
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Date 15-Mar-13
Bid Price 98.000
YTW (%) 4.871
STW (bp) 475
Company Description
Louisiana-Pacific (LPX) manufactures building products and is the world's largest producer of oriented strand board (OSB). The company has approximately 3,800 employees and owns facilities in North and South America. Louisiana-Pacific's products are primarily used in the construction of new and manufactured homes, and for repair and remodeling work.
Investment Strengths: - Leading North American OSB producer: LPX is the largest North American OSB producer. - Well positioned for recovery in new home construction: LPX operates relatively low-cost OSB facilities across North and South America, which puts the company in a good position to benefit from a recovery in new home construction. Investment Risks: - EBITDA is likely to remain weak until the housing market recovers: LPX has generated weak EBITDA for many quarters, and profitability is unlikely to improve significantly until the housing market starts to recover.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total recourse debt Total cash and investments Net recourse cash / (debt) Key Credit Statistics Total debt/EBITDA EBITDA/interest EBITDA margin NM = not meaningful
12/31/09 FY:09 1,055 (54) 72 10 309 440 131
12/31/10 FY:10 1,384 77 64 15 245 436 191
9/30/10 Q3:10 323 6 15 7 243 434 191
6/30/11 Q2:11 362 (2) 14 6 255 368 114
9/30/11 Q3:11 351 2 14 5 257 375 118
NM NM NM
3.2x 1.2x 5.6%
4.5x 0.4x 1.9%
20.2x NM NM
29.9x 0.1x 0.6% Comps Georgia-Pac Leverage 2.1x Coverage 4.8x Ratings Baa3/A-
Capitalization Description 13.000% senior secured notes Chilean term credit facility Other debt Recourse portion of limited recourse notes Total recourse debt Non-recourse debt Total debt
9/30/2011 Amount 188 40 10 19 257 470 727 Debt to EBITDA 21.9x 29.9x 29.9x 29.9x
Maturities:
300 250 200 150 100 50 0 2012 2013 2014 2015+
114
January 26, 2012
High Yield
Marina District & Finance Company, Inc. (Borgata) Updated

1/23/12
Kevin Coyne 212-357-9918 Celeste Everett 212-902-4751
IN-LINE: We believe Borgata will be able to weather the recent competitive threat from Aqueduct Racetrack in Queens, NY. However, over the next six months, the BORGAT
bonds will face the overhang of the new Revel Casino in Atlantic City. We think the next 6-12 months may create more attractive entry points for long-term investors. Bond Summary Size Cpn (MM) (%) $400 9.875
Priority Sr Sec
Maturity 15-Aug-18
Agency Ratings B2/BB-
Next Call Price 104.938
Date 15-Aug-14
Bid Price 92.250
YTW (%) 11.595
STW bp 1,033
Z-spread bp 1,023
Company Description The Borgata Hotel Casino & Spa (Borgata, BORGAT) is an upscale destination resort with 2,000 guest rooms and a 161,000 square foot casino floor. The property sits on 46 acres and is located in Atlantic City, New Jersey. Borgata was instituted as a 50/50 joint venture between Boyd Gaming Corporation (BYD) and MGM Resorts International (MGM). The property opened in 2003 with an initial investment of $1.1 billion and has since undergone two expansions that totaled $650 million of additional capital. Today, the property includes 12 restaurants, two nightclubs, 11 boutique shops, a 54,000 square foot spa, meeting and event space with 88,000 square feet, and an entertainment venue with 2,400 seats. In March 2010, MGM transferred its ownership interest into a divestiture trust to facilitate sale to a third party, and it has until March 2013 to sell the property before turning it over to the trustee to facilitate a sale in the following 12 months. Key Dates/Catalysts: - August 2011: Hurricane Irene caused all Atlantic City casinos to close for two days, reducing revenues by approximately $10 mn and EBITDA by $6 mn, per BYD management. - October 2011: Expected opening of Resorts World New York at Aqueduct Racetrack with 5,000 slots. - November 2011: Reduced its revolver capacity by one-half to $75 million and reduced its minimum LTM EBITDA maintenance covenant to $125 million from $150 million. - December 2011: Recorded 19% yoy growth in gaming revenue during the month. - May 2012: Expected soft opening of Revel in Atlantic City with 150,000 square feet of gaming space. Financial Profile Net Revenue Adjusted EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin FY10A 738 169 50 4 16 99 861 42 819 1Q11A 169 32 21 (0) 4 8 829 24 805 2Q11A 183 39 21 0 7 10 820 21 799 3Q11A 202 50 21 0 9 20 807 32 774 4Q11E 177 38 20 0 12 6 807 39 767 FY11E 731 159 83 0 31 44 807 39 767
Investment Strengths: - Borgata is in our view the best property in Atlantic City as it brought back the glamour and glitz of Las Vegas. It is the youngest property in Atlantic City at eight years old (most properties were built in the late 1970s or early 1980s). - Ability to attract more high-end customers, as evidenced by ADR of $132 in 2010 versus $100 for the overall Atlantic City market. For the trailing-12-months ending August 31, 2011, its slot win/unit/day is 23% higher than the market average, and its table win/unit/day is 44% higher. - We expect the property to continue to generate positive free cash flow through 2013 despite expected EBITDA declines following the opening of Aqueduct in NY in 2011 and Revel in AC in 2012. - Low maintenance capex requirements of $15 million per year. Additional capex of $50 million is planned through 1H2012 to renovate the 1,600 rooms in the original hotel tower ahead of Revel's opening in May 2012. - Well-established property with a robust rewards database of 2.8 million customers. Investment Risks: - Future additional supply in an already-weak market: Revel expected to open by summer 2012 with 1,100 hotel rooms and 150,000 square feet of gaming space. Landry's Inc. plans to invest $150 million in its recently re-branded Golden Nugget. Two additional boutique hotels have been authorized by New Jersey regulators (Hard Rock has submitted plans for a $275 million facility, according to the Associated Press.) - Pressure from neighboring states' gaming expansion: Resorts World New York is planning to open with 5,000 slots by the end of 2011; LVS opened a 300-room hotel tower at its Sands Bethlehem property in May 2011; two additional Category 3 facilities planned in PA. - Potential for future gaming expansion in neighboring states: available license in PA from former group led by the Mashantucket Western Pequot Tribe. - Limited room under the credit facility maintenance covenant, although we believe lenders would be willing to amend the covenant under nominal terms in the event it is violated. - Table hold has become more volatile since the addition of Pennsylvania table games, placing pressure on earnings. - Elevated fuel prices could reduce visitation and spend per visit. - Non-standard redemption options that allow annual redemption for up to 10% of the principal amount outstanding at 103 for both the 9.5% and 9.875% senior secureds. Comps Leverage Coverage BORGAT 5.2x 1.8x BYD sr 6.3x 2.0x 7.7x 0.7x CCTRH 1st lien HET 1st lien 7.1x 0.9x Ratings B2/BBB3/B B1/B B3/B
5.1x 4.8x 1.9x 22.9%
5.1x 4.9x 2.5x 18.8%
5.2x 5.0x 2.0x 21.2%
5.2x 5.0x 1.8x 24.7%
5.1x 4.8x 1.9x 21.7%
5.1x 4.8x 1.9x 21.7%
Capitalization Description Sr secured revolver due Aug 2014 Total senior secured priority debt 9.5% sr secured notes due Oct 2015 9.875% sr secured notes due Aug 2018 Total debt Other, including OID Total debt 3Q11A 15 15 398 394 807 (23) 784 Lvg 0.1x
Liquidity Source Revolver due 2014 Letters of Credit & other Borrowings Revolver Availability Cash Total Liquidity 3Q11PF 75 15 60 32 92
5.2x 5.1x
Maturities:
Pro forma for the November 2011 credit facility amendment.
Credit facility maintenance covenants Minimum LTM EBITDA $125 million
500 400 300 200 100 0 2012 2013 2014 2015 2016 2017+
115
January 26, 2012
High Yield
McClatchy (MNI)
IN-LINE/UNDERPERFORM
Updated 1/23/2012
212-357-9922 212-902-9760
Our In-Line rating on the 11.5% of 2017 reflects our outlook for challenging fundamentals, which is partially offset by MNI's FCF generation, improved maturity profile, and opco gaurantees on the 11.5% of 2017. Our Underperform on the 5.75% of 2017 reflects fundamentals and valuation. Bond Summary Size (MM) $336 $865 Coupon (%) 5.750 11.500 Priority Sr Unsec Sr Sec Maturity 1-Sep-17 15-Feb-17 Agency Ratings Caa2/CCC B1/B+ 108.63 15-Feb-13 Price Next Call Date Bid Price 69.00 101.50 YTW (%) 13.914% 11.026% STW bp 1,314 1,027 28 / 30 pts 5-year CDS
Company Description
McClatchy is the third-largest newspaper company by circulation in the US. The company operates 30 daily newspapers and 43 non-daily papers in 29 markets across the US. It had average daily paid circulation of approximately 2.1 million and Sunday circulation of 2.8 million in 2010. MNI's portfolio of digital assets includes its newspaper affiliated Web sites and ownership stakes in Career Builder (14.4%) and Classified Ventures, LLC (25.6%). The company substantially increased its operations in 2006 with the acquisition of Knight Ridder and its portfolio of daily newspapers. MNI's larger papers by circulation include The Sacramento Bee, The Kansas City Star, The Miami Herald, and The Fort Worth Star Telegram. Key Dates/Catalysts: - 4Q2011 results February 8, 2012. - Company continues to buy back bonds on the open market.
Financial Profile Revenue Adjusted EBITDA Interest Expense Operating Cash Flow CapEx Dividends Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Consenting RC due 7/1/2013 Total Bank Debt 11.50% due 2/15/2017 Total Sub Guaranteed Debt 4.625% due 11/1/2014 5.75% due 9/1/2017 7.15% due 11/1/2027 6.875% due 3/15/2029 Total Sr Unsecured Bonds Other debt Total Debt Market Cap Total Enterprise Value Maturities: 120 100 80 60 40 20 0 2012 2013 Size 0 0 865 865 93 337 89 276 795 0 1,660 217 1,860
FY08 1,472 370 (156) 382 (21) (52) 309 1,950 5 1,945
FY10 1,375 382 (177) 225 (16) 0 209 1,775 18 1,757
FY11E 1,269 348 (160) 115 (16) 0 99 1,635 98 1,537
FY12E 1,213 329 (150) 113 (15) 0 98 1,635 185 1,450
Strengths: - McClatchy has aggressively reduced costs to help offset revenue declines. - MNI has improved its maturity profile and is now focused on buying back debt early. - Strong local presence, with largest daily paper by circulation in its respective markets. - Only 6.0% of workforce is represented by unions, which gives MNI more flexibility in restructuring operations. - Aggressive management team with history of taking steps to improve is balance sheet. - Ownership stakes in various digital ventures, including a 25.6% stake in Classified Ventures and a 14.4% stake in Career Builder, offer additional value. - Digital ventures have paid dividends to McClatchy, which the company can utilize for debt reduction. Risks: - High exposure to California and Florida markets has hurt performance. - Secular pressure and increased competition in local ad markets. - Underfunded pension of $298 million could require significantly higher funding in the future years. - Local online ad market has grown more competitive in recent quarters. - Print ad revenue declines remain a significant concern. - Expense cuts will likely be smaller and more challenging going forward. - Heavy debt load and higher leverage limit flexibility. - A double-dip recession or weaker-than-expected rebound in advertising would hurt results further.
5.3x 5.3x 2.4x 25.1%
4.6x 4.6x 2.2x 27.8%
4.7x 4.4x 2.2x 27.4%
5.0x 4.4x 2.2x 27.1%
Comps NYT GCI
Gross Leverage 2.2x 1.8x
Coverage 3.8x 6.4x
Agency Ratings B1/B+ Ba1/BB
Debt to EBITDA
Liquidity Consenting RC Letters of Credit Borrowings 125 Matures July 1, 2013 47 0 50 28 17 45
2.4x
Minimum liquidty covenant Revolver Availability Cash Total Liquidity
4.7x 4.7x
Credit agreement maintenance covenants: Leverage (as defined) Interest Cov (as defined) 6.5x 1.5x
2014
116
January 26, 2012
High Yield
McMoRan Exploration (MMR)

UNDERPERFORM
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $106.25
YTW (%) 6.95%
STW bp 706 Investment Strengths: Strong history of US GOM exploration Extensive US GOM infrastructure in place Significant upside potential with Davy Jones discovery Investment Risks: High exposure to the Gulf of Mexico and exposure to the inherent risks; limited diversity Potential for increased regulation in the GOM following the Macondo oil spill Management typically does not hedge Aggressive company, with little balance in terms of low-risk projects Increased its GOM exposure with purchase of Plains Exploration (PXP) shallow water assets Key Dates/Catalysts: Flow tests of Davy Jones I and II; first production expected in 1H2012 Reserve bookings at Davy Jones Announcement with respect to other new ultradeep opportunities; MMR has identified 15 shelf prospects with large structures
Company Description
McMoRan is a US-Gulf-focused exploration-oriented E&P. The company's core competency is finding reserves in deep structures. MMR is one of the purest "wildcatting" stories in HY energy. Predecessor company McMoRan Oil & Gas was spun out by metals & mining giant Freeport-McMoRan in May 1994. The company then merged with Freeport-McMoRan Sulfur in 1998 and renamed the combined entity McMoRan Exploration. In 2000, the company closed its sulfur mining operations at Main Pass, and in 2002 MMR sold all of its sulfur transportation and terminalling assets. In August 2007, McMoRan acquired Newfield Exploration's US GOM shelf assets for $1.1 bn plus assumption of $200 mn of asset retirement liabilities. The acquisition added 321 bcfe of proved reserves and 235 mmcfe/d of production. The NFX acreage expanded McMoRan's acreage in the GOM from 0.3 million acres to 1.5 million acres. In September 2010, MMR announced it would acquire Plains Exploration's shallow water GOM assets for $818 mn.
2008A $1,072 $762 $387 $236
2009A $436 $199 ($7) $138
2010A $430 $195 ($119) $217
2011E $543 $275 ($320) $524
2012E $478 $190 ($185) $300
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2011-14 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $562 $562 $562 $0 $1,689 $2,251 Size $642 $0
2008A 0.5x 15.0x 55%
2009A 1.9x 4.6x 59%
2010A 2.9x 5.1x 24%
2011E 2.0x 15.5x 25%
2012E 2.6x 5.3x 24%
Comps MMR SGY WTI
Coverage ('11E) 15.5x 33.5x 15.8x
Agency Ratings Caa1/B Caa2/CCC+ Caa1/B
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $150 $100 $0 $50 $642 $692
2.1x
Total Liquidity
Maturities:
350 300
250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
117
January 26, 2012
High Yield
MDC Holdings Inc. (MDC)

UNDERPERFORM
Bond Summary GS Rating U Size (MM) 250 Coupon (%) 5.625 Priority Sr. Nts Maturity 1-Feb-20
Updated
1/26/2012
212-357-6157 212-902-0459
Agency Ratings Ba3/BB-
Next Call Price MW Date
Bid Price 94
YTW (%) 6.60%
OAS bp 506
Company Description
MDC Holdings is one of the smaller publicly traded homebuilders in the United States, with an enterprise value of just under $1 billion, FY2010 closings of 3,245 homes, and FY2010 revenues of $959 million. In its core homebuilding operations, the company primarily purchases finished lots for the construction and sale of single-family detached homes under the brand Richmond American Homes. Key Dates/Catalysts: 4QFY11 earning release Potential share buybacks Potential large acquisition
Investment Strengths: - Significant cash balance. - Clean balance sheet. - Conservative management team. Investment Risks: - Gross margins have been relatively weak and SG&A expense has been elevated. - Company has been less adept versus other builders at managing speculative inventory. - Company is land-light, which could cause underperformance at the onset of a housing recovery.
Financial Profile ($, mn)* Total Revenues Total Adjusted EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Balance Sheet Debt Total Cash and Cash Equivalents Key Credit Statistics Homebuilding Debt / Capitalization Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) Homebuilding Gross Margin (1)
FY:09 898 (5) (58) 153 (8) 120 1,027 1,562 48% NM 0.5x 22%
FY:10 959 3 (72) 149 (8) (334) 1,268 1,541 56% NM 0.6x 22%
FY:11E 862 (37) (63) 26 (33) (216) 755 833 47% NM NA 18%
4Q:10 260 (3) (18) 4 (0) (100) 1,268 1,541 56% NM 0.6x 20%
3Q:11 211 (6) (15) 3 (2) (46) 1,017 1,103 53% NM 0.8x 19%
4Q:11E 266 (5) (13) (1) (8) 755 833 47% NM NA 19% Comps MDC Toll DR Horton Debt-toCap 53% 38% 38% Inventoryto-Debt 0.8x 2.1x 2.2x Ratings Ba1/BB+ Ba3/BBB1/BB-
PF Capitalization ($, mn) Description Mortgage repurchase facility Total Secured 7% Senior Notes due 2012 5.5% Senior Notes due 2013 5.375% Medium-Term Notes due 2014 5.375% Medium-Term Notes due 2015 5.625% Senior Notes due 2020 Total Debt Outstanding Shares Outstanding Share Price Market Capitalization ENTERPRISE VALUE Size 11 11 250 250 250 761 47 20.7 983 904 300 250 200 150 100 50 0 2012 2013 2014 2015 Maturities: Liquidity Cash and Cash Equivalents Marketable Securities Total Liquidity 305 535 840
118
January 26, 2012
High Yield
Mediacom Communications Corporation (MCCC)

Updated 1/20/12
212-902-2233 212-902-4427
IN-LINE
Our In-Line ratings on the MCCC bonds reflect the company's high leverage at just over 6x, balanced by reasonable liquidity and our expectation that management will continue to be proactive in addressing its debt maturities. MCCC should also see notable margin expansion from migrating its phone services in-house, which should aid EBITDA growth in the near term. Bond Summary Size (MM) $350 $500 Coupon (%) 9.125 8.500 Issuing Entity / Priority MCCC LLC Sr Nts* MCCC Broadband Sr Nts* Maturity 15-Aug-19 15-Oct-15 Agency Ratings B3/BB3/BNext Call Price 104.563 102.833 Date 8/15/2014 2/27/2012 Bid Price 108.00 103.00 YTW (%) 7.28 5.87 STW bp 620 531
*MCCC LLC = Mediacom LLC. MCCC Broadband = Mediacom Broadband LLC
Company Description
Mediacom Communications Corporation (MCCC) is the eighth-largest cable television company in the US based on customers served, focusing on serving smaller cities and towns in the US. As of September 30, 2011, MCCC had approximately 1.1 million basic, 703,000 digital, 850,000 high-speed data, and 338,000 telephone customers between Mediacom LLC and Mediacom Broadband. In March 2011, MCCC's Chairman/CEO/Founder Rocco Commisso completed a go-private transaction at $8.75 per share. MCCC operates its business through two wholly owned subsidiaries: - Mediacom LLC: As of September 30, 2011, served 488,000 basic, 300,000 digital, 383,000 high-speed data, and 159,000 telephone customers. - Mediacom Broadband LLC: As of September 30, 2011, served 612,000 basic, 403,000 digital, 467,000 highspeed data, and 179,000 telephone customers. In November 2011, Mediacom Broadband LLC entity completed an extension of $216mn of its $430mn revolver that was set to mature in December 2012. The new RC matures on 12/30/2016, subject to springing maturies on the TLD (7/31/2014) and 8.5% senior notes due 2015 (4/15/2015). Key Dates/Catalysts: February/March 2012: 4Q2011 earnings release. Potential capital markets activities: MCCC management team has historically been very savvy and proactive in accessing the capital markets to clean out maturities. Financial Profile Basic Subscribers Digital Subscribers Data Subscribers Phone (VoIP) Subscribers Revenue EBITDA Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Total Debt/Basic Sub EBITDA Margin Capitalization Debt to Description Mediacom LLC: Revolver Term Loans Capital Leases HY Debt Total Mediacom LLC Debt Mediacom Broadband: Revolver Term Loans Capital Leases HY Debt Total Broadband Debt Total Mediacom Debt Market Cap Enterprise Value Maturities: 2,000 1,846 1,703 $143 1,355 500 $1,997 $3,600 NA NA 6.0x 6.1x 4.5x $93 1,160 350 $1,603 6.2x / 5.8x Cash Total Liquidity $11 $134 4.8x / 4.5x Size EBITDA * Liquidity Mediacom LLC Revolver Size Letters of Credit Borrowings Revolver Availability $225 (9) (93) $123 6.2x $2,718 37.0% 6.2x $2,837 36.5% 6.1x $3,191 38.1% 6.1x $3,273 37.9% 6.0x $3,310 38.5% 6.1x $3,310 37.7% FY09A 1,238,000 678,000 778,000 287,000 $1,460 540 123 $3,365 81 $3,284 FY10A 1,193,000 731,000 838,000 332,000 $1,499 546 115 $3,384 156 $3,228 2Q11A 1,139,000 724,000 855,000 335,000 $391 149 37 3,635 119 $3,516 3Q11A 1,100,000 703,000 850,000 338,000 $391 148 52 3,600 120 $3,480 4Q11E 1,078,089 694,215 847,115 340,760 $389 150 38 3,568 121 $3,447 FY11E 1,078,089 694,215 847,115 340,760 $1,552 585 177 3,568 121 $3,447
Investment Strengths: (1) Insulated from the telco threat in the near term: Telcos rolling out their video offerings typically target higher-density areas of the country with more attractive demographics. Because MCCC focuses on rural areas, it might not face telco competition in the near to intermediate term. (2) Opportunity for margin expansion: MCCC has recently completed the process of bringing its phone product in-house, which helped reduce its cost of goods sold for the phone business substantially. This drove double-digit EBITDA growth at both issuing entities in 3Q2011. Investment Risks: (1) High leverage: MCCC's leverage stands around 6.1x, making it the highest-levered cable credit in the US. (2) Rural footprint: With a rural focus, MCCC's systems demographics are less attractive than those of other MSOs with more urban exposure. This is evident in MCCC's below-industry-average ARPU and penetration rates of advanced services. Also, more of MCCC's subscribers are prone to cherry-pick deeply discounted packages, only to cancel the subscription when the promotion period ends, leading to higher churn. (3) Lack of scale: As a smaller cable operator with less attractive demographics, MCCC faces higher programming rates relative to larger MSOs. It also has less negotiating leverage to deal with broadcasters in retransmission discussions.
Comps Charter - CCOH Cablevision Systems Corp
Leverage 4.3x 4.0x
Coverage 2.8x 3.2x
Ratings B1/BBB1/B+
Liquidity Mediacom Broadband Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $430 (3) (143) $285 $7 $292
* Mediacom LLC's Debt/EBITDA is expressed: Excluding Investment Income / Including Investment Income. Investment Income is from the Preferred Investment in Mediacom Broadband.
1,000
26 0 2012
26 2013 2014 2015 2016+
119
January 26, 2012
High Yield
MediMedia USA, Inc. (MEDIME)

Updated 01/25/12
212-855-7718 212-902-9758
NOT COVERED
Bond Summary Size (MM) $150 Coupon (%) 11.375 Priority Sr Sub Nts Maturity 15-Nov-14 Agency Ratings Caa2/CCC+ Next Call Price $100.000 Date 15-Nov-11 Bid Price $85.000 YTW (%) 18.462% STW bp 1,840
Company Strengths: - Premier clients: Long-standing relationships with recognized organizations: American Red Cross (17-year relationship), Harvard Medical School (seven-year relationship). - Diversity of customers: about 40% of revenue from pharma, 17% from employers, 43% from health plans and physicians. Company Risks: - Stalled growth: Acquisitions have been small and organic growth is very low. - Small size: Significant competition from better-capitalized companies; competition is largely based on price. - Large debt maturity in 2014 post the extension of the majority of its credit facility to 2014. Increased interest rates under the amendment will put further strain on cash flows.
Company Description
MediMedia USA (MEDIME) provides content, printing, and marketing services to the healthcare and pharmaceuticals industries. Patient Education (60% of revenues) publishes pamphlets, newsletters and online content to educate patients about drugs, diseases, health, and safety paid for by hospitals, managed care companies, employers, and medical societies. Pharma Group (40% of revenues) provides outsourced marketing services for pharmaceutical companies (Rx pads, detailing to managed care companies to get onto preferreddrug formularies, and a proprietary database of drug inserts). MEDIME also operates a large FDA-approved drug sample distribution facility in New Jersey. Vestar Capital Partners acquired MEDIME in October 2006 for $265 mn of equity. Medimedia sold a formulary business for $34.7 mn in March 2011 and its animal health business VetStreet for $114 mn of net proceeds in August 2011. In October 2011, MediMedia amended its credit facility to provide a covenant waiver for 2Q and 3Q, reset financial covenants for the remainder of the facility term and extended the term of the majority of the facility to August 14, 2014, among other modifications. The company also repaid $114 mn of credit facility with proceeds from its sale of the animal health business. MediMedia has equity cure rights. Bonds have cross defaults. Key Dates/Catalysts: - Demand for drug samples could be further reduced, as pharmaceutical companies re-evaluate their marketing practices.
Financial Profile Revenue EBITDA Interest paid Taxes paid Capex Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description
2009A $292 63 $29 (7) 22 (1) 373 0 373 5.9x 5.9x 2.2x 21.6%
2010A $309 68 $26 (2) 21 2 371 4 367 5.4x 5.4x 2.7x 22.1%
4Q10A $81 23 $6 (3) 7 1 371 4 367
1Q11A $67 12 $6 2 8 (9) 388 47 341
2Q11A $68 5 $6 0 1 (21) 388 17 370

LTM:
3Q11A $68 9 $7 (30) 5 (9) 387 124 263 7.8x 5.3x Comps MediMedia (MEDIME) Catalent (PTSAC) snr VWR (VWRINT) Liquidity Leverage 5.5x 5.6x 5.6x Coverage NA 2.0x Agency Ratings Caa1/B Caa1/B-
1.9x Caa2/CCC+
3.7x 28.2%
1.9x 18.2%
0.8x 7.6%
1.4x 13.1%
Debt to LTM Size EBITDA $47 $76 $123 $0 $150 $150 $0 $273 NA NA 2.5x 2.5x
Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability
50 3 47 1 0 0 0 $9 10
Revolver due 2012, portion ext to 2014* TL B due 2014* Total bank debt Total sr bonds 11.375% senior sub notes due 2014 Total sub debt Other debt Total Debt Market Cap Enterprise Value
5.5x Cash* Total Liquidity 5.5x
*3Q11 cash less $114mn for debt pay down post quarter end.
LTM EBITDA is pro forma for the Animal Health sale. *Credit facility is pro forma for a $114mn pay down post quarter end, assuming this was on TL B. Per 10Q, MEDIME extended the term of the majority of the Facility to August 15, 2014. We are assuming all of TL B was extended as well as a portion of the revolver. Maturities: $300
$250 $200 $150 $100 $50 $0 2012 2013 2014 2015+
120
January 26, 2012
High Yield
Meritor (MTOR)
OUTPERFORM
Bond Summary Size (MM) $250 Coupon (%) 8.125% Priority Sr. Nts Maturity 15-Sep-15 Agency Ratings B3/CCC+
Updated 1/26/2012
212-902-7537 212-357-2769
Next Call Price NC Date NC
Bid Price 96.75
YTW (%) 919.5%
STW bp 890
Company Description
Meritor, Inc., formerly ArvinMeritor, provides the global transportation industry with integrated systems, modules, and components. The company serves commercial truck, trailer, and specialty original equipment manufacturers and related aftermarkets. Meritor also provides coil coating applications, including those for the transportation, appliance, construction, and furniture industries. Key Dates/Catalysts: - MTOR will report 1QFY12 earnings on February 2, 2012.
Investment Strengths: - Late cycle commercial truck opportunity: Significant pent-up demand in North America should continue to help MTOR's sales. - Leverage poised to improve: We expect MTOR's leverage to improve to 2.5x (net leverage of 2.1x) by the end of FY20121 (September 2012) - Improved liquidity: Liquidity remained strong at $757 million at the end of 4QFY11. In February 2010, MTOR extended the maturity of its credit facility to January 2014 from June 2011, while also issuing new senior notes ($250 million) and equity ($210 million). - Exit of light vehicle segment: MTOR completely exited its low-margin light vehicle segment in early 2011 and is now 100% levered to the commercial vehicle, military, and industrial markets. Investment Risks: - Leverage is still high: MTOR ended 4QFY11 with gross leverage of 3.0x (2.4x net). - Revised guidance: Managements credibility has come under pressure in recent months given that guidance for both 2QFY11 and 3QFY11 were revised prior to earnings and its 10% EBITDA margin target for the end of 2012 now looks unlikely to be achieved - Defense segment remains weak: Management expects lower FMTV volumes in the near term, driven by production shifting to a new prime contractor.
Financial Profile Revenue EBITDA Cash interest Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Secured Revolver due Jan-2014 A/R Securization facility due 2013 8.75% Notes due 2012 8.125% Notes due 2015 10.625% Notes due 2018 4.625% Convert Notes due 2026 4.0% Convert Notes due 2027 Unamortized Discounts/Other Total Debt Less cash Net Debt Market Cap Enterprise Value
FY08 7,167.0 364.0 (38.8) (5.0) (172.0) (161.0) 1,303.0 497.0 806.0 3.6x 2.2x 4.4x 5.1%
FY09 4,457.0 103.0 (88.9) (20.0) (111.0) (123.0) 1,177.0 95.0 1,082.0 11.4x 10.5x 1.2x 2.3%
FY10 4,584.0 258.0 (96.3) (48.0) (56.0) 155.0 1,029.0 343.0 686.0 4.0x 2.7x 2.4x 5.6%
FY11 4,667.0 342.0 (84.6) (44.3) (105.0) (7.0) 1,034.0 217.0 817.0 3.0x 2.4x 3.6x 7.3%
FY12E 4,830.9 373.4 (83.4) (84.3) (105.0) 14.6
Comps 950.0 165.6 784.4 2.5x 2.1x 4.4x 7.7% AXL CTBUS GT MTOR TEN TRW
Leverage 2.8x 1.3x 3.0x 3.0x 2.2x 0.9x
Coverage 4.8x 8.4x 6.5x 3.6x 4.5x 13.6x
Size 0.0 0.0 84.0 250.0 245.0 300.0 200.0 -45.0 1034.0 217.0 817.0 645.3 1462.3
Debt to EBITDA 0.0x 0.0x 3.0x 3.0x 3.0x 3.0x 3.0x 3.0x 3.0x 2.4x 4.3x
Liquidity LTM Revolver Size - Amt Drawn - LCs Drawn Amt Unutilized A/R Securitization Avail. Cash Liquidity 441.0 0.0 26.0 415.0 125.0 217.0 757.0
Maturities: 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 Thereafter
121
January 26, 2012
High Yield
MetroPCS Communications, Inc. (PCS)

IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
Our In-Line rating reflects PCS's strong liquidity profile and modest leverage offset by significant competitive pressure in the prepaid wireless space and the company's need to acquire additional spectrum to address its capacity needs.
Bond Summary Size (MM) Coupon (%) Priority Maturity Agency Ratings Next Call Price Date Bid Price YTW (%) STW bp
$1,000
6.625
Sr Nts
15-Nov-20
B2/B
103.313
15-Nov-15
99.75
6.66
514
Investment Strengths: (1) Strong liquidity, with over $2.1bn in cash.
Company Description
MetroPCS is the fifth-largest facilities-based wireless telecommunications provider in the United States on the basis of number of subscribers served. The company offers wireless broadband personal communication services, or PCS, on a no long-term contract, flat rate, unlimited usage basis in major metropolitan areas in the United States. MetroPCS launched service in 2002 and has consistently been among the fastest-growing wireless broadband PCS providers in the United States as measured by growth in subscribers and revenues during that period. With Metro USA, MetroPCS customers can use their services in areas throughout the United States, covering a population of over 280 million. As of September 30, 2011, MetroPCS had approximately 9.1 million subscribers.
Key Dates/Catalysts: February 23, 2012: 4Q2011 earnings.
(2) Positioned to benefit from proliferation of lower priced smartphones as a low-cost, value-driven operator. (3) Potential to participate in M&A as a possible acquisition candidate for higher quality strategic buyers.
Investment Risks: (1) Fierce competition from national postpaid carriers as well as other prepaid brands like Boost (from Sprint) and Straight Talk (from America Movil's TracFone and Wal-Mart). A further deterioration in competitive dynamics would pressure PCS's ARPU and subscriber metrics.
Potential spectrum acquisitions.
(2) Macro pressure: PCS's subscriber base tends toward consumers with less discretionary income; therefore, weak economic conditions and high gas/food prices have a disproportionately large impact on their spending.
Financial Profile FY09A FY10A 2Q11A 3Q11A 4Q11E FY11E
Subscribers ('000s) ARPU Churn CPGA CPU Revenue EBITDA Free Cash Flow Total Debt Cash Net Debt
6,640 $40.68 5.5% $146 $17.23 $3,481 956 68 $3,679 1,154 2,525 3.8x 2.6x
27.5%
8,155 $39.79 3.6% $157 $18.49 $4,069 1,176 204 $3,786 1,171 2,615 3.2x 2.2x
28.9%
9,080 $40.49 3.9% $178 $18.94 $1,209 357 79 $4,756 2,156 2,600 3.7x 2.0x
29.5%
9,149 $40.80 4.5% $194 $19.52 $1,205 327 24 $4,753 2,141 2,612 3.7x 2.0x
27.2%
9,346 $40.74 3.7% $184 $19.80 $1,256 356 2 $4,746 2,136 2,610 3.6x 2.0x
28.4%
9,346 $41.55 3.9% $177 $19.96 $4,964 1,385 56
(3) Lack of spectrum depth: PCS has an average of 20MHz of spectrum across its footprint, which is significantly less than that of its competitors. We expect PCS's management team to be aggressive in pursuing spectrum acquisitions.
Agency
$4,746 2,136 2,610 3.6x 2.0x

27.3%
Comps
Leverage
Coverage
Ratings
LEAP Secured Nts LEAP Unsecured Nts Sprint
2.1x 5.7x 3.3x
2.1x 2.1x 4.0x
Ba2/B+ B3/CCC+ B3/B+
Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin

Capitalization
Debt / Description Size EBITDA Liquidity
Revolver ($100mm Facility) Term Loan B-2 due 2016 Term Loan B-3 due 2018 Capital Leases
Total Secured Debt
$0 987 1,491 274

$2,753
Revolver Size Letters of Credit Borrowings Revolver Availability 2.1x Cash Total Liquidity 3.7x 2.0x 4.5x
$100 $100 $2,141 $2,241
7.875% Sr Nts due 2018 6.625% Sr Nts due 2020

Total Debt
1,000 1,000
$4,753
Net Debt Market Cap Enterprise Value
$2,612 3,153 5,765
Maturities:
5,000 4,000 3,000 2,000 1,000 25 0 25 25 25 4,653
2012
2013
2014
2015
2016+
122
January 26, 2012
High Yield
MGM Resorts International (MGM)

Bond Summary Size Coupon (MM) (%) $850 11.125 $743 7.625 $150 7.625
Updated 1/23/12
212-357-9918 212-902-4751
IN-LINE: We believe the MGM notes are adequately priced considering the high leverage profile and the bullish outlook for Las Vegas.
Agency Ratings Ba2/B+ B3/BCaa1/CCC Next Call Price Date 105.563 15-May-13 T+50 bps MW NC NC Bid Price 113.500 100.000 101.000 YTW (%) 4.47 7.62 6.89 STW bp 431 683 671 Z-spread bp 396 657 637 5-year CDS 6.25+500
Priority Sr Sec Nts Sr Nts Sr Sub Nts
Maturity 15-Nov-17 15-Jan-17 15-Jul-13
Company Description MGM Resorts International, Inc. (MGM) owns and operates 17 properties in Nevada, Mississippi, and Michigan, and it has investments in three other properties in Nevada and Illinois. The company has major developments under construction in Michigan and in Macau. MGM properties have over 50,000 hotel rooms, 2 million square feet of casino floor space, 1,985 table games, and 35,000 slot machines. Properties include Bellagio, MGM Grand, Mandalay Bay, Monte Carlo, the Borgata of Atlantic City, and Beau Rivage. MGM and its partner, Dubai World, jointly own CityCenter, a Las Vegas Strip property with 5,000 rooms, which opened in December 2009. According to Bloomberg, significant equity holders include Tracinda Corp. (23%), Paulson & Co. (8%), Janus Capital Mgmt (6%), and Dubai World (5%). Key Dates/Catalysts: - 2Q2011: MGM to begin consolidating Macau subsidiary in consolidated financial statements. - June 2011: Started $70 mn renovation of Bellagio's 2,568 rooms in the main tower. Renovation completed in December 2011. - September 2011: Began room remodeling of MGM Grand Las Vegas. To be completed in 12 months. - October 2011: Announced agreement with BYD and on-line poker service provider bwin.party (BPTY). If online poker is legalized in the US, MGM would acquire a 25% stake and BYD would acquire a 10% stake in a new company that would operate online poker using BPTY's technology and brands PartyPoker and World Poker Tour. - January 2012: Issued $850 mn of 8.625% notes due 2019 at par. Net proceeds to be used to repay debt. - January 2012: Signed a contract with Rolling Hills Estates Realty Trust to purchase a remote 150 acres of land in Brimfield, MA. MGM is looking to develop a casino/ resort on the lot, which is 65 miles west of Boston.
Investment Strengths: - Diverse offering of high-end and middle-market casino properties on the Las Vegas Strip. - Global diversification: Exposure to high-growth Macau market. - Banks have shown a willingness to work with company during downturn in Las Vegas operations. - Management expects to benefit from operating leverage: 1% increase in occupancy results in incremental EBITDA of $40 million, a $5 increase in room rates results in additional EBITDA of $50 million, $5 additional customer spend results in $40 million of EBITDA. - 2011: Through November , YTD convention attendance up 4.4% yoy in Las Vegas.
The financial table below is presented on a GAAP basis and accounts for the MGM China entity as a consolidated subsidiary as of June 3, 2011. Prior to June 3, MGM China was an unconsolidated investment. Financial Profile FY10A 1Q11A 2Q11A 3Q11A 4Q11E FY11E Net Revenue 6,019 1,505 1,806 2,234 2,182 7,726 EBITDA 1,131 331 375 453 466 1,626
Investment Risks: - Leverage at US subsidiary remains high at 9.3x. - Concentrated on Las Vegas Strip: 76% of 3Q2011 wholly owned casino property EBITDA was generated by wholly owned Strip casinos. - Potential cannibalization of existing Las Vegas Strip properties as CityCenter increases occupancy and reaches maximum capacity of the gaming floor and convention space.
Interest Expense Taxes paid (refund) CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
Capitalization Description - US subsidiary only
1,114 (330) 207 140 12,048 499 11,549 10.7x 10.2x 1.0x 18.8%
270 2 34 25 12,081 431 11,650 10.0x 9.6x 1.2x 22.0%
267 (174) 51 232 12,049 922 11,128 9.2x 8.5x 1.4x 20.8%
273 1 91 88 12,021 936 11,085 8.4x 7.7x 1.7x 20.3%
262 (20) 97 128 12,299 794 11,505 7.6x 7.1x 1.8x 21.3%
Liquidity
1,071 (191) 273 473 12,299 794 11,505 7.6x 7.1x 1.5x 21.0%
Comps MGM (US; sr) HET WYNN Leverage 9.2x 12.8x 1.9x Ratings Coverage 1.7x B3/B0.9x Ca/CCC 6.6x Ba2 / BBBMax. Capex 500 500 500
Maintenance covenants Min. LTM EBITDA 3Q11 1,150 4Q11 1,200 1Q12 / 2Q12 1,250 Note: Step-ups continue through 2013 Enterprise Value 3Q11A Source
3Q11A
Debt to EBITDA
Source
Size
13% senior secured notes due 2013 750 10.375% senior secured notes due 2014 650 11.125% senior secured notes due 2017 850 9% senior secured notes due 2020 845 Total sr secured debt (incl. liens) 4,145 3.2x Revolver due Feb 2014 450 Term loan due Feb 2014 1,717 6.75% senior notes due Sept 2012 535 5.875% senior notes due Feb 2014 508 4.25% convertible sr notes due Apr 2015 1,450 6.625% senior notes due July 2015 877 7.5% senior notes due June 2016 733 7.625% senior notes due Jan 2017 743 11.375% senior notes due March 2018 475 Other senior notes 1,286 Total senior debt 11,869 9.2x 8.375% sr sub notes due Feb 2011 0 Other 152 Total Debt 12,021 9.3x Note: Excludes $850 mn of 8.625% notes issued in January 2012.
Maturities:
5,000 4,000 3,000 2,000 1,000 0 2012 2013 2014 2015 2015+
Revolver due 2014 Letters of Credit & other Borrowings Revolver Availability
1,700 59 450 1,191
Shares O/S (mm) Stock Price Market cap Net Debt Minority interest Enterprise Value LTM EBITDA EV/ EBITDA EV/ 2011E EBITDA EV/ 2012E EBITDA
488.8 $13.11 6,409 11,099 0 17,508 1,434 12.2x 10.8x 8.8x
922 2,113
Note: Liquidity excludes $188 mn of cash held in trust by state of NJ as part of the sale of the Borgata investment. Amount is currently reported in "Prepaids exp. & other." Operating statistics Las Vegas Strip Properties: Las Vegas Strip Properties: Occupancy rate Average daily rate RevPAR Revenue by Segment Las Vegas Strip Other Nevada properties MGM Grand Detroit Mississippi MGM China (51% owned) Other Total revenue
1Q11A
2Q11A
3Q11A
87.0% $130 $113 $1,111 34 143 116 0 100 1,505
94.0% $126 $118 $1,207 37 142 122 193 117 1,818
95.0% $124 $117 $1,205 35 139 130 623 101 2,234
123
January 26, 2012
High Yield
Michaels Stores (MIK)

IN-LINE/OUTPERFORM
Bond Summary Size Coupon (MM) (%) $800 7.75% $400 11.38%
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts Sr Sub Nts
Agency Next Call Maturity Ratings Price Date 1-Nov-18 Caa1/CCC $103.88 1-Nov-14 1-Nov-16 Caa2/CCC $105.69 Current
Bid Price 104.00 105.75
YTW (%) 6.75% 8.27%
STW bp 578 781 Investment Strengths: - Historically positive industry dynamics - Strong brand-name recognition - Excellent store locations - Almost all mature stores are cash flow positive - Improving working capital management - Good chance of an IPO in 2012 - Firing on all cylinders and recent momentum Investment Risks: - High debt leverage - Crafts space is highly competitive - Cyclicality in seasonal and picture frame sales
Company Description
Michaels Stores is the largest arts-and-crafts specialty retailer in the US and Canada. The company operates more than 1,000 retail stores in 48 states under two formats: (1) Michaels Stores and (2) Aaron Brothers.
Key Dates/Catalysts: Mid- to late March Fourth quarter earnings release
FY09A 3,888.0 548.0 258.7 45.4 43.0 201.0 3,803.0 217.0 6.9x 6.5x 2.0x 14.09%
FY10A 4,031.0 622.0 311.8 66.1 81.0 163.1 3,668.0 319.0 5.9x 5.4x 2.0x 15.43%
FY11E 4,183.7 688.1 247.2 102.1 109.0 229.8 3,271.5 78.7 4.8x 4.6x 2.4x 16.45%
4Q10A 1,331.0 241.0 77.1 48.7 20.0 95.2 3,668.0 319.0
4Q11E 1,377.7 249.1 59.2 56.3 25.0 108.6 3,271.5 78.7
Comps Neiman JCG Yankee Michaels
Yield Leverage Coverage Ratings 7.66% 4.6x 3.5x Caa1/BCaa1/CCC+ 8.70% 5.4x 3.2x 10.14% 4.5x 1.9x B3/CCC+ 8.27% 4.3x 2.8x Caa2/CCC
3QA Amounts Outstanding 10/29/11 Asset-Based Revolver ($900mm, due Apr 201 0.0 Secured Term loans 1,996.0 7.75% Senior Notes due Nov 2018 795.0 11.375% Senior Sub Notes due Nov 2016 13% Sub. Discount Notes due Nov 2016 Other Debt Total Debt 393.0 327.0 0.0 3,511.0
3.1x 18.11%
4.2x 18.08%
Description Asset-Based Revolver ($900mm, due Apr 2014) L+3 Secured Term loan B-1 due Oct. 2013 L+225 Secured Term loan B-2 due Jul, 2016 L+450 Secured Term loan B-3 due Jul. 2016 L+450 Total Secured Debt 7.75% Senior Notes due Nov 2018 11.375% Senior Sub Notes due Nov 2016 13% Subordinated Discount Notes due Nov 2016 Total Sub debt
Forecasted 2012E Debt to Size EBITDA 0.0 256.9 869.9 619.2 1745.9 2.5x 3.7x 795.0 393.0 4.3x 337.6 1525.6 4.8x
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total Liquidity
3Q11A 850.0 55.0 0.0 747.0 NA 0 NA 111.0 858.0
Total Debt Market Cap Enterprise Value Maturities: 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013
3271.5 N/A N/A
4.8x
2014+
124
January 26, 2012
High Yield
Millar Western Forest Products (MILLAR)

IN-LINE
Bond Summary Size (MM) $210 Coupon (%) 8.500 Priority Sr Nts Maturity 1-Apr-21 Agency Ratings B3/B-
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Price 104.250 Date 1-Apr-16
Bid Price 74.000
YTW (%) 13.522
STW (bp) 1,160 Investment Strengths: - Competitive, low-cost production facilities - Strong, experienced management team Investment Risks: - Prolonged weakness in lumber demand and prices - Strong Canadian dollar
Company Description
Millar Western is a privately owned manufacturer of pulp and lumber headquartered in Edmonton, Alberta.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Senior notes Other Total debt 9/30/2011 Size 220.1 10.0 230.2
12/31/10 FY:10 295.4 41.5 16.2 22.2 202.5 45.1 157.4
12/31/11 FY:11E 273.7 26.1 16.9 44.0 220.1 24.2 195.9
9/30/10 Q3:10 83.4 12.5 4.2 6.1 NA NA NA
6/30/11 Q2:11 71.8 13.2 4.2 13.3 212.7 41.5 171.1
9/30/11 Q3:11 71.8 5.9 4.2 12.3 230.2 35.3 194.9
4.9x 3.8x 2.6x 14.0%
8.4x 7.5x 1.5x 9.5%
NA NA 3.0x 14.9%
5.9x 4.7x 3.2x 18.4%
7.8x 6.6x 1.4x 8.2%
Debt to EBITDA
Liquidity Revolver size Letters of credit
9/30/2011 50.0 3.4 46.6 35.3 81.9
7.8x
Borrowings Revolver availability Cash Total liquidity
Maturities: 250
200
150
100
50
0 2012 2013 2014 2015+ *Unless otherwise noted, all references to dollars are in Canadian dollars.
125
January 26, 2012
High Yield
Mohegan Tribal Gaming Authority (TRIBAL)

Updated 1/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $250 $225 Coupon (%) 6.125 7.125 Priority Senior Sr. Sub Maturity 15-Feb-13 15-Aug-14 Agency Ratings Caa2/CC Ca/CC Next Call Price 101.531 102.375 Date current current Bid Price 83.50 62.00 YTW (%) 26.39% 29.36% STW bp 2,590 2,913 Z-Spd bp 2,457 2,878
Company Description
Mohegan Tribal Gaming Authority (TRIBAL) operates two properties: the Mohegan Sun in Uncasville, Conn., and Pocono Downs in Plains Township, PA. TRIBAL owns the Connecticut Sun, a WNBA team, and the Mohegan Sun Arena, part of the Mohegan Sun complex. It operates a golf course and country club in southeast Connecticut. In August 2007, Mohegan Sun opened the Sunrise Square, an Asian-themed gaming area with an 8,500-sq-foot gaming space, a 5,000-sq-foot bus lobby, and a 4,000-sq-foot Asian food outlet. Current projects include a new gaming area and hotel tower at Mohegan Sun and an expansion in Pocono Downs. Key Dates/Catalysts: - November 2010: Announced it has engaged Blackstone Advisory Partners "to assist the Authority in its strategic planning and analysis in connection with its business and financial goals, including operational improvements, contemplated hotel projects and the Authoritys bank and bond maturities." - May 2011: Enters a joint venture with Concord Resort Hotel to develop a $600 mn resort in the Catskills region of NY state. The plans include a 258-room hotel, a 75,000 sq. ft casino with 2,100 VLTs, five restaurants, and a harness racetrack, which will include pari-mutuel racing. TRIBAL will manage the property and will have a small equity stake. - August 2011: Massachusetts lawmakers introduce gaming bill. Bill includes three all-inclusive gaming licenses for three casinos in three separate parts of the state. Bill also includes a slots-only license to operate up to 1,250 slots in any region of the state. - December 2011: Receives going concern opinion from auditors. Lenders grant waiver to covenants in order to not treat the going concern opinion as an event of default. As management works with advisors and lenders to finalize a refinancing plan, TRIBAL is "pleased with the progress made in recent weeks."
Fiscal year ended September 30th
Company Strengths: - High-quality resort in Mohegan Sun. - Mohegan Sun Arena offers full-scale entertainment. - TRIBAL has an option to purchase 152 acres of land in western Massachusetts, which could be used to build and operate a casino if gaming is approved in MA. This could reduce impact to its Connecticut property if MA residents decide to allow casinos closer to home. - July 2010: Added 80 table games at PA casino. - Reduced tribe distributions to $4.5 mm in 2QFY11 from $11.2 mn in 2QFY10 - Management contracts would be a capital-efficient avenue to increase EBITDA. Company Risks: - Limited liquidity due in part to its covenants. - Sizable maturities in 2012. - Geographic risk: Majority of revenue is generated by its Mohegan Sun property in Connecticut. - Competitive threats are emerging, such as Aqueduct in Queens, NY, which will be operated by Genting and is expected to install VLTs by February 2011. - Uncertainty in Massachusetts: State Senate voted to approve three casino licenses, and the House passed a gaming bill that would need to be reconciled before gaming is ultimately approved. The governor vetoed the bill since it involved slots at too many racetracks. - Uncertainty regarding restructuring laws in Native American jurisdictions. - Numerous casino operators with deep pockets competing for three Massachusetts gaming licenses.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/LTM EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
FY10 1,422 283 117 48 118 1,862 65 1,797 6.6x 6.3x 2.4x 19.9%
F1Q11 336 68 30 16 23 1,878 94 1,784 6.5x 6.2x 2.3x 20.4%
F2Q11 348 80 30 7 43 1,808 66 1,742 6.2x 6.0x 2.7x 22.9%
F3Q11 361 83 29 17 37 1,780 69 1,711 5.8x 5.6x 2.8x 23.0%
F4Q11 373 91 29 1 12 48 1,803 114 1,689 5.6x 5.2x 3.1x 24.2%
FY11 1,418 322 118 2 52 150 1,803 114 1,689 5.6x 5.2x 2.7x 22.7%
Comps TRIBAL BYD PNK MGM (sr)
Ratings Ca/CC Caa1/CCC+ Caa1/B B3/B-
Capitalization Description Revolver due March 2012 11.5% sr sec notes (2nd lien) due 2017 Salishan Credit facility & other Senior relinquishment liability Senior secured debt 6.125% senior notes Feb 2013 Total senior debt 8% senior sub nts due April 2012 7.125% senior sub nts due Aug 2014 6.875% senior sub nts due Feb 2015 Junior relinquishment liability and other Total debt F4Q11 535 200 20 89 845 250 1,095 250 225 150 89 1,809 5.6x 3.4x 2.6x Debt to EBITDA
Liquidity Source Revolver Size Letters of Credit Borrowings Revolver Availability Less: limitations due to covenant restrictions Net Revolver Available 3 134 F4Q11 675 4 535 136
Property Summary Mohegan Sun % of Rev. # of rooms # of slots # of tables Square footage Gaming 315,500 100,000 130,000 90,000 79% 1,200 6,360 326 Pocono Downs 21% 2,390 66
114 248
Meeting Retail
Maturities: Credit facility maintenance covenants 900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 2012 2013 2014 2015 2016+ Total Period ending 4Q11 Leverage 6.25x Senior Leverage 3.75x Fixed Charge 1.10x
126
January 26, 2012
High Yield
Momentive Performance Materials (MOMENT)

Updated
1/26/2012 Kristen McDuffy

Adam Goodwin
212-357-6157 212-902-0459
IN-LINE
Bond Summary GS Rating IL IL IL Size (MM) 200 635 382 Coupon (%) 12.500 9.000 11.500 Priority 2nd lien S. 2nd lien Sr. Sub Maturity 15-Jun-14 15-Jan-21 1-Dec-16 Agency Ratings B2/CCC Caa1/CCC Caa2/CCC Price 106.3 104.5 105.8 Next Call Date 15-Dec-11 15-Jan-16 1-Dec-11 Bid Price 106.00 84.50 78.50 YTW (%) 8.77% 11.85% 18.37% OAS bp 862 1026 1762
Company Description
Momentive Performance Materials (MPM), a specialty chemical company, is the worlds second-largest producer of silicones and silicone derivatives, and is a leading producer of quartz derivatives. Momentive is the former GE Advanced Materials business, and was acquired by Apollo in September 2006 for approximately $3.8 billion. In October 2010, Momentive and Hexion completed a merger under a new holding company, with each of their respective capital structures remaining separate and in place. Key Dates/Catalysts: 4Q2011 earnings release Potential combination of Momentive/Hexion opcos Potential IPO of the combined company, which management has mentioned as a goal
Investment Strengths: - Attractive industry growth dynamics, with an estimated CAGR of 5-6%. - High-margin, true specialty business . - Technical know-how creates significant barriers to entry. - Diverse end-markets, geographical exposure, and customer base. Investment Risks: - Leverage is very high. - Limited free cash flow due to higher interest burden. - Rising raw material costs. -Continued inventory destocking
Financial Profile ($, mn) Revenue Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Equivalents Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest Expense EBITDA margin PF Capitalization ($, mn) Description Revolver New $300 mn revolver Senior Secured Term Loan ($) Senior Secured Term Loan () Extended secured term loan ($) Extended Secured Term Loan () Construction loan borrowings Other short-term borrowings Total Senior Secured Debt 2nd lien notes Total Secured Debt Springing second lien notes ($)
FY:09 2,083 262 (257) 4 (77) (40) 3,087 210 2,877 11.8x 11.0x 1.1x 13%
FY:10 2,588 488 (250) (12) (95) 155 3,006 254 2,752 6.2x 5.6x 2.0x 19%
FY:11E 2,673 421 (259) (18) (106) (2) 3,018 247 2,771 7.2x 6.6x 1.6x 16%
4Q:10 670 108 (66) (1) (41) 10 3,006 254 2,752 6.2x 5.6x 2.0x 19%
3Q:11 653 95 (64) (8) (26) (27) 3,021 250 2,771 6.8x 6.2x 1.7x 16%
4Q:11E 632 83 (66) (3) (35) (0) 3,018 247 2,771 7.2x 6.6x 1.6x 16%
Comps MPM Huntsman
Leverage 6.8x 3.5x
Coverage 1.7x 4.8x
Ratings B3/BB1/BB-
Size 66 116 403 434 38 21 1,077 200 1,277 1,161 204 2,642 379 3,021 663
Debt to EBITDA
Liquidity Revolver size Borrowings Letters of Credit Revolver Availability Synthetic LOC Letters of Credit LOC Availability 300 50 250 34 33 1 250 500
2.4x Cash Equiv. Liquidity 5.9x 6.8x 8.3x 1200 1000 800 600 400 200 0 2011 2012 2013 2014 2015 2016 Maturities:
Springing second lien notes (150mn) Total Senior Debt Senior Subordinated Notes ($) Total Debt PIK Seller Note ($400 million)
127
January 26, 2012
High Yield
Momentive Specialty Chemicals (HXN)

OUTPERFORM
Updated
1/26/2012
212-357-6157 212-902-0459
We rate the Momentive Specialty Chemicals (MSC) 8.875% 1.5 lien bonds of 2018 Outperform. At current valuations, we believe that these bonds offer compelling relative value given MSC's strong growth trajectory. In our view, the possible sale of MSC's formaldehyde and resins business offers a potential catalyst for spread tightening for the 1.5 liens, as we think the company would be likely to use proceeds to pay down bank debt or acquire a higher-margin specialty business. Bond Summary GS Rating OP IL Size (MM) 1,000 440 Coupon (%) 8.875 9.000 Priority 1.5 lien 2nd lien Maturity 1-Feb-18 15-Nov-20 Agency Ratings B3/CCC+ Caa1/CCC+ Next Call Price 104.4 104.5 Date 2/1/2014 11/15/2015 Bid Price 99.25 90.50 YTW (%) 9.04% 10.69% OAS bp 796 912
Company Description
Momentive Specialty Chemicals is the world's largest producer of thermosetting resins, operating in four primary segments: epoxy and phenolic resins, formaldehyde and forest product resins, coatings and inks, and performance products. Epoxy and phenolic resins and formaldehyde and forest product resins represent over 80% of its total EBITDA. The primary end markets for the company's products are industrial, construction, and consumer/durables, with no end market representing more than 20% of sales. Hexion, the predecessor to Momentive Specialty Chemicals, was created in May 2005 when Apollo Management L.P. combined three of the companies in its portfolio, Resolution Performance Products, Resolution Specialty Materials, and Borden Chemical. In October 2010, Hexion and Momentive completed a merger under a new holding company, with each of their respective capital structures remaining separate and in place. Hexion was renamed Momentive Specialty Chemicals, and Momentive's name was changed to Momentive Performance Materials. Key Dates/Catalysts: 4Q2011 earnings release Potential sale of the formaldehyde business Potential IPO of the combined company, which management has mentioned as a goal
Investment Strengths: - Hexion has right-sized its cost base and will benefit significantly from an improvement in the automotive and construction end markets. - Sufficient liquidity and covenant headroom. Investment Risks: - Leverage remains high. - Could experience margin compression due to increasing raw material costs. -Looser market conditions in base epoxy resins, resulting in less favorable results in this part of the business. -Continued inventory destocking.
Financial Profile ($, mn) Revenue Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Equivalents Net Debt Key Credit Statistics Debt/Adjusted EBITDA Net Debt/Adjusted EBITDA Adjusted EBITDA/Interest LTM EBITDA Margin
FY:09 3,751 374 (234) 19 (131) 28 3,610 135 3,475 9.7x 9.3x 1.6x 10%
FY:10 4,818 601 (277) (23) (119) 182 3,738 180 3,558 6.2x 5.9x 2.2x 12%
FY:11E 5,343 661 (261) (8) (130) 262 3,530 334 3,196 5.3x 4.8x 2.5x 12%
4Q:10 1,218 140 (71) 10 (45) 34 3,738 180 3,558 6.2x 5.9x 2.2x 13%
3Q:11 1,322 162 (67) (6) (38) 51 3,636 171 3,465 5.5x 5.2x 2.5x 12%
4Q:11E 1,224 136 (65) (1) (21) 49 3,530 334 3,196 LTM 5.3x 4.8x 2.5x 12% Comps MSC Huntsman MPM Leverage 5.5x 3.5x 6.8x Coverage 2.5x 4.8x 1.7x Ratings B3/CCC+ B1/BBB3/B-
PF Capitalization ($, mn) Description Existing Revolver ($225 mn) New $200 mn Revolver Additional credit facilities Term Loan Extended Term Loan A/R facility - Apollo (off balance sheet) Total 1st Lien Debt Senior Secured 1.5 Lien Debt Total 1.5 Lien Debt Senior Secured 2nd Lien Debt Senior Secured 2nd Lien Debt Untendered second lien notes Total Senior Secured Second Lien Debt Unsecured credit facility from Apollo $4 million loan from Apollo Australian Term/Working Cap facility Sinking Fund Debenture Borden Debentures Borden Debentures Brazilian bank loans Capital leases Other debt Total Debt at Hexion Specialty Chemicals In Termination facility at Hexion LLC Total Debt through Hexion LLC Holdco Size 457 930 1,387 1,000 2,387 574 120 3,081 100 2 18 62 74 189 68 12 30 3,636 172 3,808 5.7x 5.5x
500 450 400 350 300 250 200 150 100 50 0 2011 2012 2013 2014
Debt to EBITDA
Liquidity Existing Secured Revolver Size Letters of credit ($50 mn) Borrowings Revolver Availability Apollo liquidity vehicles 225 25 0 200 200 0 100 156
2.1x
Borrowings Facility Availability Additional Facility Availability
4.6x
171 627
Maturities:
128
January 26, 2012
High Yield
MTR Gaming Group, Inc. (MNTG)

Updated
1/23/12
212-357-9918 212-902-4751
NOT COVERED
Size (MM) $565
Coupon (%) 11.500 Priority Sr Sec (2nd lien) Maturity 1-Aug-19
Bid Price 91.00
YTW (%) 13.52
STW bp 1,152
Z-spread bp 1,185
(a) MNTG has the option to pay the coupon in either: a) cash at a rate of 11.5% per year, or b) 10.5% in cash and 1% PIK until August 2013.
Company Description
MTR Gaming Group Inc. (MNTG) is a regional casino operator of mid-market casinos and horseracing tracks with three principal properties: Mountaineer Casino, Racetrack and Resort in Chester, WV; Presque Isle Downs in Erie, PA; and Scioto Downs racetrack in Columbus, OH. Top equity holders are Jeffrey Jacobs, former chairman of MTR's board (14%), Brigade Capital (10%), Arbiter Partners (7%), Par Capital Mgmt (7%), according to Bloomberg. Key Dates/Catalysts: - March 2011: Pittsburgh-based Rivers Casino to add 19 table games, bringing total to 107. - August 2011: MNTG completes $565 mn senior secured note offering; proceeds will be used to purchase a gaming license in Ohio and build out a gaming facility at Columbus-based Scioto Downs racetrack. - October 2012: Ohio public policy group files lawsuit to challenge the governor's and legislature's authority to put VLTs at the seven racetracks in Ohio. - 2012: MNTG intends to apply for a gaming license to operate VLTs at its Scioto Downs Racetrack in Columbus, OH. MNTG expects to spend $50 mn on the license and $125 mn to build out 130,000 sq. ft of additional space, which will include a 70,000 sq. ft. gaming floor. MNTG expects to install up to 2,200 VLTs in 2012 upon resolution of the public policy lawsuit against Ohio lawmakers.
Company Strengths: - Columbus market opportunity: one of two gaming facilities for 1.8 mn people. Attractive tax rate of 33% compared to PA and WV. - Modest maintenance capex. - New bond indenture includes an excess free cash flow sweep. - May 2011: Entered into lease mineral rights agreement with Chesapeake Energy. ($2 mn payment / year + 14% royalty on sales). Company Risks: - With the Penn Proposal passing for four all-inclusive casinos, MNTG's two properties in West Virginia and Pennsylvania will be negatively affected. PENN expects to open its Columbus, Ohio, location at the end of 2012. The Cleveland casino will be owned by Cleveland Cavaliers owner Dan Gilbert and will be operated by Caesars. The Cleveland facility is expected to open in the first half of 2012, and Columbus is expected to open in 4Q2012. - Under the governor's recent amendments, PENN has announced its intention to move its Columbus-based Beulah Park racetrack to the Youngstown, OH, area, which would be a negative for the Mountaineer casino. - Dependent on Mountaineer and Presque Isle Downs for a majority of revenues. - MNTG expects to increase use of casino credit for qualified patrons to further enhance gaming revenue.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes (refund) CapEx (incl. gaming license) Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description
3Q10A 119.1 24.0 13.7 0.0 14.9 (4.6) 377.8 41.4 336.4 5.0x 4.5x 1.8x 20.2%
4Q10A 94.8 17.2 13.4 2.3 1.5 378.1 53.8 324.3 4.8x 4.1x 1.3x 18.2%
FY 10A 424.9 78.8 54.1 8.9 27.8 (12.0) 378.1 53.8 324.3 4.8x 4.1x 1.5x 18.5%
1Q11A 98.3 16.2 13.4 0.3 2.5 377.3 45.8 331.5 4.8x 4.2x 1.2x 16.5%
2Q11A 110.5 23.1 13.4 3.4 6.3 378.7 59.5 319.2 4.7x 4.0x 1.7x 20.9%
3Q11A 115.6 23.4 16.3 4.4 2.7 548.7 64.7 483.9 6.9x 6.0x 1.4x 20.3%
Comps MNTG PNK GCCN BYD ISLE PENN MGM (sr)
Ratings B3/BCaa1/B B2/BB-
2.0x Caa1/CCC+ 2.4x Caa1/CCC+ 6.5x 1.7x B1/BB B3/B-
3Q11 565.0 565.0
Debt to EBITDA
Liquidity Revolver Letters of Credit
3Q11 20.0 20.0
Enterprise Value Shares O/S (mm) Share price Market cap Net debt Enterprise value (EV) $ 27.64 2.38 65.8 500.3 566.1 7.1x 80.0
Senior secured revolver due Aug. 2016 Total senior secured (1st lien) debt 11.5% Sr Sec (2nd lien) notes due 2019 (a) Other Total debt
7.1x 7.1x
Borrowings Revolver available
Cash Total Liquidity (a) MTR has the option to pay the coupon in either: a) cash at a rate of 11.5% per year, or b) 10.5% in cash and 1% PIK until August 2013.
64.7 84.7
EV / LTM EBITDA LTM EBITDA
(Mkt Val Debt- cash) / 2008E EBITDA Maturities: #REF!
600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017+
Credit facility maintenance covenants Maximum Total Effective date 4Q11 1Q12 2Q12 3Q12 1Q13 4Q13 Leverage 7.75x 7.75x 7.75x 7.50x 7.00x 6.50x Minimum Interest Coverage 1.25x $ 1.25x $ 1.30x $ 1.40x $ 1.40x $ 1.40x $ Minimum LTM EBITDA 60 80 80 80 80 80
Note: Capex limited to $25 mn per year.
129
January 26, 2012
High Yield
Mylan Inc. (MYL)

OUTPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate MYL Outperform. We like MYLs creditor-friendly generics business and robust pipeline. With leverage close to the companys 3.0x target we no longer see significant delevering but continue to see the bonds as highest quality of our pharma names. Bond Summary Size (MM) $550 $1,000 Coupon (%) 7.625 7.875 Priority Sr Sr Maturity 15-Jul-17 15-Jul-20 Agency Ratings B1/BBB1/BBNext Call Price $101.906 $103.938 Date 7/15/2015 7/15/2015 Bid Price $110.000 $111.000 YTW (%) 4.746% 5.395% STW bp 442 460 Investment Strengths: - Poised for growth: governments/payers seek to reduce costs and a number of branded drugs are going off-patent in 2012. Including Bioniche, MYL has 170 ANDAs pending FDA approval, which represents over $98.4 bn in annual brand sales and will likely boost earnings throughout 2011. - Highly diversified: MYL operates in 140 countries worldwide with a portfolio consisting of over 900 products; MYL's top product is less than 5% of revenue. - Significant free cash flow generator: Free cash flow was over $450 mn in 2009 and 2010; MYL projects CFO of $800-900 and capex of $250-300 mn for the year 2011. - Well-articulated long-term leverage target of 3.0x. MYL still expects to pay down 2012 converts with cash. Investment Risks: - Risk of a moderate-size acquisition: MYL could possibly make an acquisition to gain a presence in emerging European or Latin American markets or to add to its branded portfolio. - Uncertain visibility in longer-term industry growth: Beyond 2012, growth will depend on emerging markets and bio-similars.
Company Description
Mylan operates a global generic pharmaceutical business, as well as a small branded pharmaceutical business. The company operates in 140 countries with strong market positions in several countries including US, France, Italy, and Australia and has a product portfolio consisting of over 900 products. MYL operates two segments: Generics (92% of 2010 revenues) and Specialty (8%). MYL is the No. 3 player globally and has a No. 2 position in the US. Formerly a domestic pharmaceutical company, the 2007 acquisition of Merck KgaA gave MYL a global presence with a diversified product portfolio. The acquisition of a controlling interest in Matrix Laboratories in 2006 and the remaining interest in 2009 allowed MYL to manufacture and supply active pharmaceutical ingredients for products it manufactures, as well as for third-party clients. On its 3Q11 conference call, MYL stated that it would consider a $2-4 bnsized acquisition that temporarily brought leverage to 4x, but management does not see a need to do this and the immediate focus is driving organic growth. Key Dates/Catalysts: - Quarterly earnings - Ongoing FDA approvals and subsequent product launches, particularly "first to file" submissions - Potential for rating agency upgrade (though MYL commented on its 3Q earnings call that this is not a focus and the company sees being a cross-over rated company as the sweet spot). - Potential approval of Copaxone ANDA in early part of 2012 Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow 2009A $5,093 1,237 $318 (21) 154 451 2010A $5,451 1,388 $331 10 193 739 2011E $6,150 1,657 $331 170 238 540 4Q10A $1,435 363 $91 (23) 97 98 3Q11A $1,576 434 $86 35 57 226 4Q11E $1,552 411 $76 53 70 282
Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
4,965 381 4,584 4.0x 3.7x 3.9x 24.3%
5,103 662 4,441 3.7x 3.2x 4.2x 25.5%
5,142 831 4,311 3.1x 2.6x 5.0x 26.9%
5,103 662 4,441
5,106 513 4,593
5,142 831 4,311
LTM Comps Mylan (MYL) Valeant (VRX) Warner Chilcott (WCRX) Endo (ENDP)
Agency Ratings B1/BBB1/BBB3/B+ Ba3/BB-
4.0x 25.3%
5.1x 27.5%
5.4x 26.5%
Description Revolving Credit Facility US Term Loan A 11/14/2016 Total Sr Sec debt 1.25% Sr Convertible Notes due Mar 2012 3.75% Sr Convert Notes due Sept 2015 7.625% Sr Notes due July 2017 7.875% Sr Notes due July 2020 6.00% Sr Notes due Nov 2018 Total Sr debt Other Short term borrowings (Matrix WC facility) Total Debt Market Cap Enterprise Value Maturities: 5,000 4,000 3,000 2,000 1,000 0 2012 2013
Size 200 1,250 1,450 600 575 550 1,000 800 3,525 9 158 5,142 8,983 13,612
Debt to LTM EBITDA
Liquidity Revolver Size Letters of Credit $1,250 0 200 1,050 $513 $1,563
0.9x
0.9x
Borrowings Revolver Availability Cash Total Liquidity
3.1x
3.0x
3.2x 8.5x
3.1x 8.2x
2014
2015+
130
January 26, 2012
High Yield
Neenah Paper (NP)

Updated 1/23/12
(212) 902-3299 (212) 902-9813
NOT COVERED
Bond Summary Size (MM) $158 Coupon (%) 7.375 Priority Sr Nts Maturity 15-Nov-14 Agency Ratings B1/BBPrice 101.229 Next Call Date Current Bid Price 100.000 YTW (%) 7.354 STW (bp) 727 Company Strengths: - Strong market positions: Neenah maintains a leading position in most of its product categories. Company Risks: - Lower-than-expected demand and selling prices: Currently weak economic conditions may result in lower-than-expected demand and selling prices for Neenah's paper products. - Possible future acquisitions: Following the sale of its timberlands, Neenah may look to make additional leveraging acquisitions.
Company Description
Neenah Paper manufactures premium and specialty paper products. Based in Alpharetta, Georgia, Neenah has paper manufacturing operations in the United States and Germany.
Financial Profile Revenue EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin
12/31/2009 FY:09 573.9 68.0 21.8 8.4 319.2 5.6 313.6
12/31/2010 FY:10 657.7 83.0 20.0 17.4 244.9 48.3 196.6
9/30/2010 3Q:10 161.5 19.6 4.8 6.2 246.4 38.7 207.7
6/30/2011 2Q:11 182.9 23.6 3.7 4.7 206.2 9.3 196.9
9/30/2011 3Q:11 174.9 20.4 3.6 6.0 190.5 10.8 179.7
4.7x 4.6x 3.1x 11.8%
3.0x 2.4x 4.2x 12.6%
2.9x 2.4x 4.1x 12.1%
2.4x 2.3x 6.4x 12.9%
2.2x 2.1x 5.7x 11.7% Comps Boise Inc. Leverage 1.7x Coverage 5.4x Ratings Ba3/BB
Capitalization Description Revolver Neenah Germany revolver Project financing Senior notes due 2014 Total debt Market capitalization Enterprise value
9/30/2011 Size 6.1 17.1 9.3 158.0 190.5 353.4 533.1 Cash Total liquidity 10.8 88.3 Debt to EBITDA 0.4x 0.4x 0.4x 2.2x Liquidity Revolver size Borrowing base Letters of credit Borrowings Revolver availability 9/30/2011 95.0 84.5 0.9 6.1 77.5
Maturities: 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 2012 2013 2014 2015+
131
January 26, 2012
High Yield
The Neiman Marcus Group (NMG)

IN-LINE
Bond Summary Size (MM) $500 Coupon (%) 10.375 Priority Sr Subs Maturity 15-Oct-15 Agency Ratings Caa1/B-
Updated: 1/26/12
212-902-6957 212-357-7875
Next Call Price $103.46 Date Current
Bid Price $103.45
YTW (%) 7.66
STW bp 720 Investment Strengths: - Strong management team - Luxury has been a leading subsegment within retail - Highly variable cost structure (pays little rent expense and sales force is 100% commission-based) Investment Risks: - High leverage - Moderate free cash flow - Sales performance highly correlated to stock market
Company Description
Neiman Marcus serves the unique needs of the luxury market, and has a goal of providing its customers with distinctive merchandise and superior service. The company operates 41 Neiman Marcus stores in the United States and two Bergdorf Goodman stores in Manhattan. It also operates 28 Last Call clearance centers as well as Neiman Marcus Direct, its direct-to-consumer business that conducts both print catalog and online operations under the Neiman Marcus, Horchow, and Bergdorf Goodman brand names. Key Dates/Catalysts: Early March second quarter earnings release
FY10A 3,692.8 447.0 237.1 (3.48) 75.9 137.4 2,879.7 421.0 6.4x 5.5x 1.9x 12.10%
FY11A 4,002.3 524.7 280.5 17.64 94.2 132.4 2,681.7 321.6 5.1x 4.5x 1.9x 13.11%
FY12E 4,309.8 578.1 164.0 103.57 178.2 132.3 2,681.7 486.9 4.6x 3.8x 3.5x 13.41%
2Q11A 1,171.6 136.4 55.2 12.89 22.8 45.4 2,789.8 530.7
2Q12E 1,239.7 147.9 40.3 28.50 55.0 24.1 2,681.7 453.2
Comps Neiman Michaels Yankee J. Crew
Yield 7.66% 6.75% 10.14% 8.70%
Ratings Caa1/BCaa2/CCC B3/CCC+
3.2x Caa1/CCC+
2.1x 11.64% 2012E Debt to EBITDA
2.2x 11.93%
Size 0.0 2060.0 0.0 2060.0 0.0 500.0 121.7 621.7 2681.7 N/A N/A
1Q12A 700.0 3.5 0.0 626.5 NA 0.0 NA 289.6 916.1
Revolver ($700mm, due Jan 15 2016) Sr Sec. Term Loan Facility (L+350 due May 2018) Sr Sec. Term Loan Facility (L+400 due April 2016) Total Secured Debt 9% Sr Nts due 2015 10 375% Subs due 2015 7.125% Senior Debentures due June 2028 Total Sub debt Total Debt Market Cap Enterprise Value Maturities: 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013
3.6x
Revolver Availability A/R facility Borrowings A/R Availability
4.6x Cash 4.6x Total Liquidity
2014+
132
January 26, 2012
High Yield
New York Times Co. (NYT)

IN-LINE
Updated 1/23/2012
212-357-9922 212-902-9760
Our In-Line reflects NYT's improved balance sheet, strong liquidity and premium content which is offset by spread valuation, its high cost structure and print ad revenue weakness. In addition, we believe the unexpected retirement of CEO Janet Robinson and sale of its Regional Media business create uncertainity. Bond Summary Size (MM) $225 Coupon (%) 6.625 Priority Sr Notes Maturity 15-Dec-16 Agency Ratings B1/B+ Bid Price 103.000 YTW (%) 5.905% STW bp 513 5-year CDS 245/265
Company Description
The New York Times (NYT) is a media company whose primary operations include newspapers and Internet businesses. NYT classifies its business into two segments: the News Media Group and About Group. The News Media Group consists of the New York Times Media Group, which includes The New York Times paper, NYTimes.com, and the International Herald Tribune. The News Media Group also holds the New England Media Group, which primarily includes The Boston Globe and the Worcester Telegram and Gazette. The About Group consists of the About.com Web site and other Internet businesses. The company also owns a stake in New England Sports Ventures and interests in a newsprint mill and paper mill. A significant portion of the company's revenue is derived from selling advertising in its newspapers and related Web sites. The company reports its advertising in three categories: National, Retail, and Classified. In January, the company sold its Regional Media Group to Halifax Media LLC for $143 million. The Regional Media Group consisted of 14 daily regional newspapers. Key Dates/Catalysts: - 4Q2011 results on February , 2012 - The company is currently searching for a new CEO following the retirement of CEO Janet Robinson. Financial Profile Revenue Adjusted EBITDA Interest Expense Operating Cash Flow CapEx Dividends Free Cash Flow Total Debt Cash Net Debt FY09A 2,440 328 82 246 51 0 194 769 37 733 FY10A 2,393 377 85 153 34 0 120 996 400 597 FY11E 2,331 357 85 163 49 0 114 772 357 415
Investment Strengths:
NYT owns a premier asset in the New York Times

paper. - NYTimes.com is one of the leading newspaperrelated Web sites. - Company is well positioned to monetize content across alternative platforms such as tablets and smartphones. - Recent digital subscription offerings could help offset decline in print circulation revenue. - The company has cleaned up its debt maturity schedule. - Healthy liquidity, with $206 million in cash pro forma for the repayment of its 14.053% notes. Investment Risks: - Higher cost structure than industry peers. - Unexpected retirement of CEO Janet Robinson creates uncertainty. - Pension plan was underfunded by $442 million as of 12/31/10 and could require increased funding. - NYT is reliant on its "Times" franchise, creating some concentration risk for investors. - More than 40% of NYT's workforce is unionized, which may constrain future restructuring efforts. - Print ad revenue declines have not abated. - About Group ad revenue performance has been weak, which has weighed on overall digital ad revenue. - Recent NYTimes.com pay-wall could cannibalize digital ad revenue. - Double-dip recession or weaker economy could further weaken ad revenue.
Comps Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Credit Facility - June 2016 4.610% MTN due 9/26/2012 5.00% notes due 3/15/2015 6.625% notes due 12/15/16 Total Bonds Other debt Total Debt Market Cap Enterprise Value Size 0 75 250 225 550 225 775 1,175 1,687 2.2x Cash Total Liquidity Credit agreement maintenance covenants (as defined): Springing Fixed Charge Covenant Maturities: 263 326 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 125 Matures in June 9, 2016 62 0 63 2.3x 2.2x 4.0x 13.4% 2.6x 1.6x 4.4x 15.8% 2.2x 1.2x 4.2x 15.3% Gannett MNI RRD
Agency Ratings Ba1/BB Caa1/B Ba1/BB+
750
500
250
0 2012 2013 2014 2015
133
January 26, 2012
High Yield
Newfield Exploration (NFX)

IN-LINE
Bond Summary Size (MM) $700 Coupon (%) 6.875% Priority Sr. Sub. Maturity 2/1/2020 Agency Ratings Ba2/BB+
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $107.25
YTW (%) 5.30%
STW bp 453
Company Description
Newfield has successfully transformed itself from a US Gulf-only player in 1995 to a predominantly onshore US producer today. NFX's growth engine is its leading position in the Woodford Shale (OK), which is one of the most attractive shale plays in the US. Recent acquisitions and divestitures have increased the company's US Rockies exposure. Newfield was founded in 1989 with an initial focus on the shallow waters of the Gulf of Mexico. Since the mid1990s, the company has moved toward a more diversified asset base, including domestic US assets in the Onshore Gulf Coast, Mid-Continent, Rocky Mountains, and Gulf of Mexico regions, and international assets in the UK North Sea, Malaysia, and China. In 2007, the company raised $1.8 bn through the sale of non-core assets, including the sale of N Sea assets for $486 mn (October 2007) and the divestiture of its shallow gulf properties to MMR for $1.1 bn. In addition, in June 2007, NFX spent $578 mn to acquire Stone Energy's Rocky Mountain assets. Subsequently, NFX sold its North Sea properties to Centrica PLC for $286 mn in October 2007. In May 2008, NFX announced a JV agreement with XOM to explore 87k gross acres in South Texas over three years. In November 2009, NFX announced a JV with Hess in the Marcellus shale for up to 140k gross acres. In July 2010, S&P raised Newfield's corporate family rating to investment grade.
Investment Strengths: Strong upside potential from Granite Wash, Marcellus, and Eagle Ford positions Strong hedge position, with 58% of 2012E volumes protected Well balanced between oil and gas (60% gas) Investment Risks: Company may require external capital or asset divestitures to fund growth in new plays Rich valuation and near-term deleveraging unlikely Recent struggles in the Granite Wash Key Dates/Catalysts: Continued updates on capital spending plans Eagle Ford, Uinta, and Granite Wash results
2008A $1,944 $1,377 ($1,456) $2,310
2009A $2,189 $1,715 $178 $1,400
2010A $2,327 $1,702 ($28) $1,658
2011E $2,644 $1,666 ($374) $1,936
2012E $3,023 $2,107 $72 $1,852 Comps Leverage ('11E) 1.8x 2.0x 2.8x 1.9x Coverage ('11E) 10.3x 33.6x 4.0x 8.6x Agency Ratings Ba2/BB+ Ba3/BB+ B1/B Ba1/BBB-
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Debt + Preferred per Proved Boe Debt + Preferred per PDP Boe Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior sub notes 2014-20 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $2,919 $2,919 $2,985 $0 $3,838 $6,823 Size $31 $66
2008A 1.6x 12.3x 40% $4.50 $7.27
2009A 1.2x 13.6x 42% $3.38 $6.41
2010A 1.4x 10.9x 41% $3.72 $6.39
2011E 1.8x 10.3x 43% $4.82 $8.27
2012E 1.4x 14.0x 39% $4.82 $8.27
NFX CHK FST PXD
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $1,250 $0 $66 $1,184 $31 $1,215
1.7x
Total Liquidity
Maturities:
800 700
600 500 400 300 200 100 0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
134
January 26, 2012
High Yield
Nova Chemicals (NCX)

IN-LINE
Bond Summary GS Rating IL Size (MM) 350 Coupon (%) 8.375 Priority Sr. Unsec Maturity 1-Nov-16
Updated
1/26/2012
212-357-6157 212-902-0459
Agency Ratings Ba2/BB-
Bid Price 111.00
YTW (%) 4.16%
OAS bp 388
Company Description
Nova Chemicals is a leading North American olefins/polyolefins producer that is wholly owned by IPIC, an Abu Dhabi investment vehicle. The company has two large olefins/polyolefins sites in Canada a large ethane-based site in Joffre, Alberta, and a naphtha-based site in Corunna, Ontario. Key Dates/Catalysts: 4Q2011 earnings release Potential combination of Nova with Borealis, also owned by IPIC
Investment Strengths: - Nova's owner, IPIC, is a double-A rated entity that has verbally pledged its support for Nova. Nova's bonds trade to reflect this implicit IPIC guarantee. - Large, backward-integrated producer. - Joffre site has access to advantaged feedstocks, and therefore is the lowest-cost ethylene producer in North America. - IPIC has indicated it may look to combine Nova with Borealis, another of its portfolio companies, over the long term. Investment Risks: - Minimal business diversity. - Commodity chemical business is highly cyclical. - Decreased ethane availability at Joffre could pose near-term headwinds until newly identified sources become operational.
Financial Profile ($, mn) Revenue EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics LTM Debt/EBITDA LTM Net Debt/EBITDA LTM EBITDA/Interest Expense LTM EBITDA Margin PF Capitalization ($, mm) Description Credit Facility ($350mn) Cogen Debt (1) A/R Financing Total Senior Secured Debt Unsecured revolver drawings Senior Unsecured (C$ 250) Senior Unsecured Senior Unsecured Senior Unsecured New Senior Unsecured Bonds New Senior Unsecured Bonds Other Unsecured Debt Transaction Costs and Other Total Debt Shareholder's equity Total Capitalization
FY:09 2,957 342 (142) 33 (101) (75) 2,065 267 1,798
FY:10 4,576 881 (161) 16 (131) 612 1,810 300 1,510
FY:11E 5,240 1,155 (132) (125) (176) 583 1,813 959 854
Q4:10 NA NA NA NA NA NA NA NA NA
Q3:11 1,448 311 (23) (7) (42) 369 1,813 874 939
Q4:11E 1,101 116 (41) (1) (80) 93 1,813 959 854
Comps 6.3x 5.5x 2.4x 12% 2.1x 1.7x 5.5x 19% 1.6x 0.7x 8.7x 22% NA NA NA NA 1.5x 0.8x 8.9x 23% 1.6x 0.7x 8.7x 22% Nova Chem Olin PolyOne
Ratings WR/NR Ba1/BB Ba3/B
Size 184 184 400 400 100 350 350 29 1,813 2,426 4,239
Debt to EBITDA
Liquidity Revolver Borrowing base Est. Amount Drawn 425 425 16 409 40 100 140 140 874 1,423
0.2x
Letters of Credit Revolver Availability Bilateral facilities Unsecured revolver Unsecured revolver Unsecured revolver Total Bilateral Facilities Borrowings Availability
Maturities: 700 600 500 400 300 200 100 0 2012 2013 2016
135
January 26, 2012
High Yield
NRG Energy, Inc. (NRG)

IN-LINE
Updated 1/25/2012
212-357-5764 212-902-9355
Core high yield power holding that exhibits complementary businesses (wholesale and retail) and a solid underlying financial and liquidity position. Bond Summary Size (MM) $1,200 Coupon (%) 7.875 Priority Sr Unsec'd Maturity 15-May-21 Agency Ratings B1/BBNext Call Price 103.94 Date 15-May-16 Bid Price 94.250 YTW (%) 8.790 STW bp 680 Investment Strengths: - Well-positioned generation portfolio, underpinned by company's low-cost baseload fleet (38% of capacity), which includes nuclear and coal generation assets. - Large retail service provider operations represent a complementary hedge to the company's wholesale generation portfolio, which will provide a degree of cash flow stability. - Comprehensive hedging strategy for baseload output, with baseload hedge positions of 100% in 2012 and 35% in 2013. - Strong liquidity profile, with about $1.5 billion of available liquidity and no major debt maturities over the near-term. - Favorable bond covenants package, which includes RP, COC, and limitation on liens in the 2017 notes. Investment Risks: - Wholesale and retail operations are exposed to volatile commodity markets and a high degree of competition which may pressure gross margins. - Guidance was recently reduced for 2011 owing to a mismatch in its hedging profile due to extreme weather in Texas. - Focus on returning capital to shareholders would reduce the company's strong liqudity profile. - Capital spending is manageable, but future environmental spending and renewable development backlog could elevate capital outlays and associated funding needs. - Financial results rely heavily on Texas, which is the company's primary geographical region.
Company Description
NRG is a wholesale power generation company engaged in the ownership, development, construction, and operation of electric generation facilities. Also, the company provides retail services to more than 1.8 million customers, largely composed of Mass customers. The company's generation portfolio of around 25GW is diverse on a geographical, fuel, and dispatch basis. NRG's domestic portfolio regions include Texas (10.7GW), Northeast (6.9GW), South Central (4.1GW), West (2.15GW), and Thermal (115MW). The company also has just over 1GW of international generation assets located in Australia and Europe. NRG recently completed the acquisition of Green Mountain Energy ($70-80 million of 2011 EBITDA) for $350 million and 1.278GW related to the Cottonwood Generating Station for $525 million. Key Dates/Catalysts: - Mid-to-Late Febraury, NRG is expected to release 4Q earnings. The company expects 2011 EBITDA of $1.8-$1.85 bn with free cash flow of $800-$875 mn. For 2012, the company expects EBITDA of $1.825 bn to $2.0 bn. We will listen closely for an update on the company's hedge position as gas and power prices continue to fall.. - Environmental regulations are pending: Cross-State Air Pollution Rule (stay implemented late December), Once Thru Cooling (316(b)), anticipated final rule July 2012. - In January 2012, NRG can call its 2017 notes, which have more restrictive covenants than recent notes. Thus, we would look for an update on the company's capital allocation plans. For 2011, NRG is targeting $430 mn in share repurchases. - Update on expansion into renewable projects. - Future capital allocation related to deployment of large cash balance. - Status of the South Texas Project has been out of service since late November 2011. Financial Profile Gross Margin EBITDA EBITDAR - ex M2M Interest Expense Cash Taxes CapEx Free Cash Flow Lease Adjusted Debt Cash Net Debt Key Credit Statistics Lease Adj Debt/EBITDAR
Net Lease Adj Debt/EBITDAR
FY08A 4,244 2,257 2,311 (683) (46) (899) 282 8,583 1,494 7,089 3.7 3.1 3.4
FY09A 4,766 2,672 2,774 (705) (47) (734) 1,742 9,234 2,304 6,930 3.3 2.5 3.9
FY10A 3,874 2,412 2,523 (714) (20) (706) 982 12,902 2,951 9,951 5.1 3.9 3.5
FY11E 3,571 1,796 1,864 (784) (50) (2,464) (1,576) 10,886 2,907 7,979 5.8 4.3 2.4
LTM3Q11 3,606 2,066 2,177 (924) (20) (2,061) (872) 10,177 1,127 9,050
Comps 4.7 4.2 2.4 AES Corp* Calpine Corp Dynegy Edison Mission GenOn CMS
EBITDAR/Interest
Capitalization Description 2011 Senior Credit Facility ($2,300) Term Loan Facility 2018 Project and operating lease debt Total Secured & Non-recourse project debt NRG Energy 7.25% due 2014 NRG Energy 7.375% due 2016 NRG Energy 7.375% due 2017 NRG Energy 7.625% due 2018 NRG Energy 7.625% due 2019 NRG Energy 8.5% due 2019 NRG Energy 8.25% due 2020 NRG Energy 7.875% due 2021 Other Total Debt Operating lease adjustment Lease Adjusted Debt Size 1,592 1,616 3,208 1,090 1,200 800 691 1,100 1,200 9,289 888 10,177 4.3x 4.7x 1.5x Debt to EBITDAR
NRG
*AES reflects sub distributions to parent obligations; LTM4Q2011
As of September 30, 2011 Liquidity Revolving credit facility Total facilities Facility borrowings Revolver Availability Cash Total NRG Liquidity 2,300 2,300 (1,949) 351 1,127 1,478
Preferred Shares Market Cap Enterprise Value to EBITDA
248 3,985 14,410 7.0x
Maturities (includes project debt) 450 400 350 300 250 200 150 100 50 0 2011 2012 2013 2014 2015
136
January 26, 2012
High Yield
NXP B.V. (NXPBV)

IN-LINE
Bond Summary Size (MM) $922 Coupon (%) 9.750 Priority Snr Secured Maturity 1-Aug-18 Agency Ratings B2/B+
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 113.00
YTW (%) 5.9%
STW bp 563
Company Description
NXP is an integrated device manufacturer (IDM) of high-performance mixed signal and standard semiconductors for the automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer, and computing markets. The company was formed from the divested assets of Philips Electronics' semiconductor manufacturing solutions and is headquartered in the Netherlands. In August 2006, Phillips sold an 80.1% controlling stake to a group of private equity investors led by KKR, Silver Lake Partners, and AlpInvest Partners. The purchase price was 4.305 billion, or 7.5x LTM adjusted EBITDA. In 2010, NXP completed an initial public offering of 14% of the equity, which raised gross proceeds of $476 million. Key Dates/Catalysts: - NXP is expected to report 43Q2011 earnings on February 9, 2012. - NXP closed the sale of its Sound Solutions business to Dover Corp. for $855 million in July 2011. - NXP completed its IPO on August 5, 2010, and a 25 million share secondary offering on March 9, 2011
Investment Strengths: - Aggressive debt reduction efforts: By the end of 2011, NXP will have repaid $2.5 bn of debt since its 2006 LBO, helped by $442 mn of IPO proceeds and $885 mn of proceeds from the sale of its Sound Solutions business. - Leverage to a strong auto cycle: NXP's HighPerformance Mixed-Signal (HPMS) segment is well leveraged to strong global auto production and improving content-per-vehicle opportunities. - Successful cost-cutting initiatives should drive further margin growth: NXP has reduced capex by $450mn since its 2006 IPO and expects further efficiencies. Investment Risks: - Leverage profile: While NXP has made progress in reducing financial leverage, it is still more levered than many of its peers especially given the historical volatility of the operating cycle. - Inventory correction: Companies with high exposure to the computing and industrial end markets have been affected by semiconductor industry inventory cycle corrections, which can result in sales and margin volatility. - Working capital has consumed free cash flow: Changes in working capital have consumed cash over the past couple of years, driving a more volatile free cash flow profile.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization (LTM) Description E+275 Revolver due 2012/2015
FY08 5,443 486 (743) (8) (379) (1,001) 6,367 1,796 4,571 13.1 x 9.4 x 0.8 x 8.9%
FY09 3,843 336 (381) (8) (96) (841) 5,283 1,041 4,242 15.7 x 12.6 x 0.5 x 8.7%
FY10 4,657 1,105 (393) (14) (258) 101 4,528 898 3,630 4.1 x 3.3 x 0.6 x 23.7%
LTM-3QE 4,341 1,167 (313) (28) (273) (29) 3,821 865 2,956 3.3 x 2.5 x 3.7 x 26.9%
FY11E 4,275 1,084 (276) (30) (267) 125 3,312 583 2,729 3.1 x 2.5 x 3.9 x 25.3%
FY12E 4,210 1,081 (208) (40) (289) 538 2,823 633 2,190
Comps AMD
Sr. Unsec Ratings Ba3/B+ Ba3/BB Caa1/CCC+
2.6 x 2.0 x 5.2 x 25.7%
AMKR FSL
Size 0 221 39 498 0 666 668 0 922 510 275 22 3,821 865 2,956 5,333 8,289
Debt to EBITDA 0.2 x 0.2 x 0.2 x 2.6 x 2.6 x 2.6 x 2.6 x 2.6 x 2.6 x 3.3 x 3.3 x 3.3 x 3.3 x -2.5 x -7.1 x
Liquidity Revolver Size Borrow Base - Amt Drawn - LC's Amt Unutilized Cash Liquidity Maturities: 1,000.0
FY2011E 701 701 0 32 669 583 1,252
10% Super Priority USD Notes due 2013 10% Super Priority EUR Notes due 2013 L+325 Term Loan due 2017 L+425 Term Loan due 2017 L+275 Sr. Sec. USD Notes due 2013 E+275 Sr. Sec. EUR Notes due 2013 L+550 Sr. Sec. USD Notes due 2016 9.75% Sr. Sec. USD Notes due 2018 9.5% Sr. USD Notes due 2015 8.625% Sr. EUR Notes due 2015 Other (incl unamor discount) Total Debt Less cash Net Debt Equity Market Cap Enterprise Value
500.0
0.0 2012 2013 2014 2015 2016 2017 2018 After
137
January 26, 2012
High Yield
Olin Corporation (OLN)

UNDERPERFORM
Bond Summary GS Rating U Size (MM) 150 Coupon (%) 8.875 Priority Sr. Unsec. Maturity 15-Aug-19
Updated
1/26/2012
212-357-6157 212-902-0459
Agency Ratings Ba1/B+
Bid Price 107.00
YTW (%) 7.32%
OAS bp 599
Company Description
Olin is a commodity chemical company that produces chlorine and caustic, primarily for the merchant market. The company also has a small ammunition business, which is called Winchester. Over the last several years, Olin made one major acquisition and one major divestiture. In August 2007, the company acquired Pioneer Companies, consisting of significant chlor-alkali assets, primarily located in Canada. In October 2007, Olin sold its Metals business to Global Brass and Copper Holdings for $400 million. Key Dates/Catalysts: 4Q2011 2Q2011 results Potential acquisition in the bleach space
Investment Strengths: Strengths: - Low leverage and conservative balance sheet. - Ample liquidity. - Strong market share in merchant chlor-alkali market. Investment Risks: Risks: - Olin has expressed a willingness to be acquisitive in the downturn. - Olin has high-cost technology relative to some peers. - Phase-out of mercury-based chloralkali plants in the US will require significant capex over the next several years. - ECU margins may weaken over the intermediate term due to new vinyls-based chlor-alkali capacity. - Loss of business due to Westlake's recent decision to build out additional chlor-alkali capacity.
Financial Profile ($, mn) Revenue EBITDA+distributions Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt including SunBelt Total cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA LTM EBITDA/Interest LTM EBITDA Margin PF Capitalization ($, mm) Description Senior unsecured revolving facility 6.5% Senior unsecured notes 6.75% Senior unsecured notes 9.125% Senior unsecured notes 8.875% Senior unsecured notes Industrial development bonds Tennessee tax-exempt bonds Mississippi tax-exempt bonds AL recovery and go zone bonds Other Total Debt SunBelt Debt Total Debt including SunBelt Share price Market Capitalization Enterprise Value
FY:09 1,532 202 (14) (40) (138) 11 447 459 2.2x 0.0x 12.0x 11%
FY:10 1,586 197 (25) 10 (85) 97 539 561 2.7x 0.0x 7.0x 11%
FY:11E 1,946 313 (30) (33) (253) (4) 538 270 269 1.7x 0.9x 10.3x 16%
4Q:10 385 59 (6) (4) (22) 27 539 561 2.7x 0.0x 7.0x 11%
3Q:11 550 99 (8) (8) (65) 18 590 390 200 1.9x 0.7x 10.2x 15%
4Q:11E 431 68 (8) (8) (125) (73)
Comps 538 270 269 1.7x 0.9x 10.3x 16% Olin PolyOne
Leverage 1.9x 1.9x
Coverage 10.2x 5.4x
Ratings Ba1/BB Ba3/B
Size 11 125 75 150 11 41 42 34 15 504 85 590 22.2 1,794 2,383
Debt to EBITDA
Liquidity Revolver Revolver usage Letters of Credit Revolver Availability LOC facility Usage Availability Cash & equivalents 240 9 232 35 26 9 318 72 621
1.7x 1.9x
Restricted cash Liquidity
6.5x
Maturities: 160 140 120 100 80 60 40 20 0 2011 2012 2013 2014 2016
138
January 26, 2012
High Yield
Omnicare (OCR)
NOT RATED
Bond Summary Size (MM) $550 Coupon (%) 7.750% Priority Snr. Sub. Maturity 2-Jun-20 Agency Ratings Ba3/BB
Updated 01/25/12
212-855-7718 212-902-9758
Bid Price $109.750
YTW (%) 5.576%
STW bp 478
CDS Levels Sub 5-Year 250 / 300
Company Description
OCR provides pharmacy services primarily purchasing, repacking, and dispensing drugs to nursing homes and assisted living facilities. Under Medicare Part D, prescription drug plans (PDPs) operated by the likes of UnitedHealth and Humana contract with OCR to provide drugs to members of the plans. The PDPs pay OCR for drugs at contracted rates, commonly pegged to Medicaid rates. OCR buys drugs primarily from drug distributors at negotiated rates. OCR adds value to the supply chain by having pharmacists steer patients to the most cost-effective drugs (typically generics) and by being a volume purchaser, which earns rebates from manufacturers. John Figueroa from McKesson was named CEO in December 2010 following the departure of the previous CEO in August 2010. In September, OCR acquired Continuing Care RX (32,000 beds). On September 3, 2010, Omnicare announced it would exchange its home infusion business for Walgreen's long-term care pharmacy business, adding approximately 7,000 serviced beds. In its 4Q2010 conference call, OCR characterized 2011 as a year of transformation due to continued investments in the business. In August 2011, OCR tender for Pharmerica (PMC) at $15 per share. PMC has urged shareholders to take no action. OCR's tender offer has been extended to January 27, 2012. Key Dates/Catalysts: - Quarterly earnings announcements - January 27, 2012 - deadline for tender offer for PMC shares.
Company Strengths: - Strong FCF at 26% of debt as of LTM 3Q2011. In our view, cash priorities are likely share repurchase ($79 mn left on the current authorized program of $300 mn) . - Benefit from the trend to generic drugs: The dispensing of generic drugs has higher margin than the dispensing of branded drugs, so OCR is positioned to benefit from the large number of generics to be introduced over the next several years. Company Risks: - New management may be unable to fix the service quality problems that have been causing the company to lose beds, or operating problems may extend beyond service quality. - Reduced prescription volume and increased reimbursement pressure. - Former CEO Joel Gemunder is a permitted holder under the bond indenture.
Financial Profile Revenue EBITDA
2009A $6,188 688
2010A $6,146 594
2011E $6,150 608
4Q10A $1,558 147
3Q11A $1,544 157
4Q11E $1,521 156
Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
$110 97 31 453 $2,109 276 1,833 3.1x 2.7x 6.2x 11.1%
$126 12 24 345 $2,216 494 1,722 3.7x 2.9x 4.7x 9.7%
$132 109 49 493 $2,043 584 1,459 3.4x 2.4x 4.6x 9.9%
$34 (19) 5 93 $2,216 494 1,722
$50 23 21 147 $2,193 680 1,513
$26 29 10 84 $2,043 584 1,459 LTM Comps OCR snr HLS ALR sub Leverage 2.6x 4.0x 5.0x Coverage 5.7x 3.4x 3.4x Agency Ratings Ba2/BB B2/B+ B3/B-
4.4x 9.4%
3.2x 10.2%
5.9x 10.3%
Description Revolving Credit Facility due 5/18/2015 Term loan due Aug 2017 Total Sr debt 6.125% Sr. Sub. notes, due 2013* 6.875% Sr. Sub. notes, due 2015* 7.75% Sr Sub notes, due 2020 3.75% Convert Sr. Sub Nts due 12/15/2025 Total Sub debt with gty 3.25% convertible Sr. Notes, due 2035 Capitalized lease and other debt obligations Total Debt Market Cap Enterprise Value
*PF for announced repayments post quarter end.
Amount $0 $450 450 $0 0 550 575 $1,125 453 15 $2,043 3,813 $5,327
Debt to LTM EBITDA
Liquidity Revolver Size Letters of Credit $300 20 0 280 $0 0 0 $530 $810
0.8x
0.7x
Borrowings Revolver Availability A/R facility Borrowings
2.6x
2.6x
A/R Availability Cash* Total Liquidity
*3Q11 cash less $150mn for repayments of 2013 and 2015 3.4x 8.9x 3.4x 8.8x notes post quarter end.
Maturities: 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015+
139
January 26, 2012
High Yield
Owens-Illinois, Inc. (OI)

UNDERPERFORM
Bond Summary Size (MM) $600 $250 Coupon (%) 7.375 7.800 Priority Sr Nts Sr Debs Maturity 15-May-16 15-May-18 Agency Ratings Ba3/BB B1/BB-
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Price NC NC Date NC NC
Bid Price 111.000 109.500
YTW (%) 4.534 5.967
STW (bp) 380 467
Company Description
Owens-Illinois is the largest manufacturer of glass containers in the world, with operations in North America, South America, Asia Pacific, and Europe.
Investment Strengths: - Low-cost global operations: OI's scale, diversity, and proprietary equipment and technologies help keep the company's operations very cost-competitive throughout the world. - Long relationships with strong, stable customers: For many years OI has provided glass bottles to its top customers, which include leading consumer products companies. - Strong asset base: OI has invested significantly in recent years to improve productivity and reduce costs Investment Risks: - Inability to maintain selling prices in the face of weaker demand: Prolonged volume weakness could pressure glass bottle manufacturers to reduce selling prices in order to preserve or gain market share. - Acquisitions: OI management has expressed interest in expanding its glass business, and acquisitions could result in increased leverage.
Financial Profile Net sales EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin
12/31/2009 FY:09 6,652 1,209 212 407 3,608 756 2,852
12/31/2010 FY:10 6,633 1,266 230 500 4,278 640 3,638
9/30/2010 Q3:10 1,689 355 54 154 4,345 658 3,687
6/30/2011 Q2:11 1,959 322 67 80 4,340 260 4,080
9/30/2011 Q3:11 1,862 349 62 51 4,088 257 3,831 Comps Leverage 2.8x 2.9x 6.3x 3.2x Coverage 6.6x 4.9x 1.5x 3.2x Ratings Ba1/BB+ Ba3/BB B2/B B3/B
3.0x 2.4x 5.7x 18.2%
3.3x 2.8x 5.5x 19.1%
3.4x 2.9x 6.6x 21.0%
3.4x 3.2x 4.8x 16.4%
3.3x 3.1x 5.6x 18.7%
Ball Crown Holdings Solo Cup Plastipak
Capitalization Description Revolving credit facility Term loans Short-term loans and other Senior notes and debentures Total debt Market capitalization Enterprise value
9/30/2011 Size 30 1,069 295 2,694 4,088 3,778 7,609 Cash Total liquidity 257 1,024 Debt to EBITDA 1.1x 1.1x 1.1x 3.3x Liquidity Revolver size Letters of credit Borrowings Availability 9/30/2011 900 103 30 767
Maturities:
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015+
140
January 26, 2012
High Yield
Parker Drilling Company (PKD)

UNDERPERFORM
Bond Summary Size (MM) $300 Coupon (%) 9.125% Priority Sr. Maturity 4/1/2018 Agency Ratings B1/B+
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $104.70
YTW (%) 7.78%
STW bp 748 Investment Strengths: Good scale and geographic diversification for the ratings category; one of the best high yield energy vehicles for international exposure Long-term trend toward growing demand for deep international drilling Solid and growing backlog of project management services revenue Investment Risks: Weak recent quarterly operating results US barge drilling market remains weak High leverage, although leverage position has improved materially from historical levels International drilling continues to be weak Key Dates/Catalysts: Continued expansion of project management business Expansion of Quail Tools into new shale plays and internationally
Company Description
PKD's primary business segments include US "brown water" barge drilling; international land and offshore barge drilling; and drilling-related rental tools. Parker's US barge fleet consists of 12 deep barge rigs, three intermediate barge rigs, and two shallow/workover barge rigs. The company's drilling-related rental tools business operates under "Quail Tools" and is currently undergoing a geographic expansion. PKD's core competency is deep land drilling in international locations; the company has experience operating in over 51 countries. Internationally, PKD markets 28 drilling rigs that operate throughout the CIS, Latin America, Asia Pacific, and Africa & Middle East. In addition, the company has two barge rigs in Mexico and the Caspian Sea, and also focuses on project management contracts for clients. In early 2012, Parker announced a delay in its 2 Alaska rigs, due to necessary modifications.
2008A $830 $274 $23 $197
2009A $753 $155 ($49) $160
2010A $659 $162 ($96) $219
2011E $702 $238 $67 $184
2012E $860 $284 $65 $170
Comps PKD Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Term loans Senior notes Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization Maturities: Maturities:
350 300
Coverage ('11E) 13.4x 12.8x 2.4x
Agency Ratings B1/B+ B3/B Ba3/BB-
2008A 1.7x 11.2x 45%
2009A 2.7x 5.3x 42%
2010A 2.9x 6.1x 45%
2011E 2.0x 13.4x 43%
2012E 1.7x 111.2x 39%
BAS HOS
Size $103 $0 $67 $420 $487 $487 $0 $633 $1,120
Debt to EBITDA
2.2x
250 200 150 100 50 0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
141
January 26, 2012
High Yield
Peabody Energy (BTU)

UNDERPERFORM
Bond Summary Size (MM) $1,500 Coupon (%) 6.250% Priority Sr Notes Maturity 15-Nov-21 Agency Ratings BB+/Ba1
Updated 1/20/12
212-357-6711 212-357-9774
Next Call Price MW Date MW
Bid Price 104.63
YTW (%) 5.55
STW bp 422 Investment Strengths: - World leader in both sales and reserves. - Diversified geographic footprint, with operations in the US and Australia. - Australia provides significant upside with global met and steam coal exposure. Investment Risks: - Cost inflation is an issue for all coal companies. - Higher costs and production problems in the Australian operations have hurt results in the past, and might offset some of the benefits of strong export coal pricing. - Limited capacity at Australian coal export terminals could limit upside for the company's production. - Purchase of Macarthur Coal could indicate that Peabody plans to focus on expansion rather than on improving credit quality, and that it could pursue additional leveraging acquisitions. We think this forestalls an upgrade to Investment Grade in the near term.
Company Description
Peabody Energy is the largest public coal company in the world. Peabody's largest tonnage exposure is to the Powder River Basin (PRB), but its largest EBITDA exposure is to Australia. This is especially true after the recent Macarthur Coal acquisition. Peabody has mines in the Powder River Basin, the Southwestern US, Illinois, and Australia. It owns 20 mines in the US and 10 in Australia. Key Dates/Catalysts: Peabody's PRB operations could see lower prices if low natural gas prices continue to put pressure on the demand for thermal coal.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Term Loan Revolver Capital Leases New Macarthur-related term loan 7.375% Senior Notes due 2016 7.875% Senior Notes due 2026 6.5% Senior Notes due 2020 Other debt 6% Senior Notes due 2018 6.25% Senior Notes due 2021
FY10 6,860 1,815 (222) -(633) 2,064 2,750 1,295 1,455 1.5x 0.8x 8.2x 26.46%
2Q11 2,008 605 (49) -(263) 395 2,512 1,252 1,260
3Q11 2,036 504 (45) -(310) 575 2,502 1,402 1,101
4Q11 2,229 659 (47) -(250) 533 6,956 916 6,041
FY11E 8,018 2,184 (191) -(938) 1,724 6,956 916 6,041 3.2x 2.8x
FY12E 9,490 2,533 (434) -(1,100) 1,815 6,504 1,086 5,418 2.6x 2.1x 5.8x 26.69% Comps Peabody Energy Steel Dynamics US Steel Corp. FMG Leverage 3.2x 2.7x 4.3x 7.6x Coverage 11.4x 5.1x 5.0x 12.4x Agency Ratings BB+/Ba1 BB+/Ba2 BB/B1 B1/B
12.3x 30.10%
11.3x 24.78%
14.2x 29.56%
11.4x 27.24%
Size 475.0 0.0 58.6 0.0 650.0 247.3 650.0 46.8 0.0 0.0 374.7
FY11E Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings 1500.0 0.0 0.0 1500.0 0.0 0.0
4.75% Conv. Jr. Sub. Debentures due 2066 Total Debt Market Cap Enterprise Value
A/R Availability 2,502.4 9,713.6 10,814.4 5.0x 1.1x Cash Total Liquidity
0.0 1401.6 2901.6
Maturities: 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 Thereafter
142
January 26, 2012
High Yield
Pilgrim's Pride Corp. (PPC)

IN-LINE
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts
Maturity 15-Dec-18
Agency Ratings Caa1/B-
Next Call Price Date $103.94 15-Dec-14
Bid Price 95.25
YTW (%) 8.81%
STW bp 738
Company Description
Pilgrim's Pride is the second-largest chicken producer in the US, representing approximately 17% of US chicken production, and the second-largest in Mexico. It is majority owned by a subsidiary of JBS S.A., the largest meat processing company in the world. Pilgrim's processes over 10 billion pounds of chicken annually through its 26 facilities, located primarily in the southeastern US.
Investment Strengths: - Leading market position - Chicken consumption continues to show positive trends - Implicit backing of JBS USA Investment Risks: - Currently free cash flow negative - High corn prices - Weak chicken pricing
Key Dates/Catalysts: Early to mid-February, quarterly earnings release
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest
FY09* 7,088.1 318.2 157.5 (21.6) 88.2 94.0 41.1 220.0 .1x -.6x 2.x
FY10 6,881.6 478.3 103.7 (23.8) 179.3 219.1 1,339.3 106.1 2.8x 2.6x 4.6x
FY11E 7,789.4 (160.4) 110.0 (26.9) 131.9 (375.3) 1,452.5 25.3 -9.1x -8.9x -1.5x
4Q10A 1,811.3 121.0 24.5 (19.5) 70.3 45.7 1,339.3 106.1
4Q11E 2,083.0 13.4 27.4 (20.5) 10.0 (3.5) 1,452.5 25.3
Comps Pilgrim's Smithfield Dean Foods
Yield Leverage Coverage 8.81% NM NM 5.08% 1.9x 5.8x 7.00% 5.2x 2.9x
Ratings Caa1/BB2/BBB2/B-
4.6x 6.7%
-1.4x 0.6% Liquidity 3Q11A 700.0 40.1 394.4 243.9
EBITDA margin 4.5% 6.9% -2.1% * FY09 ended September 2009, before calendar shift. Capitalization (2012E) Description Exit Credit Facility w/ 2 term notes payable maturing 2012-14 Exit Credit Facility revolving note payable due 2012 ($700) Total Secured Debt 7 7/8% Senior Notes due 2018 Other debt Total Sub debt Total Debt Market Cap Enterprise Value Size
Debt to EBITDA 578.5 372.4 950.9 496.7 4.9 501.6
NM
Revolver Size Letters of Credit Borrowings Revolver Availability
NM NM NM Cash Total Liquidity 46.9 290.8
1,452.5 1,261.2 2666.7
Maturities: 1,200 1,000 800 600 400 200 0 2012 2013 2014+
143
January 26, 2012
High Yield
Pinnacle Entertainment (PNK)
Updated 1/23/12
212-357-9918 212-902-4751
IN-LINE/UNDERPERFORM : We believe the senior notes offer better relative value in the PNK structure. We remain concerned about the increasing
concentration of properties in Louisiana and the expectations for new competitors emerging near the company's existing properties in Indiana and Louisiana. Bond Summary Size Coupon Agency Next Call Bid YTW STW Z-spread (MM) (%) Priority Maturity Ratings Price Date Price (%) bp bp $450 8.625 Senior 1-Aug-17 B1/BB 104.313 1-Aug-13 107.500 6.11 589 559 $350 8.75 Sr Sub Nts 15-May-20 Caa1/B 104.375 15-May-15 100.75 8.59 720 725
Company Description
Pinnacle Entertainment (PNK) owns and operates seven casinos in the United States. The US casinos are located in southeastern Indiana (Belterra Casino Resort); Lake Charles, New Orleans, and Bossier City, Louisiana (LAuberge du Lac, Boomtown New Orleans, and Boomtown Bossier City); Reno, Nevada (Boomtown Reno); and St. Louis, Missouri (Lumiere Place / River City). In addition, PNK has one new property under construction in Baton Rouge, LA. Significant equityholders include Columbia Wanger (10%), Jennison Associates (9%), Daruma Asset Mgmt (6%), and Vanguard (5%), according to Bloomberg. Key Dates/Catalysts: - May 2011: PNK to make $95 mn cash investment in Vietnamese casino project in return for a 26% equity stake. PNK will develop and manage the second of five projects at the new "Ho Tram Strip." MGM is developing the first project, which is expected to open in 1Q2013. PNK's site no. 2 will begin after MGM's phase 1 is open. - September 2011: Announces an $82 million expansion project for its River City Casino in St. Louis. The project includes a 200-room hotel tower, a multi-purpose event center with 10,000 square feet, and a covered parking lot with 1,700 spaces. Construction is scheduled to begin in 1Q2012 and expected to be completed in 2H2013. - November 2011: Boomtown Reno and adjoining land sold for up to $22 mn, subject to sale of the gaming license. - 4Q2011: Capex to be $65 mn of which $45 mn is related to Baton Rouge.
Investment Strengths: - Attractive properties with relatively low average age. - Credit agreement includes a cash flow sweep that requires "excess cash flow" to repay debt. - No near-term maturities. - Potential upside to River Downs acquisition with Ohio state government proposed legalization of the installation of slots at racetracks. - According to the Associated Press, the Kentucky governor is asking Congress for a constitutional amendment to legalize casinos. Investment Risks: - Concentrated in Louisiana market (LTM ending 3Q2011: Louisiana properties generated 51% of revenue and 57% of property EBITDA). - Capacity growth in Louisiana: PNK has one project in the pipeline for LA a $357 mn riverboat in Baton Rouge, which is expected to open in summer 2012. PNK has invested $109 mn to date in Baton Rouge as of 3Q2011. - Competition from new (and potential) jurisdictions, including significant proposed gaming expansion in Illinois and Ohio. - International risk with the new Vietnam joint venture and potential for future funding into an unrestricted subsidiary. PNK has stated that as more equity is required, it will have the opportunity but not the obligation to contribute. - Increased competition for the L'Auberge property in Lake Charles once Creative Casinos and its partner, MGM Resorts, open a $400 mn resort / casino expected by the end of 2013.
Comps Leverage Coverage Ratings
Financial Profile
FY10A
1Q11A
2Q11A
3Q11A
4Q11E
FY11E
Net Revenue EBITDA Interest Expense Cash Taxes CapEx & M&A Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
1,102.4 226.4 103.1 (7.3) 182.5 (51.9) 1,176.7 201.4 975.3 5.2x 4.3x 2.2x 20.5%
287.7 61.4 26.2 (0.4) 38.3 (2.7) 1,177.0 149.5 1,027.6 5.3x 4.6x 2.3x 21.4%
299.1 59.0 25.7 1.6 40.8 (9.0) 1,187.3 148.7 1,038.7 5.2x 4.5x 2.3x 19.7%
295.9 68.7 24.2 (4.1) 127.9 (79.3) 1,199.7 89.7 1,110.0 5.0x 4.7x 2.8x 23.2%
272.1 55.1 20.0 5.0 60.9 (30.8) 1,249.8 112.8 1,137.0 5.1x 4.7x 2.8x 20.3%
1,154.8 244.2 96.0 2.1 267.8 (121.7) 1,249.8 112.8 1,137.0 5.1x 4.7x 2.5x 21.1%
PNK GCCN BYD MGM (sr)
5.0x 2.8x 7.4x 9.2x
2.8x Caa1/B 4.8x B2/BB2.0x Caa1/CCC+ 1.7x B3/B-
Credit facility maintenance covenants Coverage Leverage Sr sec lvg 4Q2011 7.25x 2.75x 1.50x 1Q2012 7.50x 2.75x 1.65x 2Q2012 7.75x 2.75x 1.65x Additional step-ups and step-downs through 2015. 3Q11A Enterprise Value
Capitalization Description 3Q11A Debt to EBITDA 0.1x 2.0x Liquidity
Revolver due Aug 2016 (L+250) Total senior secured debt 8.625% senior notes due Aug 2017 Total senior debt 7.50% senior sub notes due June 2015 8.75% senior sub notes due May 2020 Other debt including OID Total debt
32.0 32.0 450.0 482.0 375.0 350.0 (7.3) 1,199.7
Revolver Size Letters of Credit Borrowings Revolver available
410.0 9.8 32.0 368.2
Shares O/S (mm) Share price Market cap Net debt Enterprise value (EV) EV / LTM EBITDA
62.13 10.81 671.7 1,116.4 1,788.1 7.5x 239.5
5.0x
Restricted cash Cash Total Liquidity
6.5 83.3 457.9
LTM EBITDA
Maturities:
900 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016+
Segment results Property 1Q11A 2Q11A 3Q11A
Boomtown New Orleans (LA) Belterra (IL) L' Auberge du Lac (LA) Boomtown Bossier City (LA) Boomtown Reno (NV) Lumiere Place / River City (MO) Total revenue
36.9 36.8 88.8 23.1 7.6 93.5 287.7
33.4 38.5 96.1 21.2 9.7 96.5 299.1
32.1 42.1 98.2 21.1 0.0 98.4 295.9
144
January 26, 2012
High Yield
Pioneer Natural Resources (PXD)

OUTPERFORM
Bond Summary Size (MM) $450 Coupon (%) 7.500% Priority Sr. Maturity 1/15/2020 Agency Ratings Ba1/BBB-
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $118.74
YTW (%) 4.65%
STW bp 332 Investment Strengths: De-risked asset base with focus on long-lived domestic assets with predictable geology Approximately 68% of 2012E production hedged Balanced oil/gas exposure Eagle Ford Shale exposure Investment Risks: Historically shareholder-friendly management, weighing on ratings High organic finding and development costs Streamlined portfolio could have more-limited growth prospects High leverage, including substantial off-balance-sheet liabilities (VPPs that roll off through 2012) Key Dates/Catalysts: Activist shareholder Southeastern Asset Management has proposed a number of shareholderfriendly initiatives Eagle Ford progress Update on test wells of additional Permian zones Additional non-core asset sales Additional vertical integration
Company Description
Pioneer's most important fields/developments are the Spraberry oil field in West Texas and the Eagle Ford Shale. The company is one of the more controversial "crossover" names in the space. Investors have penalized Pioneer for high organic F&D costs and an inability to effectively replace reserves. However, upside in Spraberry, Eagle Ford, and other plays could reverse this trend. Closest peers are NFX and Noble (NBL). In September 2004, Pioneer completed the acquisition of Evergreen Resources, which was focused on CBM development in the Raton Basin in S. Colorado, for $1.8 bn in cash and stock. PXD then purchased Occidental Petroleum assets in 2005. During 2005 and 2006, Pioneer sold a number of assets in Canada, Argentina (Apache), and the US Gulf of Mexico (Marubeni) for net proceeds of just over $2 bn. During 2005, PXD also sold almost 28 mmbbls of production forward for an average of $32/bbl through three Volumetric Production Payments with terms through 2013. In June 2010, Pioneer completed a JV in the Eagle Ford Shale with Reliance Industries for $1.15 bn. In February 2011, Pioneer completed the sale of its Tunisia subsidiary to OMV for $866 mn.
Financial Profile Revenue EBITDA (Adj for non-cash items) Free Operating Cash Flow Capital Expenditures Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2016-38 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $2,571 $2,571 $2,571 $0 $5,197 $7,768 Size $211 $0
2008A $2,271 $1,067 ($419) $1,444 2008A 2.8x 7.0x 45%
2009A $1,616 $739 $80 $463 2009A 3.7x 4.3x 43%
2010A $1,934 $1,093 $89 $1,196 2010A 2.3x 6.1x 39%
2011E $2,372 $1,467 ($961) $2,365 2011E 1.9x 8.6x 34%
2012E $3,090 $1,931 $677 $1,305 2012E 1.3x 15.4x 30%
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $1,250 $65 $0 $1,185 $211 $1,395
Comps PXD CHK FST NFX
Leverage ('11E) 1.9x 2.0x 2.8x 1.8x
Coverage ('11E) 8.6x 33.6x 4.0x 10.3x
Agency Ratings Ba1/BBBBa3/BB+ B1/B Ba2/BB+
1.8x
Total Liquidity
Maturities:
600 500
400 300 200 100 0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
145
January 26, 2012
High Yield
Plains Exploration (PXP)

IN-LINE
Bond Summary Size (MM) $400 Coupon (%) 7.625% Priority Sr. Maturity 6/1/2018 Agency Ratings B1/BB
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $107.60
YTW (%) 4.49%
STW bp 428 Investment Strengths: Balanced portfolio of long-lived onshore, and unconventional shale Strong hedge position, with 70% of 2012E production protected Significant exploration upside An experienced management team with an established track record Investment Risks: Acquisitive management High operating costs due to emphasis on mature oil production Challenging California operating environment Key Dates/Catalysts: Results from the Mowry shale Lucius updates
Company Description
PXP has traditionally been a California heavy oil producer, but over the last several years it has diversified throughout the US via three acquisitions for around $8 bn: most importantly a private company, Pogo, and a 20% stake in CHK's Haynesville acreage. The company's strategy has been to fund operations using cash flow from CA to grow its exposure in unconventional plays. The company's core areas include California, Gulf of Mexico, Gulf Coast, Panhandle, Permian Basin, and Rockies. In 2002, PXP was spun out from Plains Resources (pipeline assets became Plains All-American MLP), with Jim Flores as CEO. Assets included positions in CA, IL, and S. LA/US GOM. Historically, Plains has been acquisitive (in addition to the three recent acquisitions, PXP bought 3TEC for $400 mn in 2003; Nuevo for $964 mn in 2004; and California assets for $117 mn in 2005). Other events over the last several years have included the unwinding of underwater hedges (>$1 bn), sales of properties to help fund hedge restructuring, and an unsuccessful attempt to buy Stone Energy. PXP has been active in partnering with other companies and currently works with MMR/EXXI on Blackbeard West, CHK in the Haynesville, and Shell in the deepwater GOM. To deleverage its balance sheet, PXP announced a divestiture of Piceance and Permian assets for $1.25 bn to Occidental Petroleum (OXY) in Sept 2008. In August 2009, PXP amended its Haynesville JV agreement with Chesapeake, agreeing to accelerate the payment of its remaining joint venture drilling carries in exchange for a 12% reduction in the total amount of drilling carry obligations to CHK. In September 2010, PXP announced the divestiture of its shallow water GOM assets to McMoRan for $818 mn. In November 2010, the company acquired 60,000 net acres in the Eagle Ford shale for $578 mn. In late 2010, PXP announced its intention to divest its deepwater GOM assets by 1Q2011. However, in May 2011, the company announced that it would put the deepwater assets into a self-financing, separate entity.
2008A $2,418 $1,635 $210 $1,161
2009A $1,419 $841 ($1,144) $1,643
2010A $1,519 $922 ($152) $1,065
2011E $1,872 $1,211 ($496) $1,623
2012E $2,261 $1,531 ($533) $1,612
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2012-21 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $3,329 $3,329 $3,784 $0 $3,517 $7,301 3.2x Size $11 $455 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,400 $1 $455 $944 $11 $955 2008A 1.7x 14.2x 54% 2009A 3.1x 11.4x 45% 2010A 3.6x 8.6x 50% 2011E 4.0x 7.0x 57% 2012E 3.1x 6.3x 54% PXP FST DNR WLL
Leverage ('11E) 4.0x 2.8x 1.9x 1.2x
Coverage ('11E) 7.0x 4.0x 7.9x 22.0x
Agency Ratings B1/BB B1/B B1/BBBa3/BB+
Maturities:
1200
1000 800 600 400 200 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
146
January 26, 2012
High Yield
Plastipak Holdings, Inc. (PLASPK)

OUTPERFORM
Bond Summary Size (MM) $250 Coupon (%) 8.500 Priority Sr Nts Maturity 15-Dec-15 Agency Ratings B3/B
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Price 102.833 Date Current
Bid Price 102.500
YTW (%) 7.054
STW (bp) 683 Investment Strengths: - Long-term relationships with major consumer products companies: Relationships with top 10 customers (including PepsiCo., P&G, and Dr. Pepper Snapple Group) average over 15 years. - Competitive manufacturing facilities and processes: 27 plants, mostly located near the filling sites of key customers and complemented by the company's Whiteline common carrier subsidiary, which serves a significant portion of Plastipak's transportation needs. - Good cost pass-through arrangements: Customer agreements typically permit pass-through of higher resin costs in the form of higher selling prices. Investment Risks: - Heavy sales concentration with key customers: Top 10 customers accounted for approximately 63.7% of sales in 2010, with the company's largest customer, P&G, accounting for 18.7%. - Appetite for acquisitions: Plastipak is growth-oriented and may make additional leveraging acquisitions.
Company Description
Plastipak manufactures rigid blow-molded plastic containers, serving various end-market segments and many of the world's largest consumer products companies. In North America, the company is the exclusive supplier of plastic containers to Procter & Gamble for heavy-duty, liquid laundry detergents and is also a large supplier of plastic containers for salad dressings, barbeque sauces, and grated cheeses. Plastipak participates in four key product categories: carbonated and non-carbonated beverages, consumer cleaning, food and processed juices, and industrial, automotive, and agricultural. The company serves over 450 customers and operates 27 plants in the US, Brazil, and Europe.
Financial Profile Net sales EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description Revolving credit facility Real estate mortgage loans Notes payable to banks Secured notes payable Capital leases Other notes payable 8.500% senior notes 10.625% senior notes Total debt 7/30/2011 Size 25.2 100.3 16.9 60.2 26.3 37.7 250.0 225.6 742.2
10/31/2009 FY:09 1,778.7 210.5 55.3 100.6 710.0 61.5 648.5
10/30/2010 FY:10 1,941.8 213.7 64.9 111.8 731.6 30.5 701.1
7/31/2010 3Q:10 517.7 51.6 15.7 12.9 747.0 15.8 731.2
4/30/2011 2Q:11 572.8 69.6 17.2 22.2 756.2 10.7 745.5
7/30/2011 3Q:11 619.1 49.8 17.2 14.0 742.2 22.1 720.1
3.4x 3.1x 3.8x 11.8%
3.4x 3.3x 3.3x 11.0%
3.4x 3.3x 3.3x 10.0%
3.4x 3.3x 4.0x 12.2%
3.3x 3.2x 2.9x 8.0%
Comps Berry Plastics Owens-Illinois Crown Holdings
Ratings Caa1/CCC Ba3/BB Ba3/BB
Debt to EBITDA 1.0x 1.0x 1.0x 1.0x 1.0x 3.3x 3.3x 3.3x
Liquidity Revolver size Letters of credit Borrowings Revolver availability
7/30/2011 375.0 26.5 25.2 323.3
Cash Total liquidity
22.1 345.4
Maturities: 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015+
147
January 26, 2012
High Yield
PolyOne (POL)
IN-LINE
Bond Summary GS Rating IL Size (MM) 360 Coupon (%) 7.375 Priority Sr. Unsec. Maturity 15-Sep-20
Updated
1/26/2012
212-357-6157 212-902-0459
Agency Ratings Ba3/B+
Bid Price 106.5
YTW (%) 6.17%
OAS bp 456
Company Description
PolyOne is a leading producer of PVC compounds, specialty PVC resins, polymer formulations, and color additives. The company is also a distributor of thermoplastics and has a 50% stake in SunBelt, a chlor-alkali producer, which distributes cash to PolyOne on a quarterly basis. In 2007, the company divested its 24% stake in OxyVinyls LP, a PVC and chlor-alkali manufacturer, and in 2010 it sold its 50% interest in the SunBelt joint venture. In October 2011, PolyOne announced its plan to acquire ColorMatrix for $486 million, which would equate to an 11.1x multiple. The deal was funded with cash on hand, as well as $300 million of new debt. Key Dates/Catalysts: 4Q2011 earnings release
Investment Strengths: - Leading market positions in Vinyl Compounds, Polymer Coating Systems, and Color and Additives (No. 1 in each in North America). - Focused on moving toward more specialty and defensive end markets, such as healthcare. - Diversified by business, by geography, by end market, and by customer. - Consistent free cash flow generation. Investment Risks: - PolyOne's end markets may recover more slowly than we expect. - The company may be unable to fully pass through increases in raw material costs to customers, resulting in margin compression. - ColorMatrix acquisition resulted in a substantial increase in leverage.
Financial Profile ($, mn) Revenue EBITDA + Distributions Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt w/ Sunbelt Guarantee Cash Equivalents Net Debt Key Credit Statistics PF Total Debt/EBITDA PF Net Debt/EBITDA PF EBITDA / Interest PF LTM EBITDA Margin
FY:09 2,061 135 (34) 19 (32) 177 458 223 236 4.7x 2.4x 2.9x 7%
FY:10 2,622 225 (32) (18) (40) 111 496 378 118 2.5x 0.6x 6.2x 7%
FY:11E 2,887 235 (36) (59) (50) 3 710 201 509 2.6x 0.7x 5.4x 9%
Q4:10 618 50 (8) (5) (21) 45 496 378 118 2.5x 0.6x 6.4x 8%
Q3:11 736 57 (8) (13) (12) 12 433 410 23 1.9x 0.1x 6.7x 8%
Q4:11E 664 43 (11) (6) (18) 24 710 201 509 2.6x 0.7x 5.4x 9%
Comps PolyOne Olin
Leverage 1.9x 1.9x
Coverage 5.4x 10.2x
Agency Ratings Ba3/B Ba1/BB
PF Capitalization ($, mm) Description NEW A/R Facility NEW Term Loan Senior Secured Total Senior Secured Debt Stub 2012s Senior Unsecured Other Total Debt Share Price Market Capitalization Enterprise Value Size 300 50 350 360 710 14.2 1,304 1,837.8 6.9x 2.7x 1.3x Debt to EBITDA
Liquidity A/R facility Size Eligible A/R amount A/R Facility Drawn Letters of Credit A/R availability 300 176 176
Cash Liquidity
177 353
Maturities: 60 50 40 30 20 10 0 2011 2012 2015
148
January 26, 2012
High Yield
PulteGroup Inc. (PHM)

IN-LINE
Bond Summary GS Rating IL Size (MM) 400 Coupon (%) 6.375 Priority Sr. Nts Maturity 15-May-33
Updated
1/26/2012
212-357-6157 212-902-0459
Bid Price 72.50
YTW (%) 9.38%
OAS bp 710
Company Description
PulteGroup Inc. is the fourth-largest builder in the United States based on market cap and the second-largest builder based on LTM closings. Through its various brands, including Pulte Homes, Del Webb, Centex, and DiVosta, the company offers single-family detached homes, townhouses, condominiums, and duplexes at different price points. Pulte serves nearly all major customer segments first-time, move-up, and active adult. The company is one of the most geographically diversified homebuilders, with operations spanning 28 states and 60 markets. Key Dates/Catalysts: 4QFY11 earning release
Investment Strengths: - Strong business diversity. - Lean cost structure. - Long lot position should enable the company to outperform in the future. - Strong presence in active adult market positions the company for future growth. Investment Risks: - Legacy land positions have dampened gross margins. - Near-term operating performance is likely to lag that of certain peers.
Financial Profile ($, mn)* Total Revenues Total Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt Outstanding Total Cash and Cash Equivalents Key Credit Statistics Homebuilding Debt / Capitalization Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) Homebuilding Gross Margin (1)
FY:09 4,084 (61) (237) 360 (39) 702 4,319 1,891 57% 44% 1.2x 13%
FY:10 4,569 204 (266) 945 (15) 739 3,393 1,495 61% 47% 1.4x 17%
FY:11E 3,989 230 (224) 56 (19) (131) 3,337 1,326 63% 52% NA 18%
4Q:10 1,185 64 (60) 57 (4) (212) 3,393 1,495 61% 47% 1.4x 17%
3Q:11 1,142 117 (56) 2 (4) 58 3,337 1,256 63% 53% 1.5x 18%
4Q:11E 1,115 89 (56) 50 (4) 70 3,337 1,326 63% 52% NA 19% Comps Pulte Lennar Debt-toCap 63% 55% Inventoryto-Debt 1.5x 1.2x Ratings B1/BBB3/B+
PF Capitalization ($, mn) Description Size 97 63 117 336 311 245 402 469 149 299 398 299 150 3,335 1 3,337 7.5 2,867 4,948 700 600 500 400 300 200 100 0 2012 2013 2014 2015 Maturities: Liquidity
4.550% Sr. Unsecured Notes 7.875% Sr. Unsecured Notes 8.125% Sr. Unsecured Notes 7.875% Sr. Unsecured Notes 7.500% Sr. Unsecured Notes 5.450% Sr. Unsecured Notes 6.250% Sr. Unsecured Notes 5.125% Sr. Unsecured Notes 5.250% Sr. Unsecured Notes 5.700% Sr. Unsecured Notes 5.200% Sr. Unsecured Notes 5.250% Sr. Unsecured Notes 6.500% Sr. Unsecured Notes 7.625% Sr. Unsecured Notes 7.875% Sr. Unsecured Notes 6.375% Sr. Unsecured Notes 6.000% Sr. Unsecured Notes 7.375% Sr. Unsecured Notes Total Balance Sheet Debt Joint Venture Recourse Debt & Guarantees Total Debt Outstanding Share Price Market Capitalization Enterprise Value
Cash Restricted Cash Total Liquidity
1,143 113 1,256
149
January 26, 2012
High Yield
PVH Corp. (PVH)

Updated 01/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $100 $600 Coupon (%) 7.75% 7.375% Priority Sr Secured Sr Notes Maturity 15-Nov-23 15-May-20 Agency Ratings Ba1/BBB Ba3/BB+ Price NC $103.688 Next Call Date NC 15-May-15 Bid Price 110.000 111.000 YTW (%) 6.519 4.767 STW bp 457 446 Z-Spread bp 446 413
Company Description
Phillips-Van Heusen is one of the largest apparel companies in the world, with a wide variety of brands including Calvin Klein, Van Heusen, Tommy Hilfiger, IZOD, ARROW, and Bass. The company also maintains a portfolio of licensed brands, including Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, JOE Joseph Abboud, MICHAEL Michael Kors, Michael Kors Collection, CHAPS, DKNY, Elie Tahari, Nautica, Ted Baker, Ike Behar, Claiborne, J. Garcia, Robert Graham, U.S. POLO ASSN., Jones New York, Axcess, and Timberland. PVH operates in three segments: Calvin Klein (Calvin Klein Licensing, Calvin Klein Apparel, Calvin Klein dress furnishings), Tommy Hilfiger (Tommy Hilfiger North America and Tommy Hilfiger International), and Heritage Brands (Heritage Brand Wholesale Dress Furnishings, Heritage Brand Wholesale Sportswear, Heritage Brand Retail). Approximately 350 different manufacturers produced its apparel products in 500 factories in over 30 countries worldwide in FY2010, and it sells its products through over 16,000 doors in the US through department, mass market, specialty, and independent stores. Key Dates/Catalysts: - May 2010: Completed the $3 billion acquisition of Tommy Hilfiger. - FY2011 guidance: Adjusted EPS of $5.28-$5.30 (vs $5.23-$5.25). 4QFY11 comp sales expected to be +15% in the Calvin Klein business, +12% in the Tommy Hilfiger North America business, +12% in the Tommy Hilfiger International business, and +4% in the Heritage Brands business. - FY2012 guidance: Adjusted EPS of $5.90-$6.00, including a $0.25 negative impact from a weaker euro, an increase in pension expense of $0.15, and a decrease in interest expense of $0.10. Earnings growth is expected entirely in 2HFY12 given input cost inflation and larger currency impacts through 1HFY12.
Company Strengths: - Calvin Klein and Tommy Hilfiger have strong global brand awareness. Over the last seven years, CK sales have growth at a CAGR of more than 13%. Since 2005, TH has grown at a CAGR of over 13%. Management expects both brands to grow sales at 8-10% in the long term. - Customer diversity improved following the Tommy Hilfiger acquisitions: top five customers decreased to 23% of FY2010 revenues versus 31% in FY2009 and 32% in FY2008. - Leading market share in dress shirts, neckwear, and sportswear tops. -Focus on de-leveraging. PVH has paid down $538 million in the past 18 months and expects to repay another $165 million during 4QFY11and $300 million in 2012. The company maintains a leverage target of 2.0-2.5x, which it expects to reach by year-end 2011 or into 2012. - Strong management team. - Will look to grow its product categories and brands opportunistically. Management has stated it is not looking to fix brands, and would like a business with global reach to leverage the platform it has built for CK and TH. Any transaction it pursues must be accretive within the first six months. Company Risks: - Apparel industry is highly competitive. - Economically sensitive industry; sales could be hurt in a sluggish economic environment. - Relies on business partners to preserve the value of the Calvin Klein brand (such as The Warnaco Group and Coty). - Non-exclusive agreement with Li & Fung Trading Limited whereby PVH is required to use Li & Fung for at least 54% of its sourced products.
Financial Profile Revenue Adjusted EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
3QFY10 1,516 249 41 56 26 125 2,524 491 2,032 4.4x 3.6x 6.0x 16%
4QFY10 1,398 161 38 (18) 46 95 2,369 499 1,870 3.6x 2.8x 4.2x 12%
FY10 4,637 658 127 23 101 408 2,369 499 1,870 3.6x 2.8x 5.2x 14%
1QFY11 1,369 200 33 30 34 103 2,267 295 1,972 3.0x 2.6x 6.1x 15%
2QFY11 1,334 183 31 35 39 77 2,155 288 1,867 2.7x 2.4x 5.8x 14%
3QFY11 1,654 259 32 53 44 130 2,104 160 1,944 2.6x 2.4x 8.2x 16%
Agency LTM Comps PVH 7.375s HBI 6.375s ZQK 6.875s Leverage 2.6x 3.9x 3.7x Coverage 8.2x 4.6x 2.7x Ratings Ba3/BB+ B1/BBCaa1/CCC+
Note: Fiscal year ending on the Sunday closest to February 1. Capitalization Description Senior secured revolver due 2016 Senior secured Term Loan A due 2016 Senior secured Term Loan B due 2016 7.75% Senior secured notes due 2023 Total Secured 7.375% senior notes due 2020 Other Total Unsecured 3QFY11 0 742 650 100 1,492 600 13 2,104 2.6x Total Liquidity 518 EV / LTM EBITDA 9.2x Cash 160 1.9x Lvg Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 3QFY11 460 102 0 358 Enterprise value Source Shares O/S (mm) Stock price Market cap Preferred stock Net debt Enterprise value $ 67.61 77.60 5,246 189 1,944 7,379
Maturities: 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016+
150
January 26, 2012
High Yield
Quicksilver Resources (KWK)

OUTPERFORM/IN-LINE
Bond Summary Size (MM) $298 Coupon (%) 9.125% Priority Sr. Maturity 8/15/2019 Agency Ratings B2/B
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $98.19
YTW (%) 9.47%
STW bp 870 Investment Strengths: Debt repayment remains a priority Industry-leading all-in cost structure and long reserve life; 10-year drilling inventory in the Barnett Extremely strong reserve replacement track record Strong leverage to the prolific Barnett Shale unconventional gas play Growth potential in emerging Horn River Basin Investment Risks: High leverage levels Significant capital spending requirements ne Limited geographic diversity; 80%+ of reserves in the Barnett Shale High natural gas exposure Key Dates/Catalysts: Following the Darden family's decision not to take the company private, management indicated it might pursue asset sales to help shore up the balance sheet Drilling results from Horn River (Canada) and Greater Green River Basin (Colorado) plays Potential JVs Progress in new oil plays (Exshaw, Southern Alberta, Sandwash Basin, Bone Springs) IPO of Barnett MLP
Company Description
Quicksilver Resources is focused on unconventional natural gas resources (82% of production, 76% of reserves) with assets in the Barnett Shale, Rocky Mountains, and Canada (Horseshoe Canyon CBM). The Barnett Shale, where the company sees a 10-year inventory of drilling locations, is the clear growth engine, along with the Horn River. While the company has made acquisitions in the past, management is primarily focused on drill bit growth in onshore, unconventional plays. KWK has historically not been afraid to be a first mover in new plays. Mercury Exploration, KWK's predecessor, was started in 1963 by Frank Darden. Quicksilver Resources was founded in 1997 and became a public company through a merger with MSR Exploration in 1999. The original focus plays were located in OK, NM, and W TX. In 1991, KWK began operations in N. Michigan to develop Antrim Shale gas. The company bolstered its MI presence through the 2000 acquisition of Terra Energy Ltd and other Michigan assets from CMS Energy Corp, and the 2002 purchase of Enogex Exploration from OGE Energy for $32 mn. Then, in September 2007, the company sold its MI assets to BreitBurn Energy Partners (where KWK retains 40% ownership) for $1.5 bn to focus on the Barnett Shale and Canada. In August 2008, KWK acquired Barnett Shale acreage (13k acres; 350 bcfe reserves) from a variety of private parties for $1.3 bn in cash and stock. In July 2010, KWK sold its interest in Quicksilver Gas Services for $1 bn. The Darden family continues to control around 3% of the company. In October 2010, an investor group, including the Darden family, sent a letter to the company requesting a review of strategic alternatives, including a possible take-private transaction. However, in March 2010 the Darden Family announced it would not pursue a take-private transaction. In 4Q11Quicksilver secured a JV on its Horn River midstream assets and the company is currently pursuing JVs in several other plays to help fund its cash flow gap. In November 2011, the company announced its intention to form an MLP with its Barnett assets.
2008A $801 $579 ($830) $1,287
2009A $832 $567 ($82) $694
2010A $930 $584 ($297) $695
2011E $895 $422 ($422) $701
2012E $821 $367 $40 $375
Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Debt + Preferred per Proved Boe Debt + Preferred per PDP Boe Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior sub notes and other Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $1,826 $1,826 $2,080 $0 $1,118 $3,198 Size $7 $254
2008A 4.5x 5.7x 70% $7.10 $11.30
2009A 4.3x 2.9x 79% $6.03 $8.84
2010A 3.2x 3.1x 64% $3.91 $5.78
2011E 4.6x 2.3x 63% $3.36 $4.96
2012E 4.6x 2.3x 58% $2.73 $4.04
Comps KWK CHK FST PXD
Leverage ('11E) 4.6x 2.0x 2.8x 1.9x
Coverage ('11E) 2.3x 33.6x 4.0x 8.6x
Agency Ratings B2/B Ba3/BB+ B1/B Ba1/BBB-
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $1,075 $77 $254 $744 $7 $750
4.6x
Total Liquidity
Maturities:
1000 900 800 700 600 500 400 300 200 100 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
151
January 26, 2012
High Yield
Quiksilver, Inc. (ZQK)
Updated 1/23/2012
Kevin Coyne
212-357-9918
Contact analyst or see latest research for updates to ratings, estimates, and other information. Celeste Everett 212-902-4751 IN-LINE: Management is doing a nice job of growing the business and taking market share. However, we believe macro pressures will pick up in 2012, and execution risk is increasing with the 2012 launch of a cold weather apparel line in the US. We believe the bonds are reasonably priced versus its peers considering ZQK's niche focus on surfer and skate apparel. Bond Summary Size (MM) $400 Coupon (%) 6.875% Priority Sr Maturity 15-Apr-15 Agency Ratings Caa1/CCC+ Next Call Price $102.292 Date Current Bid Price 94.500 YTW (%) 8.877 STW (bp) 857 Z-spread (bp) 826
Company Description Quiksilver, Inc. (ZQK) designs, develops, and distributes apparel, footwear, and accessories in over 90 countries under its three core brands: Quiksilver, Roxy, and DC. In FY2011, Quiksilver contributed 41% of revenues, Roxy generated 27%, and DC generated 28%. ZQK began operations in California in 1976 producing boardshorts for surfers under a license agreement with Quiksilver brand founders in Australia. ZQK went public in 1986, introduced its Roxy brand for teenage girls in 1991, and acquired DC in 2004. ZQK's products are sold primarily in surf, skateboard, snowboard shops, and specialty stores. ZQK's largest equity holders include Rhone Capital (19%), Triton (14%), Janus Capital Mgt (8%). Key Dates/Catalysts: - FY2012 guidance: Expects yoy growth across its brands and regions, and despite continued margin pressure from (1) elevated input costs through 2QFY12 and (2) higher cost purchases in Europe for FY2012 from a weaker euro, ZQK expects yoy EBITDA growth.
Investment Strengths: - Niche player with a focus on the action sports of surfing, skateboarding, and snowboarding. - Controls and builds brand awareness through close relationships with independent specialty active sport stores and chains and through top athlete sponsorship. - Diversified with presence in European and Asia Pacific regions, which combined account for 53% of FY2011 revenue stream and 59% of gross profit. - Adequate liquidity and minimal near-term maturities. Completed a debt-for-equity exchange with Rhone Capital in August 2010 for $140 million of term loans due in 2014. - Net leverage target of 2.0x, and aims to increase revenues to $2.53.0 billion over the next five years with at least $350 million of annual EBITDA, or an improvement in margins of 200-300 bp. Investment Risks: -Largely discretionary apparel items at higher price points that may be vulnerable to a weak consumer. - Exposure to the European consumer: ZQK derived 39% of LTM revenues and 44% of gross profits from Europe as of 4QFY11. If the European consumer were to be pressured by potential austerity measures, we think sales could decline meaningfully. - Rising input costs: Reported a 160 bp yoy decline in gross margins for both 3QFY11 and 4QFY11, largely reflecting a 250 bp and 100 bp yoy decline in margins in its Americas segment in 3QFY11 and 4QFY11, respectively. - High fashion risk: Its target casual youth lifestyle can switch tastes relatively quickly, and recent relative public comps are signaling a return to classic trends over the surf/skate trends favored by ZQK. - Increased competition in industry from specialty store brands as well as mass retailers striking exclusive arrangements with other surf brands (Ocean Pacific in Wal-Mart). Nike has begun targeting action sports customers with "Salvation Stores" that include Converse and Hurley. - The Asia/Pacific region has been underperforming due to recessionary pressures in Australia and a strong Australian dollar, reducing the number of tourists to the region.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
2QFY11A 478 62 15 12 16 19 733 139 594 3.6x 2.9x 1.8x 13.0%
3QFY11A 503 53 16 3 13 22 747 126 621 3.7x 3.1x 1.8x 10.5%
4QFY11A 545 57 14 4 34 5 748 110 638 3.7x 3.2x 2.7x 10.5%
FY11A 1,953 200 74 21 81 25 748 110 638 3.7x 3.2x 2.7x 10.3%
1QFY12E 437 21 15 (6) 16 (4) 746 234 512 3.9x 2.7x 3.2x 4.9%
FY12E 2,033 206 61 41 76 27 745 121 623 3.6x 3.0x 3.4x 10.1%
LTM Comps ZQK 6.875s HBI 6.375s JAH 7.5s LEVI 7.625s
Ratings B1/BBB2/B B2/B+
2.7x Caa1/CCC+
Note: Fiscal year ends October 31.
Capitalization
Description European ST credit arrangements Asia/Pacific AUD$30 mn ST lines of credit $150 mn Americas ABL facility due Aug 2014 $20 mn Americas TL due Aug 2014 Total senior secured debt 6.875% sr notes due April 2015 8.875% sr notes due Dec 2017, 200 mn Capital lease obligations & other Total debt
4QFY11A 2 18 21 19 60 400 283 5 748
Lvg
Liquidity Total credit facilities Letters of Credit Borrowings Credit facility availability
4QFY11A 385 73 42 184
Enterprise Value Shares o/s (mm) Stock price Market cap Net debt Minority interest Enterprise value (EV) 165 $4.41 729 638 12 1,379
0.3x Cash 3.7x Total Liquidity 110 293
EV/LTM EBITDA EV/FY11E EBITDA
6.9x 6.9x
Maturities: 450 400 350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017+
152
January 26, 2012
High Yield
R.R. Donnelley (RRD)
Updated 1/20/2012
212-357-9922 212-902-9760
UNDERPERFORM Our Underperform reflects our view the challenging operating environment should continue to weigh on company fundamentals. In addition, we believe RRD will need to issue debt and / or draw on its revolver to supplement its liquidity position, both of which could be negative for spreads. Finally, our U reflects event risk tied to M&A and share buyback activities.
Bond Summary Size Ticker RRD (MM) $400 Coupon (%) 7.625% Maturity 06/15/20 Agency Ratings Ba1/BB+ Bid Price 89.00 YTW (%) 9.561 UST Spread 762 Z Spread (bp) 791 5 Yr CDS 9 1/2 - 111/2
Investment Strengths: - RRD is the largest commercial printer in North America, which allows it to leverage its scale and pass along cost savings to customers. - RRD is operating from a position of financial strength relative to most peers. - The company continues to generate $500 million to $600 million of free cash flow before dividends despite the difficult operating environment. - Organic growth opportunity to cross sell products to large exisiting client base. Investment Risks: - Share buyback program and new leverage target of 2.5x to 3.0x demonstrates more-aggressive financial policy. - Close to 90% of its cash is overseas, which hampers liquidity and financial flexibility. - Negative outlooks by both Moody's and S&P could lead to further downgrades. - Underfunded pension will require increased funding. - Commercial printing market is highly competitive, fragmented, and secularly challenged, and suffers from a supply/demand imbalance. - Pricing for services is expected to continue to decline on an annual basis. - M&A strategy creates event risk. - Company does not have full access to its credit facility because of leverage covenant restraint. - The US Postal Service is under financial strain and may discontinue Saturday delivery or raise postage rates, which could reduce demand for RRD's services.
Company Description
R.R. Donnelley is the world's largest provider of print (including digital) and related services, with operations in North America, Europe, Latin America, and Asia. The company leverages its scale and diverse product offering to maintain market share. In addition to commercial printing, RRD offers solutions in direct mail, financial printing, forms and labels, logistics, print management, online services, and content and database management. The company also has an International segment, with printing operations in Asia, Europe, Latin America, and Canada. That segment produces around 25% of revenue. RRD has over 60,000 customers and serves more than 90% of Fortune 500 companies, capturing 15% of their print spend. The company has historically grown through a series of acquisitions in recent years. RRD recently completed the acquisition of Bowne & Co. for $481 million in November 2010. Bowne is a provider of business services that helps companies manage shareholder, investor, and marketing communications. Key Dates/Catalysts: - 4Q11 earnings on February 22, 2012, where we expect the company to provide full year guidance. - RRD could look to tap bond market to term out revolver borrowings. - Moody's and S&P both have negative outlooks.
Financial Profile Revenue Normalized EBITDA Interest Expense Operating Cash Flow CapEx Dividends Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Credit Facility Borrowings 5.625% sr notes 1/15/12 4.95% sr notes 4/1/14 5.5% sr notes 5/15/15 8.60% sr notes 8/15/16 6.125% sr notes 1/15/17 7.25% sr notes due 5/15/18 11.25% sr notes 2/1/2019 7.625% sr notes 6/15/2020 8.875% sr notes 4/15/21 6.625% sr notes 4/15/29 8.82% sr notes 4/15/31 Other Total Debt Market Cap Enterprise Value Maturities:
700 600 500 400 300 200 100 0 2012 2013
FY08 11,582 1,785 (227) 1,016 (323) (219) 474 4,127 324 3,803
FY09 9,857 1,306 (235) 1,421 (195) (214) 1,013 3,322 499 2,823
FY10A 10,019 1,253 (223) 744 (225) (214) 304 3,530 519 3,011
FY11E 10,611 1,265 (246) 922 (254) (204) 464 3,689 436 3,253
FY12E 10,579 1,294 (248) 722 (225) (185) 312 3,930 489 3,441
Comps GCI NYT
Gross Leverage 1.8x 2.2x
Coverage 6.4x 3.7x
Agency Ratings Ba1/BB B1/B+
2.3x 2.1x 7.9x 15.4%
2.5x 2.2x 5.6x 13.2%
2.8x 2.4x 5.6x 12.5%
2.9x 2.6x 5.2x 11.9%
3.0x 2.7x 5.2x 12.2%
Size 345 159 600 400 350 525 600 172 400 81 200 69 46 3,947 2,922 6,501
Debt to EBITDA
Liquidity Revolver Size Letter of Credit Covenant reduction Borrowings Revolver Availability Cash Total Liquidity Credit agreement maintenance covenants: Interest Cov (as defined) Lev Cov (as defined) 3.0x 4.0x 1,750 Matures December 17, 2013 37 434 345 934 368 1,302
3.2x
2014
2015
153
January 26, 2012
High Yield
RadioShack Corp. (RSH)

Updated 1/25/2012
212-902-0673 212-902-8028
NOT COVERED
Credit Summary Size Ticker RSH (MM) $325 Coupon (%) 6.75 Maturity 15-May-19 Agency Ratings Ba3/BB-/B+ Price $85 UST Spread 777 Z Spread (bp) 822 5 Yr CDS 739/798 Company Strengths: - The company benefits from its convenient locations in major shopping malls and strip centers as well as individual storefronts. - The liquidity profile remains healthy, with only the 2013 convertible notes and 2019 notes outstanding. - Solid performance of its wireless service business.
Company Description
RadioShack Corporation is engaged in the retail sale of consumer electronics goods and services through its RadioShack store chain and non-RadioShack-branded kiosk operations. The company's strategy is to provide costeffective solutions to meet the routine electronics needs and distinct electronics wants of its customers. As of December 31, 2010, RadioShack had 4,486 company-operated stores under the RadioShack brand located throughout the United States as well as in Puerto Rico and the US Virgin Islands. There are approximately 211 company-operated stores in Mexico. Key Dates/Catalysts: Earnings announcements Limited amount of debt/high liquidity Additional capital structure announcements
FY09 4,276 454 362 41 246 (81) (31) 134
FY10 4,473 464 372 42 155 (80) (27) 49
3Q11 1,032 32 11 13 162 (21) 0 140
Company Risks: - The company's performance is tied to the macro environment and consumer spending trends. - Small store size limits product selection and variety. - Competition remains very aggressive, and the unfavorable pricing environment persists. - Event risk candidate owing to management's past interest in taking the company private.
Total Debt Cash Net Debt (Cash) Key Credit Statistics Total Debt/EBITDA Adjusted Debt/EBITDAR Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Short term debt 2.5% convertible notes due 2013 6.75% notes due in 2019 Total Debt Size
669 908 (239) 1.5x 4.0x -0.5x 11.1x 10.6%
640 569 70 1.4x 4.5x 0.2x 11.1x 10.4%
666 668 (1) 2.1x 4.5x 0.0x 2.6x 3.1%
Comps JCP LTD M
Adjusted Leverage 3.3x 3.5x 2.4x
Coverage Agency Ratings 5.8x 8.3x 7.5x Ba1/BB+/BBBBa2/BB+/BB+ Baa3/BBB-/BBB-
Debt to EBITDA 0 337 325 662 2.1x
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity 450 29 0 421 668 1,089
Market Cap Enterprise Value Maturities: $400 $350 $300 $250 $200 $150 $100 $50 $0 2012 2013
1,016 1,015
2014
2015
2016+
154
January 26, 2012
High Yield
Range Resources (RRC)

IN-LINE
Bond Summary Size (MM) $250 Coupon (%) 7.250% Priority Sr. Sub. Maturity 5/1/2018 Agency Ratings Ba3/BB
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $107.24
YTW (%) 4.10%
STW bp 389 Investment Strengths: Industry-leading all-in cost structure and reserve replacement Top-tier acreage position in the Marcellus Shale 40% of 2012E production hedged 24-year reserve life is near the high end of our coverage Much of RRCs Marcellus gas has high liquids content RRC plans to use non-core asset sales to fund growth in Marcellus Investment Risks: Management has historically outspent cash flow Production growth in the Appalachia region could be limited by the pace of infrastructure development High natural gas exposure and tight valuation High leverage per PDP boe Key Dates/Catalysts: Drilling results from the Upper Devonian, Utica, and Mississippian Potential for fracking legislation Ethane agreements in the Marcellus Additional non-core asset sales
Company Description
Forth Worth, TX, based Range Resources is along with CHK, HK, and SWN one of the four major shale gas E&Ps. The company is focused on two core areas: (1) the Marcellus shale in Pennsylvania and (2) the Nora CBM in Appalachia. Management has refocused the company on gas resource plays by actively selling conventional properties to fund capital spending. With its key Marcellus Shale play still in early development, Range has a multiyear backlog of potential development activity. Range began in 1980 as Lomak Petroleum and was initially listed on the NASDAQ and transferred to the NYSE in 1996. In 1998, the company was renamed Range Resources. Since then RRC has pursued a strategy of organic growth coupled with acquisitions on a cost-efficient basis. Range has completed over $1.3 billion of acquisitions focused in the Southwestern and Appalachian regions of the US since 2004. Finding and development cost performance has been strong with a five-year average of $2.13/mcfe. The company has a drilling inventory of over 11,000 identified locations, or around 15 years based on its current pace of drilling. Range was added to the S&P 500 Index in December 2007. In July 2009, RRC closed the sale of its West Texas Furhman Mascho properties for $182 mn. In March 2010, Range closed the sale of its Ohio properties for $300 mn. In February 2011, Range announced the sale of its Barnett shale properties to a private company for $900 mn.
2008A $1,283 $935 ($93) $918
2009A $1,018 $646 $17 $574
2010A $947 $566 ($319) $832
2011E $1,085 $710 ($856) $1,476
2012E $1,278 $850 ($296) $1,000
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior sub notes 2013-21 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $1,788 $1,788 $1,788 $0 $2,324 $4,111 2.5x Size $52 $0 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,500 $22 $0 $1,478 $52 $1,530 2008A 1.9x 9.4x 42% 2009A 2.6x 5.5x 42% 2010A 3.5x 4.3x 47% 2011E 3.0x 6.1x 47% 2012E 2.7x 7.4x 48% RRC SWN CHK
Coverage ('11E) 6.1x 26.4x 33.6x
Agency Ratings Ba3/BB Ba1/BBBBa3/BB+
Maturities:
600
500 400 300 200 100 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
155
January 26, 2012
High Yield
Reynolds Group Holdings Limited

Bond Summary Size (MM) $1,500 $1,500 Coupon (%) 7.125 9.000 Priority Sr Sec Nts Sr Nts Maturity 15-Apr-19 15-Apr-19 Agency Ratings Ba3/BBCaa1/B-
Updated 1/23/2012
212-902-3299 212-902-9813
Next Call Price 103.563 104.500 Date 15-Oct-14 15-Oct-14
Bid Price 103.500 97.000
YTW (%) 6.254 9.580
STW bp 540 804
Company and Europe. more than 100 production units located in North America Description Reynolds Group Holdings Limited is a leading global manufacturer and supplier of consumer food and beverage packaging and storage products. Reynolds Group Holdings Limited is based in Auckland, New Zealand.
Over the last 15 months, Reynolds completed three significant acquisitions: (1) Pactiv, in November 2010, for approximately $6.0 billion; (2) Dopaco, in May 2011, for approximately $400 million; and (3) Graham Packaging, in September 2011, for approximately $5.0 billion. Pactiv manufactures a wide array of consumer and foodservice packaging products, including branded products like Hefty trash bags. Dopaco manufactures paper cups and folding cartons for the quick-service restaurant and foodservice industries. Graham Packaging manufactures value-added rigid plastic containers for the food, beverage, and consumer products markets. These acquisitions, which were completed for an average multiple of 8.7x LTM EBITDA, strengthened and diversified Reynoldss product offerings, and are expected to deliver significant synergies.
Investment Strengths: - Recession-resistant business model: the global consumer, food, beverage, and foodservice packaging markets have historically experienced stability through economic downturns as food and beverage products are typically less sensitive to changing economic conditions than many other products. - Strong market positions: Reynolds is one of the worlds largest providers of consumer packaging products, beverage packaging and foodservice solutions with strong, competitive positions across its markets; most of the company's revenue is derived from number one or number two market positions. Investment Risks: - Acquisition risk: management has shown a willingness to incur debt and increase leverage to make acquisitions. - Integration risk: management could encounter problems in combining and operating the businesses it has acquired or in realizing synergies
Financial Profile
12/31/2010 FY:10
12/31/2011 FY:11E
12/31/2012 FY:12E
9/30/2010 3Q:10
6/30/2011 2Q:11
9/30/2011 3Q:11
Revenue EBITDA Interest expense Capital expenditures
6,774 1,251 496 337
11,984 2,166 1,002 547
14,552 2,719 1,320 700
1,612 310 124 78
2,843 476 206 116
3,069 563 243 125
Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin
12,143 652 11,491
17,605 538 17,068
17,355 500 16,855
6,119 451 5,668
12,840 584 12,256
18,079 1,037 17,042
6.7x 6.3x 2.5x 18.5%
6.8x 6.6x 2.2x 18.1%
6.7x 6.2x 2.1x 18.7%
5.3x 4.9x 2.5x 19.2%
6.7x 6.4x 2.3x 16.7%
7.2x 6.8x 2.3x 18.4% Comps Berry Solo Exopack Plastipak Leverage 6.4x 6.3x 5.5x 3.2x Coverage 2.1x 1.5x 2.3x 3.2x
Agency Ratings Caa1/CCC B2/B Caa1/CCC+ B3/B
Capitalization Description Senior secured term loans Senior secured notes Other secured debt Total secured debt Senior guaranteed notes Other unsecured debt Total debt
9/30/2011 Pro Forma Size 4,650 5,734 53 10,437 5,183 1,988 17,608 7.0x Cash Total liquidity 555 676 4.2x Debt to EBITDA Liquidity Revolver size Letters of credit Borrowings Revolver availability Pro Forma 9/30/2011 228 107 121
Note: Pro forma for change of control put.
Note: Pro forma for change of control put.
Maturities: 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 2012 2013 2014 2015 2016+
156
January 26, 2012
High Yield
Rite Aid (RAD)

OUTPERFORM/IN-LINE
Bond Summary Size (MM)
$500 $500 $300
Updated: 1/26/12
212-902-6957 202-357-7875
Coupon (%)
7.500 8.625 7.700
Agency Priority
Sr Sec Nts Sr Nts Debs
Next Call Price

$103.75 $102.16 NC
Bid Price
$95.50 $87.50 $63.00
YTW (%)
6.68 9.00 11.08
STW bp
607 839 890
Maturity
1-Mar-17 1-Mar-15 15-Feb-27
Ratings
Caa2/BCaa3/CCC Ca/CCC
Date
1-Mar-12 1-Mar-12 NC
CompanyDescription
Rite Aid is one of the largest drugstore chains in the US, with more than 4,700 locations in 31 states and the District of Columbia. In June 2007, Rite Aid acquired Jean Coutu USA, the holding company for the Brooks and Eckerd drugstore chains.
Investment Strengths: - One of the largest drugstore chains, with a strong presence along the East and West coasts - Recent improvement in sales trends, driven by wellness+ loyalty program - Ample liquidity, with no near-term maturities - WAG/ESRX impasse to benefit RAD script business Investment Risks: - Comps have lagged CVS and WAG - High debt leverage - Competition is significantly better capitalized; underinvestment in RAD storebase
Key Dates/Catalysts: Mid-April fourth quarter earnings results
Financial Profile
Revenue EBITDA Interest Expense Taxes CapEx Free Cash Flow Total Debt Cash
FY10A
25,669.1 924.9 515.8 0.0 183.9 225.3 6,370.9 103.6 6.89 6.78 1.8x 3.60%
FY11A
25,214.9 858.9 547.6 9.8 194.6 106.8 6,219.9 91.1 7.24 7.14 1.6x 3.41%
FY12E
25,624.6 901.8 522.0 2.3 248.3 129.1 6,181.7 143.1 6.86 6.70 1.7x 3.52%
4Q11A
6,456.5 215.4 132.5 1.5 68.9 12.5 6,219.9 91.1
4Q12E
6,650.2 233.2 130.5 (10.0) 70.0 42.6 6,181.7 143.1
Comps
Rite Aid Neiman Michaels Supervalu
Yield
9.00% 7.66% 8.27% 6.89%
Leverage
6.0x 4.6x 4.3x 3.3x
Coverage
1.7x 3.5x 2.8x 3.7x
Ratings
Caa3/CCC Caa1/BCaa2/CCC B2/B

1.6x 3.34%
1.7x 3.51%
Capitalization 2012E Description

Senior sec credit facility Tranche 2 Term loan due 6/4/14 L+175 Tranche 5 Term Loan due 2/17/18 L+325 (125 floor) 8% Senior Secured Notes due 8/15/20 (1st lien) 9.75% Senior Secured Notes due 6/12/16 (1st lien) 10.375% Senior Secured Notes due 7/15/16 (2nd lien) 7.5% Senior Secured Notes due 3/1/17 (2nd lien) 10.25% Senior Secured Notes due 10/2019 (2nd lien)
Size
61.0 1044.4 331.8 650.0 404.9 442.8 500.0 268.3
Debt to EBITDA
Liquidity
Revolver Size Letters of Credit Borrowings
3Q12A
$1,175.0 $131.4 $191.0
$849.6
Total Secured Debt

Other
3703.2
5.4
4.1x
A/R facility Borrowings A/R Availability NA NA NA
Total Secured Debt

Guaranteed Unsecured Debt
3708.6
1663.5
Total Gtd Unsecured Debt

Unsecured Notes Other
1663.5
673.5 0.0
6.0x
Cash Total Liquidity $148.5 $998.1
Total Unsecured Debt

Lease Financing Obligations
673.5
136.1
Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities:
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2012 2013
6181.7
1248.9
6.9x 8.1x
7327.0
2014+
157
January 26, 2012
High Yield
Rock-Tenn Company (RKT)

IN-LINE
Bond Summary Size (MM) $300 Coupon (%) 9.250 Priority Sr Nts Maturity 15-Mar-16 Agency Ratings Ba2/BBB-
Updated 1/25/12
212-902-3299 212-902-9813
Bid Price 104.500
YTW (%) 6.939
STW bp 668
Company Description
Rock-Tenn is a leading integrated manufacturer of corrugated and consumer packaging and recycling solutions. The company primarily manufactures containerboard, recycled paperboard, bleached paperboard, packaging products, and merchandising displays. Rock-Tenn operates locations in the United States, Canada, Mexico, Chile, Argentina, Puerto Rico, and China.
Investment Strengths: - Leading market positions: Rock-Tenn enjoys leading market positions across many of its product categories. - Low-cost operations: Rock-Tenn's containerboard mill assets are clustered in the second quartile of the cost curve. Investment Risks: - Leveraging acquisitions: Rock-Tenn has made several acquisitions in recent years and may seek additional acquisition opportunities in the future.
Financial Profile Net sales EBITDA Interest expense Capital expenditures Cash Total debt Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin
9/30/2009 FY:09 2,812.3 524.3 96.7 75.9 11.8 1,345.6 1,333.8
9/30/2010 12/31/2010 FY:10 3,001.4 494.5 75.5 106.2 15.9 1,127.0 1,111.1 1Q:11 761.1 131.6 16.7 28.5 10.0 1,055.5 1,045.5
9/30/2011 12/31/2011 4Q:11 2,463.5 344.3 33.2 91.9 82.8 3,445.4 3,362.6 1Q:12 2,267.7 300.0 32.7 81.6 82.1 3,475.9 3,393.8 Comps GP Leverage 2.1x 4.8x 0.4x 1.7x Coverage 4.8x 2.7x 13.0x 5.4x Agency Ratings Baa3/ABa3/B+ Baa3/BBBBa3/BB
2.6x 2.5x 5.4x 18.6%
2.3x 2.2x 6.5x 16.5%
2.1x 2.0x 7.9x 17.3%
2.7x 2.7x 10.4x 14.0%
2.9x 2.8x 9.2x 13.2%
CASCN UFS BZ
Capitalization Description Revolver Term loans A/R facility 5.625% sr sec nts Other secured debt 9.250% sr nts Total debt Market Cap Enterprise Value
12/31/2011 Size 309 2,221 542 80 24 300 3,476 4,357 7,751 2.9x Term loan A Cash Total liquidity 227 82 1,384 Debt to EBITDA Liquidity Revolver size Letters of credit Borrowings Revolver availability 12/31/2011 1,475 91 309 1,075
Note: Revolver availability estimated.
Maturities: 3000 2500 2000 1500 1000 500 0 2012 2013 2014 2015 2016+
158
January 26, 2012
High Yield
Royal Caribbean Cruises Ltd. (RCL)

UNDERPERFORM:
Bond Summary Size (MM) $550 $300 Coupon (%) 7.000 7.500 Priority Senior Senior Maturity 15-Jun-13 15-Oct-27 Agency Ratings Ba2/BB Ba2/BB
Updated
1/23/12
212-357-9918 212-902-4751
Contact analyst or see latest research for updates to ratings, estimates, and other information. because they offer stronger asset coverage and better industry fundamentals. Next Call Price NC NC Date NC NC Bid Price 105.250 98.500 YTW (%) 3.06 7.66 STW bp 289 571
Despite an improving outlook, we remain concerned about the planned capacity increase in the cruising sector; we favor lodging names
Z-spread bp 257 539
5-year CDS 485 485
Company Description Royal Caribbean Cruises Ltd. (RCL), the world's second-largest cruise company, operates 40 ships under five brands. RCL had roughly 92,300 berths that call on approximately 420 destinations as of 3Q2011. Its two main global brands, Royal Caribbean International and Celebrity Cruises, have historically focused on serving the North American market. However, over the years RCL has expanded its international passenger sourcing with the additions of Pullmantur in Spain and Latin America, CDF Croisieres de France, and TUI Cruises (50% JV, TUI AG) in Germany. Co-founder Arne Wilhelmsen and Cruise Associates own 35% of the outstanding equity and maintain a shareholders' agreement that controls the board of directors' selection and other policies. Key Dates/Catalysts: - 2011 guidance: Due to losses taken on its WTI fuel option portfolio and a strengthening USD, lowered EPS guidance to $2.702.80 (vs. $2.85-2.95) based on an increase in net yields of approximately 4% on a reported basis (from 5%) and approximately a 3-4% increase (vs. +4%) in net cruise costs per available passenger cruise day. Anticipates a 7.5% increase in capacity. Expects capex of $1.1 billion in 2011, primarily due to new ship orders. - 4Q2011 guidance: Expects EPS of $0.09-$0.19 based on a net yield increase of 3-4% on a constant currency and reported basis and an increase in cruise costs per available passenger cruise day of approximately 6% (an increase of 3-4% excluding fuel on a constant currency basis and approximately 4% on a reported basis). Anticipates a 7.3% increase in capacity. - January 2012: Carnival Corp's Costa Concordia was grounded off the coast of Isola del Giglio, Italy with over 4,200 passengers and crew members. There were injuries and loss of life, which may cause some potential RCL customers to rethink their desire to book a cruise.
Investment Strengths: - Market leadership: No. 2 player in the cruise industry. Maintains roughly 32% of the North American market and 24% of the global cruising market (Cruise Industry News). - Export credit agents of Europe (Finland, Germany) provide cheap financing terms to fund the delivery of new vessels. The unsecured term loans carry low interest rates and are guaranteed by the ECA and effectively the sovereign government of the shipyard. - RCL operates in underpenetrated markets and has exposure to significant upside in emerging markets. It estimates that 12-17% of the North American market has cruised and that outside of NA the penetration drops to 3% of the population in Europe and 2% of the population in Asia and South America. - Hedges a portion of its fuel costs: 57% through the remainder of 2011, 55% for 2012, 47% for 2013, and 30% for 2014 as of 3Q2011. WTI Fuel options cover an additional 11% of estimated consumption for 2013.
Financial Profile Net revenue Adj. EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Unrestricted Cash Net Debt Key Credit Statistics Total Debt/LTM EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
2010A 6,752.5 1,446.3 371.2 0.0 2,187.2 (1,112.0) 9,150.1 419.9 8,730.2
1Q11A 1,672.0 322.8 100.6 0.0 66.3 155.9 8,779.3 470.3 8,309.0
2Q11A 1,767.9 340.2 93.0 0.0 185.3 62.0 8,604.9 551.5 8,053.4
3Q11A 2,322.0 684.9 98.2 0.0 778.5 (191.8) 8,775.7 451.5 8,324.2
4Q11E 1,772.9 291.6 82.7 0.0 69.9 139.0 8,527.0 324.5 8,202.5
2011E 7,534.7 1,639.6 374.5 0.0 1,100.0 165.0 8,527.0 324.5 8,202.5
Investment Risks: - The leisure and cruise industry is highly dependent on discretionary spending and consumer confidence. - Overcapacity in the cruising industry will weigh on pricing. RCL has two ship builds through 2014, Carnival (CCL) has 10 ships in the pipeline through 1Q2016, and Norwegian Cruise Line (NCL) has two ships on order through 2014. - Significant commitments to capital expenditures, mainly due to the size of the newbuild pipeline. - Geopolitical risk: The events in Northern Africa led to 63 voyage modifications, and the Japan earthquake tsunami caused 21 voyage modifications (management believes further modifications are likely). - Increased exposure to Europe and a weakening consumer: Has increased deployments from Europe to 31% in 2011 versus 11% in 2005. - Significant maturities over the next few years.
6.3x 6.0x 3.9x 21.4%
5.8x 5.5x 3.2x 19.3%
5.5x 5.2x 3.7x 19.2%
5.4x 5.1x 7.0x 29.5%
5.2x 5.0x 3.5x 16.4%
5.2x 5.0x 4.4x 21.8% Comps RCL HST HOT GET Leverage 5.3x 5.7x 3.3x 5.8x Enterprise Value 3Q11A 525.0 875.0 0.0 560.0 840.0 Source Shares OS (mm) Stock Price Market Cap Net Debt Enterprise Value (EV) EV/ EBITDA Mkt val net debt/ EBITDA Size 217 $28.11 6,107.2 8,253.2 14,360.5 8.8x Coverage 7.0x 3.9x 4.7x 2.7x Ratings Ba2/BB Ba1/BB+ Ba1/BB+ Caa2/B
Capitalization Description Revolver due Nov 2014/July 2016 Other unsecured term loans 7% senior notes due June 2013 6.875% senior notes due Dec 2013 5.625% senior notes due Jan 2014 (EUR 1bn) 11.875% senior notes due July 2015 7.25% senior notes due June 2016 7.25% senior notes due Mar 2018 7.5% senior notes due Oct 2027 Other (including derivative liability/asset) Total Debt 3Q11A 560.0 4,660.3 550.0 350.0 1,338.7 300.0 350.0 150.0 300.0 145.7 8,704.7 5.3x Lvg
Liquidity Source Revolver due Nov 2014 Revolver due July 2016 Letters of Credit Borrowings Revolver Availability
451.5 1,291.5 Maintenance Covenants Net debt-to-capital Fixed charge ratio Minimum net worth $ 62.5% 1.25x 5.7 bn
Maturities:
3000 2500 2000 1500 1000 500 0 2012 2013 2014 2015 2016+
Operating metrics 4Q10A Available berth days 7,943.8 1Q11A 8,100.3 2Q11A 8,038.0 3Q11A 8,575.9
YoY % change
Occupancy Passenger cruise days
8.3%
103.1% 8,193.1
10.1%
104.3% 8,445.7
6.6%
103.7% 8,337.6
6.3%
107.9% 9,255.8
YoY % change
Net yield per available berth $ $
10.8%
152.74 $ $
11.4%
159.25 $ $
6.7%
165.93 $ $
6.9%
202.28
YoY % change
Net cruise cost
3.2%
116.79
4.0%
119.40
3.8%
123.60
5.3%
122.41
YoY % change
0.0%
0.2%
3.3%
4.8%
159
January 26, 2012
High Yield
The Ryland Group Inc. (RYL)

IN-LINE
Bond Summary GS Rating IL Size (MM) 300 Coupon (%) 6.625 Priority Sr. Nts Maturity 1-May-20
Updated
1/26/2012
212-357-6157 212-902-0459
Bid Price 96.5
YTW (%) 7.19%
OAS bp 563
Company Description
Founded in 1967, Ryland is a leading homebuilder that primarily builds single family detached homes, in addition to attached dwellings including condominiums, townhomes, and some mid-rise buildings. The company markets its homes to entry level, first and second-time move-up buyers, with prices typically ranging from $100,000 to more than $450,000. Ryland is well diversified geographically throughout the United States, currently operating in 15 states and 20 markets across the country. Key Dates/Catalysts: 4QFY11 earning release Could potentially access capital markets to bolster liquidity
Investment Strengths: - Broad geographic footprint. - Ample liquidity. - Land acquisition is primarily focused on finished lots. Investment Risks: - Build-to-order strategy might hinder sales volumes. - Company has yet to achieve profitability on a GAAP (net income) basis. - Has been aggressively pursuing land deals given its relatively depleted inventories.
Financial Profile ($, mn)* Total Revenues Total Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Homebuilding Debt Total Cash and Cash Equivalents Key Credit Statistics Homebuilding Debt / Capitalization Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) Homebuilding Gross Margin (1)
FY:09 1,284 21 (54) 99 (2) 288 868 815 60% 18% 0.8x 15%
FY:10 1,054 58 (60) 33 (13) (90) 892 739 61% 29% NA 18%
FY:11E 933 42 (60) 21 (11) (178) 844 534 64% 44% NA 19%
4Q:10 227 16 (15) 24 (3) (56) 892 739 61% 29% 0.8x 14%
3Q:11 249 12 (15) 8 (3) (38) 844 562 64% 42% 0.9x 19%
4Q:11E 284 16 (15) (2) (27) 844 534 64% 44% NA 20% Comps Ryland DR Horton Debt-toCap 64% 38% Inventoryto-Debt 0.9x 2.2x Ratings B1/BBBa1/BB+
PF Capitalization ($, mn) Description Secured notes payable Total Secured 6.875% senior notes 5.375% senior notes 8.4% senior notes 6.625% senior notes due 2020 Total Balance Sheet Debt Joint Venture Repayment Guarantees Total Debt Outstanding Minority Interest Share Price Market Capitalization Enterprise Value Size 5 5 174 126 230 300 836 12 847 35 18.7 831 1,152 Liquidity Cash and Cash Equivalents Restricted cash Marketable securities Total Liquidity 154 68 339 562
Maturities: 250 200 150 100 50 0 2012 2013 2014 2015 2017
160
January 26, 2012
High Yield
Saks Inc. (SKS)

Updated: 1/26/12
212-902-6957 212-357-7875
NOT COVERED
Bond Summary Size (MM) $207 Coupon (%) 2.00% Priority Conv. Nts Maturity 15-Mar-24 Agency Ratings B2/BB NA Next Call Price Date NA Bid Price $102.38 YTW (%) -21.89% STW bp -2042
Company Description
Saks Inc. includes Saks Fifth Avenue luxury department stores (46 stores), Off 5th Saks Fifth Avenue Outlet stores (57 stores ), and saks.com. Saks Fifth Avenue stores are principally freestanding stores in exclusive shopping destinations or anchor stores in upscale regional malls. The stores typically offer a wide assortment of distinctive luxury fashion apparel, shoes, accessories, jewelry, cosmetics, and gifts.
Company Strengths: - Strong brand-name recognition - Significant owned real estate - Luxury has recently been a leading retail subsegment Company Risks: - Much lower margins than Neiman Marcus - Sales highly correlated to stock market
Key Dates/Catalysts: Mid- to late February: fourth quarter earnings release
Financial Profile Revenue EBITDA Interest Expense Taxes CapEx Free Cash Flow Total Debt Cash Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization 3Q11A/LTM Description
FY08A 3,052.8 26.8 39.5 (29.5) 125.0 (108.2) 640.1 10.3 23.9x 23.5x 0.7x 0.88%
FY09A 2,625.7 118.3 49.5 (40.1) 59.0 50.0 521.2 147.3 4.4x 3.2x 2.4x 4.51%
FY10A 2,785.7 222.5 56.7 (13.9) 50.5 129.2 549.3 197.9 2.5x 1.6x 3.9x 7.99%
LTM 2,954.8 266.0 52.5 40.6 72.5 129.2 405.8 73.7 1.5x 1.2x 5.1x 9.00%
Comps Saks Bon-Ton Dillard's Neiman Marcus
Yield Leverage -21.89% 40.10% 6.56% 7.66% 1.5x 5.2x 1.7x 4.6x
Ratings B1/BB B2/BBCaa1/B-
1.9x Caa2/CCC+
Size 0.0
Debt to EBITDA
3Q11A 500.0 5.9 0.0 494.1 NA 0.0 NA 73.7 567.8
Revolver due 2016 ($500mm, L+2.0-2.5)
Total Secured Debt Senior Notes 7.5% Convertible Notes due 2013 2% convert nts due 3/15/24 Capital lease obligations Total Sub debt Total Debt Market Cap (Shareholders' Equity) Enterprise Value (Total Book Cap) Maturities: 300 250 200 150 100 50 0 2012 2013
0.0 2.1 120.0 230.0 53.7 405.8
0.0x
Revolver Availability A/R facility Borrowings A/R Availability Cash
405.8 1571.6 1830.1
1.5x 6.9x
Total Liquidity
2014+
161
January 26, 2012
High Yield
Updated 01/23/12 Kevin Coyne 212-357-9918 Celeste Everett Contact analyst or see latest research for updates to ratings, estimates, and other information. 212-902-4751 OUTPERFORM: As our top pick for 2012, we prefer the SBH 6.875% senior notes to other companies in our Consumer & Apparel universe due to the companys stable operations and defensive characteristics. We believe the SBH seniors offer exposure to a more defensive business with limited commodity exposure versus HBI and PVH. Bond Summary Size Coupon Agency Bid YTW STW Z-Spread Next Call (MM) (%) Priority Maturity Ratings Price Date Price (%) bp bp $750 6.875 Sr Nts 15-Nov-19 B1/BB+ 103.438 15-Nov-15 106.750 5.495 473 429
Company Description Sally Beauty Holdings (SBH) is the largest professional beauty supplies distributor in the United States with a presence in the United Kingdom, Belgium, Chile, Mexico, Puerto Rico, France, Germany, Canada, Ireland, and Spain. As of September 30, 2011, SBH operated a total of 4,128 stores, supplied products to more than 181 stores (its franchised stores), and had over 1,116 distributor sales consultants. SBH distributes a wide array of beauty products through its two business units- Sally Beauty Supply and Beauty Systems Group (BSG). Sally Beauty Supply targets both retail consumers and salon professionals and BSG, which operates stores under the CosmoProf service mark, targets salons and salon professionals. Its largest equity holder, Clayton, Dubilier & Rice, owns 35% of the company, following a $575 mn capital contribution upon the spinoff from Alberto Culver in November 2006. Key Dates/Catalysts: - FY2012 guidance: Expects capex to be $65-70 million, with store base growth of 4-5% yoy. - October 2011: Completed an upsized secondary common stock offering of 18 mn shares held by funds associated with Clayton, Dubilier & Rice. - November 2011: Issued $750 mn of 6.875% notes due 2019 at par, proceeds used to retire existing bonds. - May 2012: Interest rate swaps expire on the Term Loan B. Management has stated it would like to wait for the swaps to expire prior to a refinance. Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA 2QFY11 802 123 28 43 14 38 1,545 59 1,486 3QFY11 837 133 28 35 14 56 1,485 53 1,432 4QFY11 837 133 27 38 17 50 1,413 63 1,350 FY11 3,269 503 113 121 60 209 1,413 63 1,350 1QFY12E 855 125 25 30 17 52 1,458 83 1,375 FY12E 3,517 553 95 143 70 245 1,458 303 1,155 Investment Strengths: - Stable and defensive operating profile: its beauty product offerings have proven to be more resilient during periods of contraction. Same-store sales declined only 0.4% in FY2009. - Strong brand recognition: Both divisions are leaders in their respective categories. - Strong management team. - Private label products (SBH owns the trademark and perhaps the actual formula) and controlled label products (SBH has exclusive rights to a manufacturer's formula) offer much higher margins and contribute 44% to Sally Beauty Supply sales. - Its loyalty card program, the Beauty Club Card (BCC), is increasing store visits on average by one trip per year and resulting in 25-40% higher spend per visit. - Opportunity for global expansion - 18% of Sally Beauty revenues were generated outside the US as of 4QFY11. - Track record for repaying debt. No near-term maturities. Investment Risks: - Restricted payment capacity increases dividend risk: as of 4QFY11, the RP basket had approximately $410 million of capacity, or three-quarters of a turn of leverage. Its financial sponsors may want to extract equity in the form of a dividend, as it has been five years since the original investment and leverage is approaching 3.0x. - Highly fragmented and competitive market. Specifically, drug stores and supermarkets are bolstering their offerings of beauty products. - Manufacturer concentration/competition by manufacturers. In December 2006, L'Oreal shifted a significant amount of revenue out of BSG into its own regional distribution networks. - Does not target investment grade ratings. Management stated on its 3QFY11 earnings call, if "you start to try to strive for investment grade type ratings, the law of diminishing returns starts to kick in, in terms of pricing and maximizing our capital structure in the market."
Sally Holdings LLC (SBH)
3.4x 3.3x
3.1x 3.0x 4.8x 15.9%
2.8x 2.7x 4.8x 15.8%
2.8x 2.7x 4.5x 15.4%
2.8x 2.7x 5.0x 14.6%
2.6x 2.1x 5.8x 15.7%
EBITDA/Interest 4.4x EBITDA margin 15.3% Note: Fiscal year ends September 30. Capitalization Description ABL facility due Nov 2015 (L+225) Term Loan B due Nov 2013 (L+250) Total Secured Debt 6.875% Senior Notes due Nov 2019 Other debt (including cap leases) Total debt
Comps SBH 10.5s REV 9.75s
Leverage 2.9x 4.4x
Coverage 4.5x 2.8x
Ratings B1/BB+ B2/B
4QFY11PF 0 697 697 750 11 1,458
Lvg
1.4x
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash
4QFY11A 400 34 0 367 63 430
Enterprise value Shares o/s (mm) Stock price Market cap Net debt Enterprise value (EV)
185 $20.45 3,779 1,395 5,173
2.9x Total Liquidity EV/LTM EBITDA EV/FY12E EBITDA 10.3x 9.4x
Pro forma for the issuance of the 6.875% senior notes.
Maturities: 800 600 400 200 0 FY2012 FY2013 FY2014 FY2014 FY2015+
162
January 26, 2012
High Yield
Sanmina-SCI Corp (SANM)

IN-LINE
Bond Summary Size (MM) $400 Coupon (%) 8.125 Priority Snr Subord Maturity 1-Mar-16 Agency Ratings B3/B-
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 104.25
YTW (%) -9.6%
STW bp (969) Investment Strengths: - Adequate liquidity: SANMs liquidity remains strong, with over $600 million of cash on hand and no drawings on its $235 million revolver. - Niche EMS markets like medical and auto should provide attractive growth opportunities over the medium to long term. - Deleveraging profile: Sanmina has reduced debt by approximately $300 million since the end of FY2007. Investment Risks: - Highly leveraged capital structure: Although SANM has reduced debt over the past few years, it is the most levered EMS credit in our sector (3.4x gross leverage; 1.7x net leverage). - Lack of visibility: SANM has limited visibility into customer demand trends, which have been historically volatile and cyclical. - Free cash flow could be stretched in a recovery. SANM burned $161 million of free cash in 2010 and $30 million in 1QFY11, as it reinvested in working capital and capex to leverage improving markets. Cash flow improved in 2Q-4Q2011, during which the company generated $158mn in FCF.
Company Description
Sanmina-SCI (SANM) is a global electronics manufacturing service (EMS) provider for original equipment manufacturers (OEMs) in the multimedia, communications, enterprise computing and storage, industrial and semiconductor capital equipment, aerospace and defense, automotive, and medical industries. SANM offers a broad array of services to OEMs, including product design and engineering, volume manufacturing, final system assembly and test, direct order fulfillment, and after-market product service and support. Over the past several years, SANM has focused the company away from more commoditized high-volume PC solutions to capture higher-margin, lower-volume solutions in niche EMS markets like industrial/auto/medical. Headquartered in San Jose, CA, SANM recorded over $6.3 billion in revenues for 2010 and has 45,000 employees in 18 countries. Key Dates/Catalysts: - SANM will report 2QFY12 earnings in April
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin PF Capitalization (FY11E) Description ABL due 2013 (L+250 bp) L+275 Senior Notes due 2014 7.00% Senior Notes due 2019 8.125% Sub Notes due 2016 Other (ST foreign credit facilities) Total Debt Less cash Net Debt Equity Market Cap Enterprise Value Maturities: 600.0 500.0 400.0 300.0 200.0 100.0 0.0 2012 2013 2014 2015 2016 Size 0 257 500 400 85 1,243 640 602 887 1,489
FY09 5,177 198 (117) (30) (66) 142 1,438 899 539 7.3 x 2.7 x 1.7 x 3.8%
FY10 6,319 322 (108) (40) (81) (161) 1,306 593 713 4.1 x 2.2 x 3.0 x 5.1%
FY11 6,602 362 (91) (12) (108) 128 1,243 640 602 3.4 x 1.7 x 3.7 x 5.5%
1Q12 1,502 73 (6) (1) (28) (50) 1,244 604 639 3.6 x 1.9 x 3.6 x 4.8%
FY12E 6,329 329 (79) (7) (98) 148
Comps 1,094 632 462 3.3 x 1.4 x 4.2 x 5.2% AMD AMKR FSL
Sr. Unsec Ratings Ba3/B+ Ba3/BB Caa1/CCC+
Debt to EBITDA 0.0 x 2.1 x 2.1 x 3.4 x 3.4 x 3.4 x -1.7 x -4.1 x
Liquidity Revolver Size Borrow Base - Amt Drawn - LC's Amt Unutilized ST borrowing facilities Utilization Availability Cash Liquidity
LTM 235 166 0 25 141 85 60 25 640 806
2017
2018
2019
After
163
January 26, 2012
High Yield
Scientific Games International, Inc. (SGMS)

IN LINE
Updated 1/23/12
212-357-9918 212-902-4751
We believe SGMS is one of the lower risk gaming credits owing to the stability of the instant lottery ticket business. We expect lottery sales to remain stable, whereas we expect regional gaming operators to continue to feel pressure from elevated unemployment.
Bond Summary Size (MM) $350 Coupon (%) 9.250 Priority Senior Maturity 15-Jun-19 Agency Ratings B1/BBNext Call Price 104.625 Date 15-Jun-14 Bid Price 109.250 YTW (%) 6.79 STW bp 657 Z-spread bp 626
Company Description
NOT COVERED Scientific Games International, Inc. (SGMS), a subsidiary of Scientific Games Corp., is a leading supplier of
technology-based products, systems, and services to the gaming market worldwide. SGMS operates in three business segments: Printed Products, Lottery Systems, and Diversified Gaming. The Printed Products group is a leading provider of instant lottery tickets to 43 of the 44 US states with lotteries and to approximately 50 countries. The Lottery Systems group provides software, equipment, and data communication services to 11 states that operate online lotteries such as Lotto and to five states that operate video lottery terminal systems. The Diversified Gaming group provides systems and services to public and private operators in wide area gaming markets. According to Bloomberg, significant equityholders include Ron Perelman (34%), Wells Capital Management (8%), and Fine Capital Partners (7%). Key Dates/Catalysts: - August 2011: Amended credit agreement to extend maturity to June 2015 from June 2013. - September 2011: Completed acquisition of Barcrest Group Limited, a supplier of gaming content and machines in Europe, for $51 million (33 million). - January 2012: Multi-state Powerball game increases ticket price to $2 from $1 (Powerball contributed $20 mn to SGMS revenues in 2010). - January 2012: Wins Illinois Video Gaming Central Communication System Contract to service the potential 60,000 VLTs at Illinois licensed bars, restaurants, and truck stops (or other venues that serve liquor). The contract has a term of six years and may be extended by up to an additional four years.
Investment Strengths: - More state and national governments are adding or increasing lotteries to make up for budget shortfalls. - Instant ticket sales have grown at a CAGR of 9.9% since 1999. - Market share leader in instant tickets (~80%). Maintains capacity to print 45 billion instant tickets, and in 2010 it printed 37 billion. - Long-term contracts make revenues predictable. - Barriers to entry owing to patents and printing presses. - Geographic diversification, with 47% of 2010 revenues generated outside the US. - Significant opportunities in new markets such as China; has installed two printing presses for local printing in China. Investment Risks: - Business model is subject to changes in regulations in any given jurisdiction. - Sizable restricted payments basket we estimate $289 million of capacity as governed by the 8.125% indenture. - Non-guarantor subs make up 100% of assets, 2% of consolidated total debt, and 51% of LTM EBITDA. - New $200 million share buyback program, which will expire December 31, 2011. During 2010, repurchased 2.6 million shares at a total cost of $26 million. No shares have been repurchased for the nine months ending September 30, 2011.
Financial Profile Revenue Adjusted EBITDA Interest Expense Cash Taxes CapEx (incl. software) Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin
FY10A 882 293 102 (3) 109 86 1,397 124 1,272 4.8x 4.3x 2.9x 33.2%
1Q11A 197 63 26 5 22 10 1,393 119 1,274 4.9x 4.5x 2.7x 32.1%
2Q11A 220 75 26 5 22 21 1,391 127 1,264 5.0x 4.6x 2.6x 34.1%
3Q11A 223 68 26 1 22 18 1,392 87 1,305 5.1x 4.8x 2.5x 30.4%
4Q11E 231 62 28 1 30 4 1,390 97 1,293 5.2x 4.8x 2.5x 27.1%
FY11E 870 269 107 12 97 53
Comps IGT HST WYNN
Ratings Baa2/BBB Ba1/BB+ Ba2 / BBB-
1,390 97 1,293
Maintenance covenants 5.2x 4.8x 2.5x 30.9% Leverage: Senior debt Total debt Int. coverage 2.75x 5.75x 2.25x 2.75x 5.50x 2.25x 2.75x 5.25x 2.25x Current 1Q2014 1Q2015
Capitalization Description Senior secured revolver due 2015 Senior secured term loan due 2015 Total senior secured debt 7.875% senior sub notes due 2016 8.125% senior sub notes due 2018 9.25% senior sub notes due 2019 Other debt Total debt 3Q11A 0 567 567 200 250 345 29 1,392 5.1x 2.1x Debt to EBITDA
Liquidity Source Revolver due 2015 Letters of Credit & other Borrowings Revolver Availability 3Q11A 250 61 189
Enterprise Value Source Shares O/S (mm) Stock Price Market cap Net Debt Enterprise Value $ Size 92.1 11.42 1,052 1,305 2,357 271 8.7x
87 276
LTM EBITDA EV/ EBITDA
Maturities:
Operating segments 4Q10A Segment revenue: Printed Products Lottery Systems Diversified Gaming Total revenue Adjusted Segment EBITDA: Printed Products 35 23 9 (2) 65 38 22 9 (6) 63 47 21 12 (6) 75 44 20 12 (8) 68 Lottery Systems Diversified Gaming Other Adjusted EBITDA 124 63 25 212 116 56 25 197 133 57 31 220 130 60 34 223 1Q11A 2Q11A 3Q11A
1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015 2016+
164
January 26, 2012
High Yield
Seagate Technology (STX)

IN-LINE
Bond Summary Size Ticker STX (MM) $600 Coupon (%) 6.88% Maturity 01-May-20 Agency Ratings Ba1/BB+/BB+
Updated 1/25/2012
212-902-0673 212-902-8028
UST Price $109 Spread 460
Z Spread (bp) 425
5 Yr CDS 285/315 Investment Strengths: - Seagate is an industry leader in the hard drive space. - The company benefits from increased pricing power following this fall's flooding in Thailand. - The company has a manageable liquidity position, with a cash balance of $3 billion. - Leverage metrics have improved owing to stronger performance. - The recent consolidation between Western Digital and Hitachi Global Storage Technologies improves the competitive landscape.
Company Description
Seagate is a leading designer, manufacturer, and marketer of hard disk drives, which are the primary medium for storing electronic information in systems ranging from desktop and notebook computers and consumer electronics devices to data centers delivering information over corporate networks and the Internet. Seagate also sells its branded storage solutions under both the Seagate and Maxtor brands. In addition to manufacturing and selling disk drives, the company provides data storage services for small- to medium-sized businesses, including online backup, data protection, and recovery solutions. Key Dates/Catalysts: Earnings announcement Potential capital structure announcements
FY10A 11,395 2,663 1,883 (180) 1,932 (639) 0 1,293
FY11A 10,971 1,580 826 (227) 1,264 (843) (74) 347
FY12E 13,948 3,170 2,353 (246) 2,561 (598) (303) 1,660
2Q11A 2,719 403 $206 ($46) 507 (202) 0 305
2Q12E 3,150 757 $577 ($66) 681 (127) (75) 480
Investment Risks: - The hard drive industry has historically been (and is likely to remain) volatile and highly competitive as participants often compete on pricing. - Weak demand environment hurts performance, leading to weaker credit metrics. - Event risk is still a concern following the company's new $2 billion share repurchase authorization and past private equity interest.
Total Debt Cash Net Debt (Cash) Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Fiscal year ends in June Capitalization Description
2,502 2,629 (127) 0.9x 0.0x -14.8x 23.4%
3,512 3,253 259 2.2x 0.2x -7.0x 14.4%
3,484 4,584 (1,100) 1.1x -0.3x -12.9x 22.7%
2,925 2,911 14 1.3x 0.0x -8.8x 14.8%
3,484 3,401 83 1.8x 0.0x -11.4x 24.0%
Comps ALU
Leverage 3.6x
Coverage 2.8x
Agency Ratings B1/B/--
Size 415 600 750 600 600 1 2,966 9,218 9,802
Debt to EBITDA
Liquidity Cash $2,988 $350 $3,338 Secured revolving credit facility due 1/15 Total Liquidity
10% Senior secured second-priority Notes due May 2014 6.8% due October 2016 7.75% notes due December 2018 6.875% due May 2020 7% due November 2021 Other Total Debt Market Cap Enterprise Value Maturities:
1.9x
3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016+
165
January 26, 2012
High Yield
Sealy Mattress Company (ZZ)

Updated 1/23/12
212-357-9918 212-902-4751
NOT COVERED
Bond Summary Size (MM) $315 $390 Coupon (%) 10.875 8.25 Priority Sr Sec Sr Sub Maturity 15-Apr-16 15-Jun-14 Agency Ratings Ba3/BBCaa1/CCC+ Price 108.156 101.375 Next Call Date 15-Apr-12 Current Bid Price 108.500 95.250 YTW (%) 7.72% 10.56% STW bp 762 1,034 Z-Spread bp 724 1,003
Company Description
Sealy Mattress Company, a wholly owned subsidiary of Sealy Corporation (ZZ), manufactures and markets mattresses and mattress foundations. The company holds the #1 position in the US, with approximately 19% market share in 2010, according to the International Sleep Products Association and Furniture/Today. The company participates primarily in the traditional innerspring segment but has also entered the specialty category in recent periods. The companys well-known brands include Sealy, Sealy Posturepedic, Stearns & Foster, and Bassett. ZZ owns and operates a total of 27 bedding manufacturing and distribution centers globally. These include three manufacturing and distribution centers in Canada, and one each in Mexico, Argentina, Uruguay, and Puerto Rico. Its vertical integration for box spring and innerspring components is a key point of differentiation versus its competitors. Sealy is approximately 46%-owned by KKR, following a 2004 LBO and subsequent IPO in 2006. Key Dates/Catalysts: - FY2012 guidance: Expect mid-single-digit raw material cost inflation, with higher inflation in 2HFY12. Plans to offset the cost pressures through other efficiency gains and improved mix. - May 2011: Redeemed $10 million of 10.875% notes. - July 2012: Soft call conversion for senior secured convertible pay-in-kind notes due 2016 if (1) the stock price is greater than $2.50 and (2) leverage excluding the converts is less than 3.4x. - December 2011: Redeemed an additional $10 million of the 10.875% notes at 103.
Company Strengths: - Leading domestic market share at around 19%. - Broad product lineup from high-end Stearns & Foster to lower end Sealy and Bassett brands. For FY2011, ZZ earned 67% of its domestic revenues from the premium end of the market with retail price points of $750 and above. - Vertical integration for certain components lessens reliance on outside suppliers. - Diversified customer base. - Historically, the mattress industry is relatively stable, with high barriers to entry: Leading brands control two-thirds of industry - Replacement demographics/innovation drive demand; average American replaces his/her mattress every seven to ten years - Reduced exposure to Europe: Following the sale of its European manufacturing operations in France and Italy in November 2010, 92% of FY2011 net revenues on a pro forma basis were earned in North America, with the US contributing 77% to total sales. ZZ transitioned into a license arrangement with third parties following the European assets sale. Company Risks: - Competitors (including specialty mattresses) have grabbed meaningful market share in recent years at high price points, resulting in increased price competition for traditional innerspring mattresses. - High-ticket and deferrable nature mean that sales/profits are sensitive to macro trends in the short term. - Exposure to raw material inflation: ZZs primary input costs are derived from oil and steel, including polyurethane foam, polyester, polyethylene foam, and steel innerspring component parts. Over 50% of ZZs raw materials are made of foam and steel, and raw materials as a percent of cost of goods sold is approximately 67%, or two-thirds. - Larger retail customer bankruptcies have pressured sales.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA
FY10 1,219 178 86 20 17 56 795 109 686 4.5x 3.9x
1QFY11 306 30 22 (1) 6 4 792 102 690 5.0x 4.4x
2QFY11 321 33 22 (1) 7 4 787 79 708 5.2x 4.7x
3QFY11 334 48 22 10 4 12 786 86 700 5.2x 4.6x
4QFY11 269 15 22 5 5 (17) 792 108 684 6.3x 5.4x
FY11 1,230 126 88 20 22 (4) 792 108 684 6.3x 5.4x
LTM Comps ZZ 10.875s BC 11.25s ZZ 8.25s BC 7.125s
Ratings Ba3/BBBa2/B+ B3/B
1.4x Caa1/CCC+
EBITDA/Interest EBITDA margin

Note: Fiscal year ends in November.
2.1x 14.6%
1.4x 9.8%
1.5x 10.2%
2.2x 14.5%
0.7x 5.6%
1.4x 10.3%
Capitalization Description $100 mn ABL facility (L+350) due 5/13/2013 10.875% Sr sec notes due 4/15/2016 8% Sr sec converts (PIK) due 7/15/2016 Total Sr Sec debt 8.25% sr sub notes due 6/15/2014 Other debt (capital leases, OID) Total debt 4QFY11 0 305 185 490 269 33 792 Cash 6.3x Total Liquidity 177 EV/LTM EBITDA 6.6x 108 3.9x Debt to EBITDA Liquidity Revolver Size LOCs, Borrowing base limits Borrowings Revolver Availability 4QFY11 100 31 0 69 Enterprise value Shares o/s (mm) Stock price Market cap Net debt Enterprise value (EV) 101 $1.45 146 684 830
Maturities: 600
400
200
0 2012 2013 2014 2015 2016 2017+
166
January 26, 2012
High Yield
Sirius XM Radio Inc. (SIRI)

Updated 1/20/12
212-902-2233 212-902-4427
NOT COVERED
$800
8.750
SIRI Sr Nts
1-Apr-15
B3/BB-
NC
NC
111.25
4.87
418
Company Strengths: (1) Solid operational momentum.
Company Description
SIRIUS XM provides satellite radio service in the US, with over 21 million subscribers. The SIRIUS system consists of four in-orbit satellites, more than 125 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities, and studios. The XM system consists of four in-orbit satellites and more than 650 terrestrial repeaters. Subscribers can also receive certain music and other channels over the Internet.
Key Dates/Catalysts: February 2012: 4Q2011 earnings.
(2) Almost all revenues come from monthly subscriber fees, with only 2% of sales from advertising. (3) Improving OEM penetration driving subscriber gains.
Company Risks: (1) Competition from other media: Erosion of subscribers due to other forms of radio (Internet radio, terrestrial HD radio, etc.).
(2) High programming costs: Efforts to retain key contracts could lead to increasing programming costs. (3) High leverage: at 4.4x LTM.
Financial Profile FY09A FY10A 1Q11A 2Q11A 3Q11A LTM
Subscribers ('000s) Revenue EBITDA Cash Flow From Ops CapEx Free Cash Flow Total Debt Cash Net Debt
18,773 $2,527 $463 $434 (249) $185 $3,219 383 $2,835 7.0x 6.1x 1.4x
18.3%
20,191 $2,839 $626 $513 (312) $201 $3,321 587 $2,735 5.3x 4.4x 2.1x
22.1%
20,564 $728 $181 $18 (35) ($17) $3,189 434 $2,755 4.9x 4.2x 2.2x
24.9%
21,016 $747 $185 $195 (40) $155 $3,114 528 $2,585 4.6x 3.8x 3.1x
24.8%
21,350 $765 $197 $115 (40) $75 $3,113 605 $2,508 4.4x 3.5x 3.2x
25.8%
21,350 $2,980 $708

Agency
$550 (170) $381 $3,089 581 $2,508 4.4x 3.5x 3.2x

23.8%
Comps
Leverage
Coverage
Ratings
Charter - CCOH CVC Corp.
4.3x 4.0x
2.8x 3.2x
B1/BBB1/B+
Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA Margin

Capitalization*
Debt to Description Size EBITDA
Liquidity
Revolver Size Letters of Credit Borrowings
$0 $0 $581 $581
9.750% Sr Secured Nts Capital Leases

Total Secured Debt
257 3
$260 0.4x
Revolver Availability Cash* Total Liquidity
13.000% Sr Nts 8.750% Sr Nts 7.625% Sr Nts

Total Senior Debt
$779 800 700

$2,539 3.6x
7.000% Exchg Sr Sub Nts

Total SIRI Debt Consolidated Debt Net Debt Market Cap Enterprise Value Maturities:
550
$3,089 $3,089 2,508 9,946 $12,454
4.4x
4.4x 3.5x
*Capitalization and cash are pro forma for the redemption of the 3.250% Convertible Notes, which matured on October 15, 2011.
1,500 1,057 1,000 779 550 500 703
0 2012 2013 2014 2015 2016+
167
January 26, 2012
High Yield
Sitel, LLC (SITEL)

IN-LINE
Bond Summary Size (MM) $293 Coupon (%) 11.5 Priority Senior Maturity 1-Apr-18 Agency Ratings Caa2/B-
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 75.00
YTW (%) 18.4%
STW bp 1,814 Investment Strengths: - Industry leader poised to benefit from cyclical recovery: We expect call volume and outsourcing needs to continue to improve in 2012 as highlighted by SITEL's public comps, including Convergys, TeleTech, and Teleperformance. Sitel is a top 5 player and well positioned to leverage growth. - Flexible cost structure: Approximately 70% of Sitels cost base is variable. Management has reduced headcount by 1,500 over the past three years. - Strong sponsor support: Sitels sponsor equity group is led by Onex and has invested approximately $251 million since 1998. Investment Risks: - Weak free cash flow: We expect free cash flow to remain break-even in 2012, reflecting elevated capex needs as the company looks to grow into its capital structure. - Secured leverage covenant requires focus: Sitel must comply with a secured debt leverage covenant, although the step-down provisions have been amended to provide greater flexibility. - European revenue exposure: Sitel generates about 40% of revenues and 17% of EBITDA from Europe.
Company Description
Sitel is a top 5 global provider of customer care outsourcing services, with service offerings encompassing technical support, customer service, customer acquisition/retention and revenue generation. The majority of Sitels customer care services are inbound and delivered telephonically. Sitel offers a global and flexible operating platform with services delivered in 36 languages through a network of over 100 customer contact centers in 26 countries. Sitel reduces costs for clients by leveraging its economies of scale, providing access to a skilled labor force, and leveraging strategically located facilities in cost-effective labor markets. Key end markets include Technology (15% of sales), Financial Services (13%), Telecom (12%), Media & Entertainment (12%), and Retail/Consumer (10%). The company is private and majority owned by Onex Corporation following its merger with ClientLogic in 2007. Key Dates/Catalysts: - Sitel is expected to report 4Q2011 earnings in February.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin LTM Capitalization Description $85 mm Revolver due 2013 L + 550 bp Term Loan due 2014 L + 675 bp Ext Term Loan due 2017 Other (incl cap leases) 11.5% Senior Notes due 2018 Total Debt Less cash Net Debt
FY08 1,747 133 (58) (10) (43) 3 638 46 592 4.8 x 4.5 x 2.3 x 7.6%
FY09 1,558 138 (60) (13) (24) 36 608 27 581 4.4 x 4.2 x 2.3 x 8.8%
FY10 1,368 115 (75) (12) (34) 1 670 74 597 5.8 x 5.2 x 1.5 x 8.4%
LTM-3Q11 1,396 128 (64) (21) (36) (42) 679 24 656 5.3 x 5.1 x 2.0 x 9.1%
FY11E 1,432 132 (67) (11) (45) (37) 678 14 664 5.1 x 5.0 x 2.0 x 9.2%
FY12E 1,492 145 (60) (12) (50) 3 683 22 661 4.7 x 4.6 x 2.4 x 9.7%
Comps SGS
Leverage 3.0x
Coverage 2.8x
Ratings B1/B+
Amt Out 26 209 145 5 293 679 24 656
Debt to EBITDA 3.0 x 3.0 x 3.0 x 3.0 x 5.3 x 5.3 x -5.1 x
Liquidity Revolver - Amt Drawn - LCs Drawn Availability Cash Liquidity 85 26 1 58 24 81
Maturities: 350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017 2018 After
168
January 26, 2012
High Yield
Smithfield Foods (SFD)

IN-LINE
Updated: 1/26/12
212-902-6957 212-357-7875
Priority Sr Nts
Maturity 1-Jul-17
Bid Price 112.50
YTW (%) 5.08
STW bp 395 Investment Strengths: - Largest pork producer and processor in the United States - Strong management team - Favorable export positioning - Significant asset value Investment Risks: - Volatile pork and corn prices - Highly capital-intensive - Shift in financial focus toward acquisitions
Company Description
Smithfield Foods is the largest pork producer and processor in the United States.
Key Dates/Catalysts: Early March third quarter earnings release
FY10A 11,202.6 413.1 266.4 (113.2) 182.7 77.2 3,008.1 451.2 7.3x 6.2x 1.6x 3.69%
FY11A 12,202.7 1,130.6 245.4 257.7 176.8 450.7 2,122.3 374.7 1.9x 1.5x 4.6x 9.27%
FY12E 13,087.6 1,071.7 186.1 189.5 297.9 398.2 2,013.0 234.8 1.9x 1.7x 5.8x 8.19%
3Q11A 3,186.2 294.2 60.3 95.7 43.8 94.4 2,503.8 577.9
3Q12E 3,377.4 264.0 47.2 49.6 80.0 87.3 2,013.0 199.7
Comps Chiquita Smithfield Dean Foods Dole
Yield Leverage Coverage 7.48% 4.1x 2.8x 5.08% 1.9x 5.8x 7.00% 5.2x 2.9x 4.54% 4.2x 2.7x
Ratings Caa1/BB2/BBB2/BB2/B+
3.8x 9.23%
6.0x 7.82%
Size 0.0 200.0 610.0 810.0 160.0 352.7 500.0 160.0 30.3 1203.0 2013.0 3743.8 5620.4
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Letters of Credit Borrowings A/R Availability
US Credit Facility, expiring Jun 2016 ($1.2 bn), L+250-325 Term loan, due August 2016 L+375 10% Senior Secured Notes due 7/15/14 Total Secured Debt 7.75% Senior Unsecured Notes due May 2013 4% Senior Convertible Notes due July 2013 7 3/4% Senior Unsecured Notes due July 2017 Various due May 2011 through May 2017 Capital Leases Total Unsecured debt Total Debt Market Cap Enterprise Value Maturities: 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014+
0.8x
2Q12A $925 0 0 925 275 116 150 9
1.9x 1.9x 5.2x Cash Total Liquidity 136 $1,071
169
January 26, 2012
High Yield
Solo Cup Company (SOLOC)

IN-LINE
Bond Summary Size (MM) $300 $325 Coupon (%) 10.500 8.500 Priority Sr Sec Nts Sr Sub Nts Maturity 1-Nov-13 15-Feb-14 Agency Ratings B2/B Caa2/CCC
Updated 1/23/12
(212) 902-3299 (212) 902-9813
Next Call Price 105.250 101.417 Date Current Current
Bid Price 100.750 91.000
YTW (%) 7.418 13.668
STW bp 738 1,342
Company Description
Solo is one of the largest providers of single-use cups, lids, food containers, plates, bowls, and cutlery in North America. Solos primary customers are foodservice distributors and operators such as Sysco, U.S. Foodservice, Starbucks, and McDonalds and retailers of consumer products such as Kroger, Target, WalMart, and Costco. Although the company is widely known for its iconic red plastic cold cups and other branded consumer product offerings, Solo is primarily a provider of food and beverage containers to the foodservice industry. Sales to this end-market represent approximately 80% of the companys total net sales.
Investment Strengths: - Diverse product offering: Solo manufactures and supplies a broad portfolio of single-use products used to serve food and beverages, including cups, lids, food containers, plates, bowls, portion cups, cutlery, and straws. - Strong customer relationships: Solo maintains strong direct relationships with prominent companies, including McDonalds, Sysco, Starbucks, U.S. Foodservice, WalMart, and Costco; Solo estimates that its top 10 customers have been with Solo for over 20 years on average. - Efficient manufacturing facilities: Solo has streamlined its manufacturing footprint in recent years, going from 32 facilities in 2004 to less than half that number today. Investment Risks: - Persistent volume weakness: Solo has experienced volume pressure in recent quarters, which has hurt earnings. - Raw material price fluctuations: Inability to pass cost increases on to customers or a significant time lag in any selling price increases could reduce Solo's profitability.
Financial Profile Net sales EBITDA Interest expense Capital expenditures Total debt Cash Net debt Key Credit Statistics Total debt/EBITDA Net debt/EBITDA EBITDA/interest EBITDA margin Capitalization Description ABL revolver Senior secured notes Other secured debt Senior subordinated notes Total debt 9/25/2011 Size 63.2 296.6 7.6 325.0 692.4
12/27/2009 FY:09 1,502.6 143.8 63.1 71.8 636.1 40.4 595.7
12/26/2010 FY:10 1,582.9 112.9 70.6 42.2 637.7 23.5 614.3
9/26/2010 3Q:10 409.6 27.9 18.3 6.3 718.8 29.2 689.6
6/26/2011 2Q:11 435.9 26.4 17.7 6.8 688.5 15.1 673.4
9/25/2011 3Q:11 416.3 19.9 17.9 7.1 692.4 27.4 664.9
Comps 4.4x 4.1x 2.3x 9.6% 5.6x 5.4x 1.6x 7.1% 6.5x 6.3x 1.5x 6.8% 6.0x 5.9x 1.5x 6.0% 6.5x 6.3x 1.1x 4.8% Plastipak Owens-Illinois Crown Holdings
Ratings B3/B Ba3/BB Ba3/BB
Debt to EBITDA 3.5x 3.5x 3.5x 6.5x
Liquidity ABL revolver size Borrowing base Letters of credit Borrowings ABL revolver availability Cash ABL revolver Canadian revolver Total liquidity
9/25/2011 200.0 168.9 12.9 63.2 92.8 27.4 92.8 9.4 129.7
Maturities: 350 300 250 200 150 100 50 2012 2013 2014 2015+
170
January 26, 2012
High Yield
Southwest Airlines Co. (LUV)

IN-LINE
Bond Summary Size (MM) $300 $373 Coupon (%) 5.125 6.150 Priority Senior EETC Maturity 1-Mar-17 1-Aug-22 Agency Ratings Baa3/BBBA2/ANC NC
Updated 1/24/2012
212-357-6711 212-357-9774
Bid Price 107.55 107.00
YTW (%) 3.49% 4.91%
STW bp 272 359
Company Description
Southwest Airlines (LUV) is the fourth-largest US airline by revenue, but it carries more domestic passengers than any other carrier. It flies a primarily Boeing 737 fleet and, until recently, did not offer assigned seats. LUV does not currently offer international flights, but is working on code share agreements with carriers in Canada and Mexico. It is not a member of any international airline alliance. Southwest does not operate a hub-and-spoke system, but instead relies on point-to-point flights. Major focus airports are Chicago Midway, Las Vegas, Dallas Love, and Denver. Key Dates/Catalysts: - Southwest has closed its merger with AirTran and is currently integrating its operations and working toward a single operating certificate.
Investment Strengths: - Large amount of unencumbered assets: Southwest has several billion of unencumbered assets that it can secure in the future if it requires additional liquidity. - Primarily 737 fleet reduces pilot training costs and the number of spare parts that are necessary to keep on hand. There is some risk to this strategy now that the purchase of AirTran and its 717 fleet is complete. - Southwest has recently been layering in fuel hedges for "catastrophic" price levels, which could aid costs if fuel prices skyrocket. - Strong history of cooperation between management and unions. Investment Risks: - Over-expansion: Southwest's historical business model has relied on providing low-cost service, particularly to cheaper, secondary airports. LUV has recently announced expansion plans in New York, Boston, and Minneapolis. - Domestic only: Southwest has begun exploring options to provide service to Mexico and Canada, including code shares and potentially direct flights. However, it does not offer any longer-range international flights. Its all-737 fleet would make trans-Atlantic or Pacific service difficult without a change in fleet composition. International flights provide end-market diversification and can often carry higher yields. - Integration risk with the AirTran acquisition.
FY10 12,104 1,796 (149) (286) (493) 1,068 3,380 3,538 (158) 12.1 x 1.9 x 14.8%
2Q11 4,135 520 (49) (114) (215) (43) 4,232 4,374 (142) 10.6 x 12.6%
3Q11 4,312 545 (46) 85 (276) (332) 4,206 3,656 550 11.8 x 12.6%
4Q11E 4,045 367 (50) (2) (325) 41 3,747 3,133 613 7.3 x 9.1%
FY11E 15,595 1,747 (177) (44) (873) 478 3,747 3,133 613 9.9 x 2.1 x 11.2%
FY12E 16,563 2,071 (169) (38) (1,300) 27 3,594 2,986 608 12.3 x 1.7 x 12.5%
Leverage 2.6x 3.9x 2.1x 4.5x 3.6x
Coverage 5.4x 4.1x 9.9x 4.6x 3.9x
Capitalization Description 10.5% notes due 2011 Term Loan Agreement due 2020 French Credit Agreement due 2012 French Credit Agreement due 2017 Various PTCs Term Loan Agreement due 2019 Other Sr. Notes Other Total Debt Market Cap Enterprise Value Size 403 445 14 73 420 391 970 1,490 4,206 7,326 7,876 2.4 x Cash 4.5 x Total Liquidity 3,656 4,456 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 800 0 0 800
Maturities: 1800 1600 1400 1200 1000 800 600 400 200 0 2012-13 2014-15 Thereafter
171
January 26, 2012
High Yield
Southwestern Energy (SWN)

OUTPERFORM
Bond Summary Size (MM) $600 Coupon (%) 7.500% Priority Sr. Maturity 2/1/2018 Agency Ratings Ba1/BBB-
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $117.00
YTW (%) 4.26%
STW bp 349 Investment Strengths: Dominant position in the emerging Fayetteville Shale play Midstream segment provides business diversity Strong organic reserve replacement history Top-tier F&D costs Investment Risks: Spending continues to outweigh cash flow generation Limited geographic diversity 100% natural gas leverage Key Dates/Catalysts: May need to access the debt markets to fund the FOCF deficit Continued rollout of midstream infrastructure; potential for separation or MLP of midstream segment over time Results from the Marcellus and other developing plays, such as the Lower Smackover/Brown Dense formation
Company Description
SWN is the clear leader in the developing Fayetteville Shale play. SWN was founded in 1929 as a local gas distribution company in Arkansas. In 1943, the company began an E&P program, and subsequently diversified into other regions. After some legal issues, a new management team was assembled in 1998, which marked the beginning of the "modern" SWN. In 2002, the company began accumulating acreage in the Overton field on the Arkansas side of the Arkoma Basin, which grew into SWN's cornerstone Fayetteville Shale play. On April 3, 2008, SWN announced it had sold 56k net acres in the Fayetteville to XTO Energy for $520 mn in cash. On July 1, 2008, SWN closed the sale of its utility business to SourceGas LLC for $320 mn. The company also announced the sale of certain Permian Basin assets for $225 mn. In total, the company sold $1 bn of non-core assets in 2008. In June 2010, the company sold $355 mn of East Texas assets to Exco. Southwestern was upgraded to investment grade by S&P in July 2010. The company is currently focused on diversifying in several new ventures, including the Lower Smackover.
2008A $2,312 $1,301 ($595) $1,756
2009A $2,160 $1,381 ($421) $1,780
2010A $2,623 $1,624 ($431) $2,073
2011E $2,984 $1,826 ($295) $2,035
2012E $3,051 $1,922 ($569) $2,300
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2017-18 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $671 $671 $1,271 $0 $3,609 $4,880 0.7x Size $13 $600 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,500 $0 $600 $900 $13 $913 2008A 0.6x 20.7x 23% 2009A 0.7x 24.5x 30% 2010A 0.7x 27.9x 27% 2011E 0.7x 26.4x 25% 2012E 0.9x 23.0x 28% SWN RRC CHK
Coverage ('11E) 26.4x 6.1x 33.6x
Agency Ratings Ba1/BBBBa3/BB Ba3/BB+
Maturities:
700 600
500 400 300 200 100 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
172
January 26, 2012
High Yield
Sprint Nextel Corporation (S)

OUTPERFORM/IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
We favor the shorter-dated bonds within Sprint's capital structure (OP on the 5.95s of 2014), which reflects our preference to invest in the company's willingness and ability to access the capital markets to bolster its liquidity. We rate the 2019 and 2032 bonds In-Line as the company faces a challenging operational environment. Specifically, we expect the company to burn $3.4bn in 2012 and $1.8bn in 2013 as it seeks to execute its aggressive 4G rollout and network modernization plan while also absorbing margin dilution from the iPhone. Bond Summary Size (MM) $1,157 $1,729 $1,998 Coupon (%) 5.950 6.900 8.750 Priority Sr Nts Sr Nts Sr Nts Maturity 3/15/2014 5/1/2019 3/15/2032 Agency Ratings Ba3/BBB1/BBB1/BBNext Call Price 1/24/2012 NC NC Date 100.744 NC NC Bid Price 99.25 83.75 82.50 YTW (%) 6.33 10.11 10.91 STW bp 584 844 811 Investment Strengths: (1) Strategic value: Sprint's position as the third largest wireless operator in the US gives the company strategic value as other communication providers look to enter the wireless market. (2) The company has reduced churn in recent quarters, and the recent addition of the iPhone 4S to its device portfolio could help reduce churn even further. Investment Risks: (1) Competition: The US wireless market is highly competitive and the top 2 players (Verizon and AT&T) have much greater scale and stronger balance sheets compared to Sprint. (2) Cash flow is expected to be significantly negative in 2012 (and to a lesser extent in 2013) as the company faces elevated capex due to its Network Vision spending plans as well as dilution from iPhone offerings. FY10A 33,112 $54.47 1.9% 12,277 $27.26 $32,563 5,633 2,880 $20,139 5,473 14,666 3.6x 2.6x
17.3%
Company Description
Sprint Nextel is the third-largest wireless operator in the United States, with about 53 million customers. The company offers a range of wireless and wireline communications services to individuals, businesses, and governments. Sprint had nearly 33 million postpaid subscribers as of the end of 3Q2011, with roughly 28 million using the company's CDMA technology and 5 million using its iDEN platform. Sprint also served approximately 14 million prepaid customers. Sprint also offers 4G services through its mobile virtual network operator wholesale relationship with Clearwire Corporation and its subsidiary Clearwire Communications LLC. As of September 30, 2011, Sprint held a 54% non-controlling economic interest in Clearwire Communications LLC and a 49.6% non-controlling voting interest in Clearwire Corporation. Key Dates/Catalysts: February 8, 2012: 4Q2011 earnings. Progress on Network Vision initiative Potential for capital markets activities.
Financial Profile Postpaid Subs ('000s) Postpaid ARPU Postpaid Churn Prepaid Subs Prepaid ARPU Revenue EBITDA Free Cash Flow Total Debt Cash & ST Investments Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin Capitalization*
FY09A 33,967 $54.75 2.1% 10,688 $24.28 $32,260 6,407 3,288 $21,001 3,924 17,077 3.3x 2.7x
19.9%
2Q11A 32,897 $56.66 1.8% 13,797 $27.54 $8,311 1,314 316 $18,488 4,271 14,217 3.4x 2.6x
15.8%
3Q11A 32,853 $57.68 1.9% 14,282 $27.23 $8,333 1,402 (210) $18,486 4,001 14,485 3.3x 2.6x
16.8%
4Q11E 33,103 $58.45 1.9% 14,932 $27.47 $8,706 748 (233) $20,236 5,062 15,174 4.1x 3.0x
8.6%
2011E 33,103 $56.98 1.8% 14,932 $27.83 $33,663 4,978 148
(3) Sprint faces meaningful debt maturities every year from 2013 through 2019.
Agency $20,236 5,062 15,174 4.1x 3.0x

14.8%
Comps LEAP Unsecured Nts MetroPCS
Leverage 5.7x 3.7x
Coverage 2.1x 5.0x
Ratings B3/CCC+ B2/B
Debt / Description Senior Guaranteed Debt Junior Guaranteed Debt Other Sprint Nextel Debt Sprint Capital Debt Nextel / iPCS Debt Capital Lease Obligations, Other Total Sprint Debt Net Debt Market Cap Enterprise Value Size $500 3,000 4,500 6,204 5,261 771 $20,236 $14,816 $9,099 23,915 4.3x Cash* 3.6x 2.7x Total Liquidity 5,420 $6,420 EBITDA 0.1x 0.6x Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $2,100 (1,100) $1,000
*Capitalization and cash are pro forma for various transactions subsequent to 3Q2011. Cash balance also reflects $331mn investment Sprint made in CLWR's equity offering in December, 2011. Maturities:
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1,773 2,637 1,351 14,475
2012
2013
2014
2015
2016+
173
January 26, 2012
High Yield
Standard Pacific Corp. (SPF)

IN-LINE
Bond Summary GS Rating IL Size (MM)
575
Updated
1/26/2012
212-357-6157 212-902-0459
Coupon (%) 8.375 Priority Sr. Nts Maturity 15-May-18
Agency Ratings B3/B
Next Call Price

MW
Bid Date Price

101.5
YTW (%)
8.06%
OAS bp
693
Company Description
Standard Pacific is a leading homebuilder, with operations in 27 markets across California, Florida, Texas, the Carolinas, Colorado, and Nevada. The company generally sells more upscale homes, with an average sales price in the mid$300,000 range; however, it participates in multiple market segments across the pricing spectrum, from the most basic homes at $100,000 to mansions at over $7 million. MP CA Homes LLC, an affiliate of MatlinPatterson Global Advisors LLC, holds 49% of the voting power of Standard Pacific's stock. MatlinPatterson initially invested in the company on June 27, 2008, as part of a more comprehensive equity recapitalization and organizational restructuring.
Investment Strengths: - Large exposure to the California market, which has been recovering more quickly versus other regions. - Best-in-class gross margins and lean cost structure. - Strong management team. - Implied backing of MatlinPatterson. Investment Risks: - Leverage remains somewhat high despite recent equity raises and debt reduction. - Speculative land acquisition strategy, focused largely on raw land. -Could draw on revolver to fund land purchases.
Key Dates/Catalysts: 4QFY11 earning release

Total Revenues Total Adjusted EBITDA Interest Expense Cash Taxes Capital Expenditures Free Cash Flow Total Debt Outstanding Total Cash and Cash Equivalents
FY:09
1,180 124 (102) (0) 459 1,243 611 73% 58% 0.8x 25%
FY:10
925 118 (109) (105) 1,354 760 68% 49% NA 29%
FY:11E
877 94 (113) (0) (300) 1,376 487 68% 58% NA 27%
4Q:10
215 26 (35) (68) 1,354 760 68% 49% 0.9x 30%
3Q:11
245 29 (35) (0) (91) 1,376 463 69% 60% 1.1x 27%
4Q:11E
280 35 (35) 25 1,376 487 68% 58% NA 27%
Debt-toComps
Standard Pacific Beazer KB Home
Inventoryto-Debt
1.1x 0.9x 1.0x
Cap
69% 86% 81%
Ratings
B3/B Caa3/CCC B2/B+

PF Capitalization ($, mn) Description

Secured project debt / notes payable 6.5% Senior Notes 6.875% Senior Notes 6.25% Senior Notes 7% Senior Notes 10.75% Senior Notes 8.375% Senior Notes 8.375% Senior Notes Term Loan B
Size
4 5 30 280 575 400 -
Liquidity
Homebuilding Cash Financial Services Cash Restricted Cash 420 11 31
Total Cash
Unsecured revolver Borrowing base Borrowings
463
210 197 -
Total Availability Total Liquidity
197 660
Total Senior
6% Senior Subordinated Notes 9.25% Senior Subordinated Notes
1,294
10
Total Homebuilding Balance Sheet

Mortgage Credit Facilities
1,304
53
Total Balance Sheet Debt

Non-Recourse JV Debt Recourse JV Indebtedness
1,356
178 -
Maturities:
35 30 25
Total Debt Outstanding

Share price
1,356
4.1
20 15 10 5 0 2012 2013 2014 2015
Market Capitalization Enterprise Value
1,399 2,293
174
January 26, 2012
High Yield
Steel Dynamics (STLD)

IN-LINE
Bond Summary Size (MM) Coupon (%) Priority Maturity Agency Ratings
Updated 1/20/12
212-357-6711 212-357-9774
Next Call Price Date
Bid Price
YTW (%)
STW bp
$350
7.625%
Sr Notes
15-Mar-20
BB+/Ba2
103.81
15-Mar-15
110.81
4.98
468
Company Description
Steel Dynamics, the nation's fifth-largest producer of steel, produces flat-rolled and long product steel at its five mini-mills. Key Dates/Catalysts: We expect demand for steel will continue to be relatively tepid in 2012.
Investment Strengths: - Low costs: STLD has lower fixed costs than its integrated peers. It can also more easily add or reduce production with less expense than integrated producers. - Diversified mini-mill: STLD produces a variety of flat-rolled, products, structural, rail, and bar products. While nonresidential construction has yet to recover (which would be necessary to see real traction in the long products businesses), this diversification is positive during times when flat-rolled pricing is under pressure. - Raw materials: Mini-mills should have an easier time passing through scrap surcharges to customers. Investment Risks: - Scrap business margins: While ownership of raw materials assets could give STLD better insight into this market, margins in the scrap business have underwhelmed since the OmniSource acquisition in 2007. - Steel price gains could be hard to maintain as domestic demand remains relatively weak. - Steel Dynamics said it is considering options for a new flatrolled mill, which could add leverage.
Financial Profile
FY10
2Q11
3Q11
4Q11E
FY11E
FY12E
Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt
6,301 602 (170) -(133) 299 2,387 187 2,200 4.0x 3.7x 3.5x 9.56%
2,080 269 (45) -(35) 189 2,379 278 2,102
2,043 182 (45) -(38) 100 2,380 457 1,924
1,879 148 (42) -(60) 46 2,380 532 1,848
8,018 885 (174) -(152) 558 2,380 532 1,848 2.7x 2.1x
8,370 913 (159) -(200) 553 2,254 728 1,526 2.5x 1.7x 5.7x 10.90%
Comps
Leverage
Coverage
Agency Ratings
Peabody Energy Steel Dynamics US Steel Corp. FMG
3.2x 2.7x 4.3x 7.6x
11.4x 5.1x 5.0x 12.4x
BB+/Ba1 BB+/Ba2 BB/B1 B1/B

6.0x 12.93%
4.1x 8.92%
3.6x 7.87%
5.1x 11.03%
Size
Liquidity
Revolver Size Term Loan Other 6.75% Senior Notes due 4/1/2015 7.375% Senior Notes due 11/1/2012 7.75% Senior Notes due 4/15/2016 7.625% Senior notes due 3/15/2020 5.125% Senior Convertible Notes
Total Debt Market Cap Enterprise Value
1100.0 49.0 0.0 1051.0 0.0 0.0 0.0 456.7 1507.7
0.0 42.7 500.0 700.0 500.0 350.0 287.5

2,380.2 3,472.9 5,396.4 6.1x 2.7x
Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total Liquidity
Maturities:
1,000 900 800 700 600 500 400 300 200 100 0 2012-13 2014-15 Thereafter
175
January 26, 2012
High Yield
Stone Energy (SGY)

IN-LINE
Bond Summary Size (MM) $200 Coupon (%) 6.750% Priority Sr. Sub. Maturity 12/15/2014 Agency Ratings Caa2/CCC+
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $98.69
YTW (%) 7.26%
STW bp 696
Company Description
Stone Energy transformed itself through the August 2008 acquisition of Bois D'Arc, which increased proved reserves to 720 bcfe from 385 bcfe. The company is now the second-largest independent producer in the US GOM. Focuses of the company include western basin oil, eastern US (Appalachia) gas, and shallow/deep offshore gas production. The company has a 50% gas/50% oil mix and an R/P ratio of around six years. SGY was founded in 1952 by James Stone as Stone Oil in Cincinnati, Ohio. The company relocated to Louisiana in 1981 and went public in 1993, initially with properties in the Gulf Coast Basin. In 2004, Stone made acquisitions in the deep shelf and deep water of the GOM and in the Rockies. In October 2005, the company announced a large reserve write-down (171 bcfe proved; 20.7% of year-end 2004), which prompted an SEC investigation; Stone's share price declined over 23%. In April 2006, SGY entered into an agreement to be acquired by Plains Exploration. However, in June 2006, the transaction was abandoned after Stone received a competing offer from Energy Partners, which the board deemed to be superior. This proposed transaction was terminated as well, after EPL received an acquisition proposal from Woodside Petroleum in October. In December 2006, Stone announced a strategic plan to refocus its operations on the Gulf Coast and sell its Rockies properties. The Rockies assets were subsequently sold to Newfield Exploration in May 2007 for $575 mn. In September 2007, its board of directors authorized a $100 mn share repurchase program. In April 2008, SGY announced the acquisition of Bois DArc Energy in a 62% cash and 38% stock transaction valued at $1.5 bn. The transaction closed in August 2008. In late 2011, Stone acquired BP's 75% interest in the Pompano field in the GOM for $204 mn.
Investment Strengths: Multi-year inventory of lower-risk exploitation projects on the Gulf Shelf Growing high-impact deepwater program Marcellus Shale acreage offers additional upside optionality Investment Risks: Challenging regulatory environment in the GOM affects exploration activities Reserve life of around six years is below E&P average of about 14 Weak recent track record of organic reserve replacement Key Dates/Catalysts: Potential for increased (and possibly costly) regulation in GOM following Macondo oil spill Horizontal well results in the Marcellus Shale Potential for bolt-on acquisitions
2008A $803 $585 $76 $447
2009A $702 $470 $188 $320
2010A $651 $439 $23 $402
2011E $840 $600 ($10) $537
2012E $775 $516 ($94) $600
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2014-17 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $575 $575 $575 $0 $664 $1,239 1.0x Size $65 $0 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $400 $61 $0 $339 $65 $404 2008A 1.4x 44.2x 58% 2009A 1.6x 16.9x 63% 2010A 1.3x 36.0x 57% 2011E 1.0x 33.5x 45% 2012E 1.1x 11.3x 41% SGY MMR WTI
Coverage ('11E) 33.5x 15.5x 15.8x
Agency Ratings Caa2/CCC+ Caa1/B Caa1/B
Maturities:
400 350
300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
176
January 26, 2012
High Yield
Stream Global Services

IN-LINE
Bond Summary Size (MM) $200 Coupon (%) 11.25 Priority Sr Sec. Maturity 1-Oct-14 Agency Ratings B1/B+
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 102.38
YTW (%) 9.7%
STW bp 955 Investment Strengths: - Improving results driven by call volume growth: Revenues grew 10% in 1H2011 thanks to new client wins and cross-selling growth with existing clients. - eTelecare deal improves competitive position: The recent purchase positions Stream as a top 10 player in the industry. - Recurring revenue base: SGS generated consistent revenue growth through the 2008/2009 global slowdown, with sales results declining only 1% from the peak. - Low-cost footprint: Stream operates 49 service centers across North America, Latin America, Europe, the Philippines, India, the Middle East, and Africa, with limited geographic overlap. Investment Risks: - Moderate customer diversity: A substantial portion of the companys revenue is generated by a limited number of clients. - Marginal free cash flow: We expect Stream to generate marginal FCF as it continues to invest in new capacity growth over the next year. - Asset-light nature of business: The value of the company lies in its diverse, low-cost labor force. - Marginal enterprise coverage: SGSs public comparables trade at approximately 5x 2011 EV/EBITDA.
Company Description
Stream Global Services is a leading global service provider of customer relationship management (CRM) and other business process outsourcing (BPO) services to a wide range of customers. The company specializes in complex voice-centric transactions, such as sophisticated technical support, warranty support, customer service, and revenue generation services. Stream's leading customers include Dell Computer, Sirius/XM Satellite, and Hewlett Packard. On August 14, 2009, Stream announced that it had entered into a definitive agreement to merge with EGS Corp., the parent company of eTelecare. Key Dates/Catalysts: - SGS is expected to report 4Q2011 earnings in February.
Financial Profile Revenue EBITDA Cash Interest Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description ABL due Oct 2013 (L+375) 11.25% 2nd Lien Notes due Oct 2014 Other (incl unamortized discount) Total Debt Less cash Net Debt Maturities: 250 200 150 100 50 0 2011 2012
FY08 823 43 (8) (13) (16) 14 74 48 26 1.7 x 0.7 x 8.5 x 5.2%
FY09 795 72 (32) (4) (23) (30) 218 15 203 3.0 x 2.8 x 4.0 x 9.0%
FY10 800 73 (29) (10) (23) (0) 228 18 209 3.1 x 2.9 x 2.5 x 9.1%
LTM-3Q11 849 80 (29) (11) (37) (7) 243 21 221 3.0 x 2.8 x 2.8 x 9.4%
FY11E 855 83 (26) (10) (36) 13 255 26 229 3.1 x 2.8 x 2.8 x 9.7%
FY12E 893 94 (31) (12) (40) 6 224 25 199 2.4 x 2.1 x 13.1 x 10.5%
Comps SITEL
Leverage 5.3x
Coverage 2.0x
Ratings Caa2/B-
Size 28 200 15 243 21 -221
Debt to EBITDA 0.3 x 3.0 x 3.0 x 3.0 x 2.8 x
Liquidity Revolver Size - Amt Drawn - LCs Amt Unutilized Covenant Limit Adjusted Availability Cash Liquidity
LTM 100 28 6 67 (20) 47 21 68
2013
2014
After
177
January 26, 2012
High Yield
Sunoco Inc. (SUN)

IN-LINE
Updated 1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $104.04
YTW (%) 4.82%
STW bp 405 Investment Strengths: Relatively low maintenance capex of around $500 mn Strong liquidity Shifting focus to more profitable logistics business Investment Risks: Reduced diversification following recent asset sales and pending coke separation Uncertainty regarding business strategy going forward
Company Description
Sunoco (SUN) is the largest independent refiner in the Northeast US. The company currently operates three refineries with over 675k b/d of processing capacity. It also owns 32% of Sunoco Logistics Partners LP, five chemicals plants, and four coke plants producing about 20% of total US supply. Finally, the company markets refined products through a network of 4,700 retail outlets, of which about 500 are owned or operated. Sunoco was founded in 1890 in PA as The Sun Oil Company and purchased its first refinery in 1894. In 1925, the company went public on the NYSE. After operating as an integrated oil company for almost a century, in 1988 Sun's board decided to spin off the E&P segment to focus on refining and marketing. Following the shift in strategy, the company made a number of refining acquisitions, including both Atlantic Petroleum's and Chevron's Philadelphia refineries. In 1998, the company was renamed Sunoco, and in 1995, it company completed the divestiture of its stake in Canadian oilsands subsidiary Suncor. After focusing its portfolio on refining for more than a decade, in 2001 the company expanded its chemicals production through the acquisition of Pittsburgh-based Aristech Chemical. Then, in 2003, the company acquired a polypropylene plant from Equistar and began construction of a $140 mn coke manufacturing facility in Haverhill, OH. Sunoco would later announce that it was permanently closing the Bayport, TX, polypropylene plant in January 2009. In 2004, Sunoco acquired El Paso's Eagle Point refinery in NJ. Most recently, in April 2009, the company announced the sale of its Tulsa refinery to Holly Corp. for $65 mn. In October 2009, the company idled its Eagle Point refinery indefinitely in response to weak market conditions. In June 2010, Sunoco announced plans to separate its Coke business. In December 2010, the company announced the sale of its Toledo refinery, indicating it plans to focus on the retail and logistics businesses. In summer 2011 SUN completed the spinoff of its SunCoke business. In late 2011, SUN announced its intention to sell or close its remaining refineries by summer 2012. Financial Profile Revenue EBITDA FOCF CapEx Key Credit Statistics Total Debt/EBITDA EBITDA/Interest Debt/Capitalization (%) Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Notes Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $3,524 $3,524 $3,524 $0 $1,302 $4,826 4.4x Size $1,656 $0 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,738 $115 $0 $1,623 $1,656 $3,279 1.1x 17.0x 43% 1.9x 9.9x 49% 2.2x 6.8x 44% 4.6x 3.5x 81% 5.2x 3.7x 97% 2008 $53,766 $1,884 $306 $1,286 2009 $31,497 $1,310 $90 $899 2010 $37,264 $1,113 $295 $772 2011E $44,226 $616 $359 $634 2012E $47,170 $838 $1,794 $500
KeyDates/Catalysts:
Sale/shutdown of refining business Ratings actions
Comps SUN VLO TSO
Coverage ('11E) 3.5x 13.3x 11.1x
Agency Ratings Ba2/BB+ Baa2/BBB Ba1/BB+
Maturities:
450 400
Debt Maturities ($ mn)
350 300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
178
January 26, 2012
High Yield
Surgical Care Affiliates (SCAFF)

IN-LINE
Updated 01/25/12
212-855-7718 212-902-9758
We rate SCAFF In-Line owing to our belief that ASCs are well positioned for a post-reform healthcare delivery system because they are low-cost providers. These factors are offset by SCAFFs small size, high leverage, and modest free cash flow. Bond Summary Size (MM) $150 Coupon (%) 10.00% Priority Sr Sub Maturity 15-Jul-17 Agency Ratings Caa1/CCC+ Next Call Price $105.000 Date 15-Jul-12 Bid Price $96.000 YTW (%) 10.991% STW bp 1,019 Investment Strengths: - Well-positioned industry owing to a trend toward outpatient settings. Outpatient procedures are on the rise as a result of technological advances that allow less-invasive procedures and also because shorter hospital stays lower costs. - Limited bad debt risk because ASCs are able to turn down patients who are unable to pay. - Limited government reimbursement risk because Medicare contributes less than 20% of revenue. - Modest capex (low $20 million range maintenance capex), and development capex can be curtailed as necessary.
Company Description
SCAFF operates 123 ambulatory surgery centers (ASC) and four surgical hospitals located in 31 states. Key states are California, North Carolina, and Florida. ASCs present a powerful value proposition to payers (the cost of performing a surgery at ASCs is less than the cost of performing the same procedure at a general hospital), doctors (better scheduling and equity ownership), and patients (ASCs provide a less intimidating setting than hospitals). Facilities are co-owned with doctors, with SCAFF owning 65% of a facility on average. The companys ASCs are multi-specialty, slanted toward gastro-intestinal and ophthalmology. 21% of revenue comes from Medicare. SCAFF was formed in June 2007 through TPG's acquisition of HealthSouth's surgery division. In July 2011, SCAFF completed the purchase of 49% of Indiana University Health (IUH) for $123 mn for nine ASCs. IUH continues to own the other 51%. To fund the acquisition, SCAFF raised $100 mn of additional Term Loan B, $25 mn of incremental equity from existing shareholders, and $0.8 mn from balance sheet. SCAFF also amended its credit agreement to carve out the IUH investments from its restrictive investment basket. Key Dates/Catalysts: - Quarterly earnings announcements - Potential additional acquisitions or sale, reflecting our view that the industry is likely to consolidate. In 3Q11, SCAFF commented that its pipeline of potential JVs continues to grow.
Investment Risks: - ASC procedures tend to be more elective/deferrable than inpatient procedures, so volumes are likely to be at least somewhat negatively affected by the weak economy. - Centers are not wholly owned and equity minority owners are paid dividends prior to debt service. - Very high leverage at 6.0x.
Financial Profile Consolidated facilities Revenue EBITDA Interest Expense Cash Taxes CapEx Other Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description
2009A 125 $737 98 $54 14 33 31 27 $678 34 644 6.9x 6.6x 1.8x 13.2%
2010A 123 $740 104 $53 16 29 27 32 $682 31 652 6.6x 6.3x 2.0x 14.0%
2011E 144 $734 116 $54 20 29 47 59 $784 82 701 6.8x 6.1x 2.1x 15.8%
4Q10A 123 $184 26.6 $13 (5) 7 1 13 $682 31 652
3Q11A 144 $181 29.6 $15 (5) 7 (18) (6) $784 48 736
4Q11E 144 $188 31.3 $14 (2) 7 22 35 $784 82 701
Agency LTM Comps SCAFF Sr SCAFF Sub USPI Sr THC VHS Leverage 4.8x 6.0x 5.2x 3.9x 4.3x Coverage NA 1.3x 3.0x 2.7x 2.9x Ratings B3/BCaa1/CCC+ Caa1/CCC+ Caa1/CCC+ B3/B-
2.1x 14.4%
1.9x 16.3%
2.3x 16.6% Liquidity
Size $0 121 219 100 $440 $165 $165 $150 $150 $28 $784 NA NA
Debt to 2011E EBITDA*
Revolver Size Letters of Credit Borrowings Revolver Availability
$132 0 0 132 $48 $180
Revolving Credit Facility due 6/30/2016 Term Loans due 12/29/2014 Term Loans--extended 12/30/2017 Incremental TL B 6/30/2018 Total Sr Sec debt 8.875% Sr PIK Toggle Notes due 2015 Total Sr bonds 10% Sr Sub Notes due 2017 Total Sub debt Capital Leases and Other Total Debt Market Cap Enterprise Value Maturities: 700 600 500 400 300 200 100 0 2012 2013
3.5x
3.8x
4.8x
5.2x
6.0x
6.5x
6.2x
6.8x
*LTM EBITDA is pro forma for IUH acquisition. 2011E is not.
2014
2015+
179
January 26, 2012
High Yield
Swift Energy (SFY)

IN-LINE
Bond Summary Size (MM) $250 Coupon (%) 7.125% Priority Sr. Maturity 6/1/2017 Agency Ratings B3/B+
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $101.84
YTW (%) 6.50%
STW bp 620 Investment Strengths: High oil exposure, at about 60% of production Emerging Eagle Ford and AWP Olmos plays provide resource upside Conservative management team issued $115 mn of equity in 2009 to reduce debt Investment Risks: Virtually no production hedges Weak historical all-in reserve replacement and F&D costs Low diversification, with the majority of production and cash flow generated in hurricane-prone regions Exposure to hurricane season with Louisiana assets Key Dates/Catalysts: Update on Eagle Ford and Olmos development
Company Description
We view Swift as a "steady as she goes" story, with few near-term catalysts and little exposure to the popular unconventional shale plays. The company has operations focused on three core regions: South Texas, South Louisiana, and Toledo Bend, which spans the TX/LA border. South Louisiana is the company's most important region, with Lake Washington, Cote Blanche Island, Bay de Chene, and others representing around 80% of production. We believe Swift is the largest oil producer in LA. The company's asset mix is weighted approximately 60% to crude oil for production and 47% for proved reserves. Earl Swift founded the company in 1979 and initially focused on West Virginia. The company went public in 1981 and expanded to 12 states by 1985. From 1998 to 2004, the company acquired new acreage in the Austin Chalk, New Zealand, and South Louisiana. In October 2007, SFY acquired 83k acres in South Texas from Escondido Resources for $250 mn. SFY then sold its New Zealand assets for $98 mn in two separate transactions in 1H2008. In September 2008, the company acquired South Texas acreage from Crimson Energy Partners for $46 mn. Swift operates 97% of its properties, giving it a high degree of control. In late 2009, the company entered into a JV with Petrohawk Energy to help develop the company's properties in the Eagle Ford Shale.
2008A $827 $607 ($40) $628
2009A $371 $216 $10 $215
2010A $438 $271 ($95) $354
2011E $591 $384 ($100) $483
2012E $746 $501 ($106) $600
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2017-20 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $472 $472 $472 $0 $971 $1,443 1.1x Size $16 $0 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $300 $0 $0 $300 $16 $316 2008A 1.0x 19.5x 49% 2009A 2.2x 7.1x 41% 2010A 1.7x 8.1x 35% 2011E 2.0x 10.9x 44% 2012E 1.6x 13.1x 40% SFY BRY
Agency Ratings B3/B+ B2/BB-
Maturities:
300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
180
January 26, 2012
High Yield
Telesat Canada (TELSAT)

IN-LINE
Updated 1/20/12
212-902-2233 212-902-2233
A dividend recap recap at Telesat no longer seems likely as management indicated that such a transaction would be inefficient from a tax perspective as well as potentially limiting with respect to other strategic alternatives the company may choose to pursue. The company has strong organic growth prospects in 2012 and 2013 due to new satellite launches, and we view its bonds as fairly valued at current levels as yield-to-call bonds. Bond Summary Size (MM) $693 $217 Coupon (%) 11.000 12.500 Priority Sr Nts Sr Sub Nts Maturity 01-Nov-15 01-Nov-17 Agency Ratings Caa1/BCaa1/BNext Call Price 105.500 106.250 Date 01-May-12 01-May-13 Bid Price 106.88 111.50 YTW (%) 5.07 7.53 STW bp 322 663
Company Description
Telesat is the fourth-largest FSS provider in the world. Telesat currently has 13 owned and operated satellites, with two more under construction (Nimiq 6 and Anik G1). The company also manages the operations of 13 additional satellites for third parties. Telesat offers services to more than 400 customers worldwide, including a variety of blue-chip companies such as Bell TV, Star Choice, EchoStar, Disney, HBO, and Canadian Broadcasting Corporation. Key Dates/Catalysts: March 2012: 4Q2011 earnings. Update on the progress of the satellite launches. Potential for bank debt refinancing in the absence of other strategic transactions.
Investment Strengths: (1) Significant deleveraging: Over the past three years since its LBO, Telesat has delevered by almost 3 turns owing to strong EBITDA growth as new satellites were successfully launched. Telesat also realized significant cost synergies from merging the Loral Skynet businesses with Telesat's existing operations. (2) Substantial revenue backlog: As of September 30, 2011, Telesat had C$5.6 billion of backlog, representing 6.9x LTM revenues. This provides excellent visibility into revenue trends. Investment Risks: (1) Satellite launch/anomaly risk: Historically, one in 10 launches has failed, and satellites are exposed to various technical anomalies while in orbit. (2) Customer concentration. (3) Intermediate-term competitive threats: For domestic (i.e., in Canada) growth opportunities, we believe Ciel could pose some threat for Telesat. In international markets, increasing supply in these regions could lead to pricing pressure. (4) Satellite capex cycle. (5) FX risk.
Financial Profile (C$) Revenue EBITDA Cash Flow From Ops CapEx Free Cash Flow Total Debt excl. Prefs Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA Margin Capitalization
FY09A C$787 560 C$298 (264) C$34 C$3,229 154 C$3,075 5.8x 5.5x 2.0x 71.2%
FY10A C$821 625 C$345 (262) C$83 C$3,107 220 C$2,887 5.0x 4.6x 2.4x 76.1%
2Q11A C$200 155 C$83 (163) (C$81) C$3,010 142 C$2,867 4.8x 4.5x 2.5x 77.5%
3Q11A C$200 154 C$162 (61) C$102 C$3,108 198 C$2,910 5.0x 4.7x 2.5x 77.0%
4Q11E C$201 155 C$61 (70) (C$9) C$3,019 285 C$2,734 4.9x 4.4x 2.6x 77.0%
FY11E C$804 637 C$422 (372) C$50 C$3,019 285 C$2,734
Agency Comps Leverage 5.8x Coverage 2.3x Ratings B3/B-
4.9x 4.4x 2.6x 77.2% EH Holdings - SATS
Debt to Description Revolver (C$153mm Facility) Term Loan A (Canadian Facility) Term Loan B (US Facility) Delayed Draw Term Loan B (US Facility) Capital Lease Obligations Total Telesat Canada Secured Debt 11.000% Sr Nts due 2015 Total Telesat Canada Sr Debt 12.500% Sr Sub Nts due 2017 Total Telesat Canada Sr Sub Debt Telesat Holdings PIK Preferreds Total Debt + Preferred Market Cap Enterprise Value Maturities: Size C$0 120 1,887 145 C$2,152 728 C$2,880 228 C$3,108 141 C$3,249 NA NA 5.2x 5.0x 4.6x 3.4x Cash Total Liquidity C$198 C$351 EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability C$153 (0) C$153
3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015
3,249
2016+
181
January 26, 2012
High Yield
Tenet Healthcare Corp. (THC)

OUTPERFORM (secureds)/IN-LINE (unsecureds)
Updated 01/25/12
212-855-7718 212-902-9758
We rate the THC secureds Outperform. We like secured hospital paper due to our continuing concerns around reimbursement and the bonds trade slightly wide to the other secured bonds, despite much lower leverage. More broadly, we are generally constructive on THC due to improving leverage and free cash flow. We rate the unsecureds In-Line as we prefer the HCA holdcos for similar yield. Bond Summary Size (MM) $900 $600 Coupon (%) 6.25 8 Priority Sr. Sec. Sr. Uns. Maturity 01-Nov-18 01-Aug-20 Agency Ratings B1/BBCaa1/CCC+ Next Call Price T+50 $104.000 Date MW 8/1/2015 Bid Price $103.500 $103.000 YTW (%) 5.619% 7.410% STW bp 482 661 Investment Strengths: - Potential for continued margin improvement and improved free cash flow as legal settlement payments have been completed. - First large bond maturity is not until 2015. Investment Risks: - Medicare and Medicaid reimbursement could be reduced. - Ongoing negative trend in higher-margin commercial volumes. THC's facilities are located in competitive urban markets. - Weak Medicare case mix due to a decline in cardio surgeries could continue to pressure earnings. - Under pressure from shareholders to create value/return cash because stock is trading well below the CYH bid price that was turned down. CDS Levels Snr 5-Year 543 / 568
Company Description
Hospital operator focused on urban markets. THC operates 49 hospitals concentrated in Florida, Texas, and California. In 2003, the DOJ initiated investigations of THC relating to Medicare fraud and physician kick-backs. The company settled in 2006 for $725 million plus $175 million of foregone Medicare fees. Through 2009 and 2010, THC refinanced over $3.5 billion of unsecured bonds with $2.4 billion of secured bonds, $600 million of 10-year unsecured bonds, and $334 million of preferred equity. In December 2010, CYH announced an unsolicited bid for THC at $6 a share for a combination of cash and stock, which THC rejected. In April 2011, THC alleged that CYH overbilled Medicare with a potential liability in excess of $1 billion. CYH subsequently changed its bid to all cash and later also raised its bid to $7.25 a share. In May 2011, CYH withdrew its bid for THC. In November 2011, THC issued $900 mn of secured bonds in order to refinance its 2015 secured bond and 2011 senior notes. Key Dates/Catalysts: - Quarterly earnings announcements - Acquisitions. THC has been acquisitive recently on the Outpatient side. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as aa net positive for hospitals. Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Pro Forma Capitalization Debt to LTM EBITDA 0.0x Debt to 2011E EBITDA 0.0x 2009A $9,031 980 $445 (23) 456 (31) $4,501 690 3,811 4.6x 3.9x 2.2x 10.9% 2010A $9,205 1,050 $424 (977) 476 (4) $4,261 405 3,856 4.1x 3.7x 2.5x 11.4% 2011E $9,630 1,157 $422 111 398 155 $4,398 232 4,166 3.8x 3.6x 2.7x 12.0% 2.8x 12.2% 2.0x 8.3% 2.9x 12.7% 4Q10A $2,301 281 $101 2 196 (21) $4,261 405 3,856 3Q11A $2,342 195 $100 4 100 48 $4,276 185 4,091 4Q11E $2,408 306 $106 38 100 129 $4,398 232 4,166
LTM Comps THC Sec THC Sr Uns CYH HCA sr uns
Coverage NA 2.7x 2.8x NA
Agency Ratings B1/BBCaa1/CCC+ B3/B B3/B-
Description Revolver Total Sec debt (Lien on assets) 9% first lien due May 1, 2015 10% first lien due May 1, 2018 8.875% first lien due July 1, 2019 6.25% first lien due 11/1/2018 Total Sec debt (Lien on stock) 6.375% Sr. Notes due 12/1/11 6.5% Sr. Notes due 6/1/12 7.375 Sr. Notes due 2/1/13 9.875% Sr. Notes due 7/1/14 9.25% Sr. Notes due 2/1/15 6.875% Sr. Notes due 11/15/31 8.0% Sr. Notes due 8/01/20 Total Sr debt Total Sub debt Notes Payable and Cap Leases Total Debt 7% Pref Equity Market Cap Enterprise Value Maturities: 5,000 4,000 3,000 2,000 1,000 0 2012 2013
Size $0 $0 $1 714 925 900 2,540 $0 57 216 60 474 430 600 1,837 0 $21 $4,398 $345 2,374 $6,932
Liquidity Revolver Size Letters of Credit Borrowings Min avail requirement Revolver Availability Cash $800 169 0 100 531 $185 $716
2.2x
2.2x
Total Liquidity
3.9x
3.8x
3.9x
3.8x
6.1x
6.0x
Note: First lien debt is limited to the greater of $2.6 bn or 3.0x; secured debt is limited to the greater of $3.2 bn or 4.0x.
2014
2015+
182
January 26, 2012
High Yield
Tenneco Inc. (TEN)

IN-LINE
Bond Summary Size (MM) $250 Coupon (%) 8.125% Priority Sr. Nts Maturity 15-Nov-15 Agency Ratings B1/BB-
Updated 1/26/2012
212-902-7537 212-357-2769
Bid Price 105.80
YTW (%) -1481.3%
STW bp (1,486) Investment Strengths: - Global emissions regulation timeline: Approximately 63% of Tennecos top line is derived from the companys emission control business. The emission control business is set up to grow over the next three years thanks to stricter global emission regulations. - Commercial vehicle opportunity: Historically, commercial vehicles have represented a small portion of Tennecos revenues (7% in 2010). Management expects to grow the commercial vehicle & specialty business to 30-35% of OE revenue by 2015 with the launch of new programs and stricter emission regulations. - Successful capital markets actions: TEN completed an initiative to amend and extend $550 million of its revolving credit facility (now due May 2014). TEN also refinanced its 8.625% subordinated notes with proceeds from the 6.875% senior notes of 2020. - Strong exposure to the BRICs and Thai markets: TEN has a global manufacturing footprint with strong relationships in the BRIC+T countries. Investment Risks: - Significant exposure to the Europe: Tenneco derives 43% of its revenue from Europe. Demand in the region may be adversely affected by the Eurozone's debt concerns and associated austerity measures. - Tenneco has one of the highest steel price exposures in the automotive sector.
Company Description
Tenneco Inc. designs, manufactures, and markets emission control and ride control products and systems for the automotive original equipment market and the after-market. The company's products include shocks and struts, shock absorbers, mufflers, and performance exhaust products, as well as noise, vibration, and harshness control components. Key Dates/Catalysts: - Tenneco is expected to report 4Q2011 earnings on February 2.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver due 2012/2014 Term Loan B due June 2016 Other (foreign lines of credit) 8.125% Senior Notes due 2015 7.75% Senior Notes due 2018 6.875% Senior Notes due 2020 Total Debt Less cash Net Debt Market Cap Enterprise Value
FY08 5,916.0 381.0 (113.0) (62.0) (233.0) (73.0) 1,451.0 126.0 1,325.0 3.8x 3.5x 3.4x 6.4%
FY09 4,649.0 353.0 (133.0) 38.0 (120.0) 121.0 1,220.0 167.0 1,053.0 3.5x 3.0x 2.7x 7.6%
FY10 5,937.0 514.0 (149.0) (53.0) (152.0) 92.0 1,223.0 233.0 990.0 2.4x 1.9x 3.4x 8.7%
LTM-3Q11 6,998.0 583.0 (130.0) (67.0) (184.0) 37.0 1,304.0 163.0 1,141.0 2.2x 2.0x 4.5x 8.3%
FY11E 7,168.8 608.4 (108.4) (83.0) (192.0) 81.5 1,304.0 343.5 960.5 2.1x 1.6x 5.6x 8.5%
FY12E 7,699.9 610.5 (108.4) (80.0) (231.0) 151.1 1,304.0 494.6 809.4 2.1x 1.3x 5.6x 7.9%
Leverage 2.8x 1.3x 3.0x 3.0x 2.2x 0.9x
Coverage 4.8x 8.4x 6.5x 3.6x 4.5x 13.6x
Size 97.0 148.0 84.0 250.0 225.0 500.0 1304.0 163.0 1141.0 1,908.4 2,448.4
Debt to EBITDA 0.6x 0.6x 0.6x 2.2x 2.2x 2.2x 2.2x -2.0x -4.2x
Liquidity Revolver/LC Size - Amt Drawn - LCs Drawn Amt Available Cash on hand Net Liquidity 752.0 97.0 54.0 601.0 163.0 764.0
Maturities: 900 800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017 After
183
January 26, 2012
High Yield
Tesoro Corp. (TSO)

UNDERPERFORM
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $113.50
YTW (%) 5.49%
STW bp 519 Investment Strengths: Ability to process a wide spectrum of crude gravities; heavy crude represents about one-third of crude processed Waterborne access at several refineries provides crude purchasing flexibility CARB fuel requirements in California limit product imports from other regions and have made PADD5 more resilient over time Investment Risks: Geographic concentration in PADD5, which remains weak Pure-play refining and marketing company Key Dates/Catalysts: Product demand trends in PADD5 Sale of Hawaii refinery
Company Description
Tesoro operates seven refineries concentrated in the Western US. With about 670k b/d capacity, TSO is the fourth largest independent refiner in the US (vs. leader Valero with 3.0 mn b/d capacity). Approximately 50% of TSO's capacity is equipped to process heavy crude. Tesoro was founded in 1968 by Bob Westfield as an E&P company and purchased Alaska assets in the 1970s. The company first entered into refining in 1998 through the purchase of the Anacortes (WA) refinery from Shell and the Hawaii refinery from BHP. In 2000, management decided to focus entirely on R&M. They purchased Golden Eagle in 2002 when the stock was at $15. Timing proved unfortunate, however, as the 9/11 events and one of the warmest winters on record made 2002 one of the worst years for refining margins in history. TSO was a distressed credit and was forced to focus on debt reduction. In January 2007, TSO announced the acquisition of Shell's Wilmington refinery, which has a capacity of 100k b/d, for $1.63 bn. In September 2007, Tracinda Corp. announced a partial tender for 16% of TSO shares for $64. The tender was later withdrawn. In December 2010, Tesoro announced it would contribute a portion of its logistics assets to an MLP and sell a minority interest in the MLP in an IPO. The $273 mn IPO was completed in April 2011. In 2012, Tesoro announced plans to divest its Hawaii operations.
2008A $28,309 $1,026 $213 $650
2009A $16,872 $442 ($19) $437
2010A $20,583 $561 $97 $297
2011E $30,204 $1,937 $1,139 $321
2012E $31,721 $1,405 $338 $670
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2012-19 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $1,604 $1,604 $1,674 $0 $3,796 $5,470 0.9x Size $1,135 $70 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $2,500 $916 $70 $1,514 $1,135 $2,649 2008A 1.6x 8.6x 33% 2009A 4.2x 3.4x 37% 2010A 3.6x 3.6x 38% 2011E 0.8x 11.1x 29% 2012E 1.1x 10.3x 26% TSO SUN
Agency Ratings Ba1/BB+ Ba2/BB+
Maturities:
500 450 400 350 300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
184
January 26, 2012
High Yield
Textron Inc. (TXT)

Textron Financial Corp.
OUTPERFORM
Bond Summary Size Ticker TXT TXT (TFC) (MM) $250 $375 Coupon (%) 5.950 5.400 Maturity 21-Sep-21 28-Apr-13
Updated 1/26/12
212-902-3258 212-855-8553
Agency Ratings Baa3/BBBBaa3/BB+
Yield (%) 5.4 2.7
Price ($) $104.03 $103.30
T-sprd Spread 350 250
Z-sprd (bp) 354 219
5 Yr CDS 235 61
Company Description
Textron Inc. (TXT) is a diversified industrial company with a portfolio of leading brands. It operates through five business segments: Cessna (24% of consolidated revenue) is the world's largest manufacturer of general aviation aircraft (e.g., business jets and piston aircraft). TXT's Industrial segment (24% of revenue) manufactures Greenlee tools, E-Z-Go golf carts, Jacobsen lawnmowers, and Kautex blow-molded fuel systems for cars and light trucks (i.e., plastic fuel tanks). TXT's Bell segment (31% of revenue) is a leading supplier of helicopters and tilt rotor aircraft. Textron Systems (19% of revenue) is a primary supplier to the US Department of Defense, providing combat vehicles, marine craft, network-centric warfare equipment, and unmanned aerial vehicles. The last segment is Finance, which accounts for only 2% of revenues. TXT, through wholly-owned Textron Financial Corp. (TFC), provides financing for TXT customers through wholesale and other forms of lending. TFC had $3.5 billion in managed receivables at 3Q2011. TFC expects to further shrink this portfolio to approximately $2.5 billion within several years by winding down its non-captive business. TXT has a support agreement with TFC that requires TXT to (1) maintain TFC's fixed charge coverage at 1.25x or higher; (2) own 100% of TFC; and (3) maintain TFC's equity at or above $200 million. In addition, as per TFC's credit agreement, it must maintain debt/equity at 9x or less. Key Dates/Catalysts: 1Q2012 Continued progress on winding down TFC's portfolio; update on business jet outlook. Investment Strengths: - TXT has a portfolio of businesses with leading brands, such as Cessna, Bell, and E-Z-Go. - TXT has solid liquidity with $871 million in manufacturing cash at 4Q11, and it should generate $499 million in FCF in 2012, in our view. - If the wind-down of Textron Finance (TFC) continues to be successful, it could free up capital for TXT by 2013. Investment Risks: FY10 10,307 1,019 (152) (301) 42 608 (270) (22) 316 122 438 2,302 898 1,404 2.26x 1.38x 43.6% 13.7% 6.7x 9.9% 4Q11 3,242 377 (30) (227) 152 272 (152) (5) 115 (30) 85 2,459 871 1,588 2.00x 1.29x 47.3% 12.9% 12.6x 11.6% FY11 11,172 1,228 (154) (229) (84) 761 (423) (22) 316 (3) 313 2,459 871 1,588 2.00x 1.29x 47.3% 12.9% 8.0x 11.0% FY12E 12,100 1,350 (150) (143) (85) 972 (450) (23) 499 0 499 2,305 1,141 1,164 1.71x 0.86x 41.4% 21.6% 9.0x 11.2% - TXT has been mentioned as a potential split-up candidate, according to Bloomberg News; at this writing, the company has not commented on this. - Textron Finance (TFC) may need further financial support from TXT, as it could decide to liquidate some of its longer-tail golf course and resort portfolios. - Cessna still faces a weak business jet market, particularly for light jets, a key market for the company. - While TXT's defense programs are well supported and funded, such as the V-22 Osprey tilt-rotor aircraft, the company is exposed to the declining US defense budget.
Financial Profile ($mn) Textron Inc. (Finco on equity basis) Revenue EBITDA Gross Interest Expense Other (non-cash pension) Working Capital Net Operating Cash Flow 1 Capital Expenditures Dividends Free Cash Flow1 Capital contribution (to)/from TFC FCF after capital transact. w/TFC Total Debt (excl TFC) Cash (excl TFC) Net Debt Key Credit Statistics LTM Total Debt/EBITDA LTM Net Debt/EBITDA Debt/Capital LTM FCF/Debt EBITDA/Interest expense
FY08 13,287 1,690 (125) (318) (357) 890 (537) (284) 69 (483) (414) 2,569 531 2,038 1.52x 1.21x 52.1% 2.7% 13.5x
FY09 10,139 928 (144) (417) 292 659 (238) (21) 400 79 479 3,584 1,748 1,836 3.86x 1.98x 55.9% 11.2% 6.4x 9.2%
4Q10 3,100 297 (43) (278) 328 304 (136) (6) 162 (5) 157 2,302 898 1,404 2.26x 1.38x 43.6% 13.7% 6.9x 9.6%
EBITDA Margin 12.7% 1 Excludes capital contributions to TFC and dividends from TFC Textron Financial Corp. Revenue Net Income Cash Assets Debt (excl interco debt) Shareholders Equity Fixed charge cov excl cap contrib2 Debt/Equity
2
723 (461) 16 9,344 7,388 1,079 -0.74x 6.8x
360 (205) 144 7,324 5,488 804 -0.89x 6.8x
24 (39) 33 4,570 3,435 501 -1.77x 6.9x
207 (230) 33 4,570 3,435 501 -1.89x 6.9x
12 NA 14 3,213 1,974 413 NA 4.8x EBITDA Coverage 6.8x 4.1x Agency Ratings Ba2/BB+ Baa1/BBB+
TXT Financial received $152mn, $383mn, $270mn, and $625mn in gross cash capital contributions from TXT in 9mos11, 2010, 2009, and 2008, respectively, to comply with support agreement.
Capitalization - TXT Inc. Description Revolvers TXT Inc 4.5% 2013 Convertible TXT Inc. 5.95% 2021 Other Sr. Debt Total Sr debt Total Sub debt Total debt (excl TFC) Size 0 375 250 1,834 2,459 0 2,459
12/31/2011 EBITDA Liquidity TXT Inc. Revolver due 2015 Commercial Paper Borrowings 2.0x 2.0x TXT Fin. Ex/Im facility Revolver Availability Cash+Available Revolver
12/31/2011
Comps Bombardier Ingersoll-Rand
Leverage 2.9x 2.2x
1,000 (11) 0 989 1,860
500 0 (426) 74 88
Net Debt (excl TFC) Market Cap Enterprise Value
1,588 6,951 8,539
1.3x 5.7x 7.0x
Letters of Credit Borrowings Ex/Im Availability TFC Cash+Ex/Im Availability
Maturities:
Textron Inc.
700 600 500 400 300 200 100 0 2012 2013 2014
Textron Financial
($, mn)
2015
185
January 26, 2012
High Yield
Toll Brothers Inc. (TOL)

IN-LINE
Bond Summary GS Rating IL Size (MM) 250 Coupon (%) 6.75 Priority Sr. Nts Maturity 1-Nov-19
Updated
1/26/2012
212-357-6157 212-902-0459
Agency Ratings Ba1/BB+
Bid Price 105.5
YTW (%) 5.86%
OAS bp 438
Company Description
Toll Brothers Inc. designs, builds, and markets single-family detached and attached homes, primarily focusing on the luxury market. The company is also involved in projects where it builds or converts apartment buildings into high-, mid-, and low-rise luxury homes. Toll Brothers targets move-up, empty-nester, active-adult, age-qualified, and second-home buyers in 21 states throughout the United States.
Key Dates/Catalysts: 1QFY12 earning release
Investment Strengths: - Leading market share in luxury market. - Strong brand recognition. - Limited competition. - Conservative leverage profile, high cash balance. - Strong management team. Investment Risks: - Strategy of buying raw land pushes profit to outyears. - Company could use revolving credit facility to fund land purchases.
Financial Profile ($, mn)* Total Revenues Total Adjusted EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt Outstanding Total Cash and Cash Equivalents Key Credit Statistics Homebuilding Debt / Capitalization Net Homebuilding Debt / Capitalization (3) Inventories / Homebuilding Debt (2) Homebuilding Gross Margin (1)
FY:10 1,495 65 (115) 149 (5) (142) 1,769 1,298 40% 13% NA 20%
FY:11 1,476 97 (115) 155 (10) (79) 1,655 1,160 38% 14% 2.1x 23%
FY:12E 1,680 116 (112) (8) (144) 1,655 744 38% 24% NA 23%
1Q:11 334 18 (30) 8 (4) (111) 1,707 1,153 40% 17% 2.0x 23%
4Q:11 428 38 (28) 0 (3) (22) 1,655 1,160 38% 14% 2.1x 24%
1Q:12E 366 21 (28) (2) (136) 1,655 752 38% 25% NA 23% Comps Toll Brothers DR Horton Debt-toCap 38% 38% Inventoryto-Debt 2.1x 2.2x Ratings Ba1/BB+ Ba3/BB-
PF Capitalization ($, mn) Description Unsecured revolver Unsecured term loan(1) Other loans payable Mortgage company warehouse loan 6.875% Senior Notes 5.95% Senior Notes 4.95% Senior Notes 5.15% Senior Notes 8.91% Senior Notes 6.75% Senior Notes Total Senior Debt Joint Venture Repayment Guarantees Total Debt Outstanding Minority Interest Shares Outstanding Share Price Market Capitalization Enterprise Value Size 98 57 140 142 268 300 400 250 1,655 1,655 1,655 6 168 23.0 3,864 4,386 Cash Marketable Securities Total Liquidity 906 234 1,140 Liquidity Unsecured revolver Borrowings LOCs Revolver Availability 885 100 785
Maturities:
350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016
186
January 26, 2012
High Yield
TPC Group Inc. (TPCG)

OUTPERFORM
Updated
1/26/2012
212-357-6157 212-902-0459
We rate the TPCG 8.25% senior secured notes of 2017 Outperform, viewing the bonds as a solid core holding that also offer compelling relative value given the company's strong growth trajectory. In our view, TPCG's operating performance over the next several years should be exceptionally strong, leading the 8.25s to tighten from current trading levels. At the same time, we think downside risk is mitigated by the secured nature of the bonds and TPCG's inherent business stability due to index-based pricing mechanisms in its sales contracts. Bond Summary GS Rating OP Size (MM) 350 Coupon (%) 8.25 Priority Sr. Sec. Maturity 1-Oct-17 Agency Ratings B1/-Next Call Price 106.19 Date 10/1/2013 Bid Price 102.5 YTW (%) 7.60% OAS bp 673
Company Description
TPC Group (TPCG) is a leading processor of crude C4 hydrocarbons, including butadiene, butene-1, raffinates, and MTBE. The company also upgrades isobutylene and propylene into higher-value derivative such as polyisobutylene, diisobutylene, nonene, and tetramer. TPCG operates as a merchant processor and marketer of these products, serving as an intermediary between its raw materials suppliers North American ethylene producers and a diverse base of customers. It is organized around two business segments: C4 Processing and Performance Products, which accounted for 65% and 35%, respectively, of its LTM EBITDA.
Investment Strengths: - Leading market positions with limited competition. - Long-term relationships with customers and feedstock suppliers. - Well-positioned assets. - Margin stability and strong free cash flow generation. Investment Risks: - Limited diversification. - Relatively low margins. - Recent actions have been shareholder-friendly. - Relatively new management team.
Key Dates/Catalysts: 4QFY11 earning release Potential ratings upgrade by credit agencies
Financial Profile ($, mn)* Revenues Adjusted EBITDA Cash Interest Cash Taxes Capital Expenditures Free Cash Flow Total Debt Outstanding Cash equivalents Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA / Interest LTM EBITDA margin
FY:09 1,179 54 (15) 7 (9) 13 274 0 5.0x 5.0x 3.7x 5%
FY:10 1,918 104 (19) 39 (23) 75 350 86 3.3x 2.5x 5.5x 5%
FY:11E 2,906 117 (34) (12) (50) 37 350 104 3.0x 2.1x 3.5x 4%
Q4:10 486 18 (8) 0 (11) 39 350 86 3.3x 2.5x 5.5x 5%
Q3:11 835 44 (9) (6) (12) 31 350 82 2.1x 1.6x 5.0x 6%
Q4:11E 722 (32) (9) 18 (18) 21 350 104 3.0x 2.1x 3.5x 4% Comps TPCG Georgia Gulf Leverage 2.1x 2.7x Coverage 5.0x 3.9x Ratings B1/-B1/B+
PF Capitalization ($, mn) Description Revolving Credit Facility 8.25% Senior Secured Notes Total Debt Share Price Market Capitalization Enterprise Value Size 350 350 30.0 480 748 4.5x Cash and Cash Equivalents Total Liquidity 82 257 2.1x Debt to EBITDA Liquidity Revolving Credit Facility Borrowing Base Borrowings Availability 175 175 175
Maturities:
400 350 300 250 200 150 100 50 0 2012 2013 2014 2015+
187
January 26, 2012
High Yield
TRW Automotive (TRW)

IN-LINE
Bond Summary Size (MM) $334 $467 Coupon (%) 7.00% 7.25% Priority Sr. Nts Sr. Nts Maturity 15-Mar-14 15-Mar-17 Agency Ratings Ba2/BB+ Ba2/BB+
Updated 1/26/2012
212-902-7537 212-357-2769
Next Call Price NC NC Date NC NC
Bid Price 107.38 108.13
YTW (%) 336.7% 541.1%
STW bp 316 465
Company Description
TRW is a leading manufacturer of active and passive safety-related automotive systems, modules, and components. TRW believes it holds a top-three market position in foundation brakes (No. 1), anti-lock braking systems (No. 3), steering gears (No. 1), seat belts (No. 1), air bags (No. 2), and engine valves (No. 2). The companys long-term strategy is to become the leading supplier of active and passive safety-related components in the automotive market. Active safety refers to automobile features that mainly allow the driver to avoid collisions. Most notably, steering and braking components fall into this category. Passive safety refers to occupant restraints that reduce the likelihood of injury once a collision has occurred. Specifically, TRWs passive safety systems include airbags, seatbelts, and crash sensors.
Investment Strengths: - Strong customer and product revenue diversity:No single customer accounts for more than 20% of revenues; TRW is a leader in multiple products, including brakes, steering gears, seat belts, air bags, and engine valves. - Strong liquidity: TRW ended 3Q2011 with more than $1.8 billion of liquidity. - Low leverage: TRW is one of the least levered high yield auto supplier credits in our coverage universe. The company ended 3Q2011 with leverage of 0.9x (0.4x net). Investment Risks: - Significant exposure to the Europe: TRW derives 51% of its revenue from Europe. Demand in the region may be adversely affected by the Eurozone's debt concerns and associated austerity measures. - Strategic acquisitions pose a risk: In our view, TRW could be poised to consider making a strategic acquisition given its scale and low leverage.
Key Dates/Catalysts: - TRW is expected to report 4Q2011 earnings on February 16, 2012.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization - Pro forma Description Revolver due 2016 Other 7.0% Senior Notes due 2014 6.375% Senior Euro Notes due 2014
FY08 14,995.0 979.0 (191.0) (148.0) (482.0) 375.0 2,922.0 766.0 2,156.0 3.0x 2.2x 5.4x 6.5%
FY09 11,614.0 911.0 (220.6) (61.0) (201.0) 236.0 2,371.0 788.0 1,583.0 2.6x 1.7x 4.9x 7.8%
FY10 14,383.0 1,671.0 (142.3) (76.0) (294.0) 758.0 1,846.0 1,078.0 768.0 1.1x 0.5x 10.3x 11.6%
LTM-3Q11 15,971.0 1,727.0 (128.5) (76.0) (354.0) 520.0 1,532.0 890.0 642.0 0.9x 0.4x 13.6x 10.8%
FY11E 16,163.9 1,704.9 (112.1) (76.0) (524.0) 638.4 1,532.0 1,320.4 211.6 0.9x 0.1x 14.0x 10.5%
FY12E 16,585.6 1,897.9 (106.0) (76.0) (540.0) 753.1 1,532.0 2,073.5 (541.5) 0.8x -0.3x 16.3x 11.4% Comps AXL CTBUS GT MTOR TEN TRW Leverage 2.8x 1.3x 3.0x 3.0x 2.2x 0.9x Coverage 4.8x 8.4x 6.5x 3.6x 4.5x 13.6x Ratings B1/BBB1/BBBa3/BBB2/B Ba3/BB Ba2/BB+
Size 0.0 105.0 334.0 233.0 174.0 467.0 219.0 1,532.0 890.0 642.0 4,867.8 5,509.8
Liquidity Revolver Size - Amt Drawn - LCs Drawn Amt Unutilized Cash Net Liquidity 1,020.0 0.0 28.0 992.0 890.0 1,882.0
3.500% Exchangeable Sr Notes due 2015 7.25% Senior Notes due 2017 8.875% Senior Notes due 2017 Total Debt Less cash Net Debt Market Cap Enterprise Value
Maturities:
800 700 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 2017 After
188
January 26, 2012
High Yield
U.S. Steel (X)

UNDERPERFORM
Bond Summary Size (MM) $600 Coupon (%) 7.375% Priority Sr Notes Maturity 1-Apr-20 Agency Ratings BB/B1
Updated 1/20/12
212-357-6711 212-357-9774
Next Call Price MW Date MW
Bid Price 101.61
YTW (%) 7.11
STW bp 579
Company Description
U.S. Steel is one of the largest steel producers in the United States. Most of its annual production is flat-rolled tonnage made in the United States, but U.S. Steel also has a large flat-rolled operation in Europe, and produces about 1 million tons of tubular products in the United States annually. Key Dates/Catalysts: January 31: U.S. Steel scheduled to announce 4Q2011 earnings.
Investment Strengths: - X owns iron ore assets, which gives it more price stability on its inputs in the US. - It has a high level of contractual business with OEMs. - X has a large OCTG (tubular) business that allows it to benefit from high demand for shale oil- and gas-related demand. Investment Risks: - Exposure to cyclical steel market. Steel prices could remain under pressure in the current global economic environment. - X has high fixed costs versus mini-mill peers, which can greatly reduce EBITDA in a low price environment. - European segment is vulnerable to this year's Euroland economic woes. - Not integrated in coking coal.
FY10 17,374 505 (274) (97) (676) (2,383)
2Q11 5,120 433 (48) (65) (221) (200)
3Q11 5,081 340 (38) (33) (225) (155)
4Q11E 4,599 101 (53) (12) (230) (210)
FY11E 19,664 937 (189) (126) (856) (728)
FY12E 19,696 1,153 (211) (85) (850) 20 Agency Ratings BB+/Ba1 BB+/Ba2 BB/B1 B1/B
Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA
3,733 578 3,155 7.4X
3,901 393 3,508 2.3X
3,858 270 3,588 2.8X
4,055 250 3,805 10.1X
4,055 250 3,805 4.3X
4,041 228 3,813 3.5X
Comps Peabody Energy Steel Dynamics US Steel Corp. FMG
EBITDA/Interest EBITDA margin Capitalization Description Industrial Development Bonds Fairfield Caster Lease Other Capital Leases and obligations
1.8X 2.91%
9.0X 8.46%
8.9X 6.69%
1.9X 2.19%
5.0X 4.76%
5.5X 5.85%
Size 458.0 10.0 80.0 142.0 114.0 300.0 450.0 500.0 350.0 600.0 863.0 3,858.0 4,230.7 7,818.7
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total Liquidity 1,296.0 230.5 1,065.5 625.0 75.0 550.0 270.0 1,885.5
Revolver drawings (US, USSK, and USSS) Province note (Stelco-related) 5.65% Senior Notes due 2013 6.05% Senior Notes due 2017 7.00% Senior Notes due 2018 6.65% Senior Notes due 2037 7.375% Senior Notes due 2020 4% Convertible Notes due 2014 Total Debt Market Cap Enterprise Value Maturities 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012-13 2014-15
4.1x 8.3x
Thereafter
189
January 26, 2012
High Yield
Unisys Corp. (UIS)

Updated 1/26/2012
212-902-7537 212-357-2769
NOT COVERED
$216
12.750
Sr. Secured
15-Oct-14
Ba1/BB+
106.38
10/15/2012
114.13
1.6%
148
Company Description
Unisys provides IT consulting and operations services to its global customer base. This includes systems integration and consulting, IT and process outsourcing, IT infrastructure development and maintenance, and security. Servicesrelated revenues contributed approximately 88% of total revenues. The remaining 12% of revenues is driven by the Technology segment, mainly enterprise server sales. Business with the US government represents a sizable portion of UIS's revenues at approximately 20%.
Key Dates/Catalysts: - Unisys will report 4Q2011 earnings on January 31, 2012.
Company Strengths: - Proactive capital structure actions: UIS priced 2.6 million shares of mandatory convertible preferred stock in 1Q2011 for net proceeds of $250 million. In April, the company used the proceeds to purchase $44 million of its senior secured notes due 2014 and $135 million of its senior secured notes due 2015. In October 2011, Unisys called for the redemption of the remaining $66 million of its 8% senior notes due 2012, with the redemption to take place in November. - Adequate cash balances support restructuring while also offsetting recent earnings weakness. - Competitive strength has been in government security programs, which are typically long-lived and provide steady growth. Company Risks: - Technology segment (12% of revenues) has been volatile, offsetting some of UIS's recent restructuring benefits. - Relatively small in size versus competitors. UIS competes against larger companies such as EDS, IBM, and Accenture, which have better financial profiles.
Financial Profile
2009A
2010A
1Q2011A
2Q2011A
3Q2011A LTM-3Q2011
Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt
4,598 698 (95) (42) (144) 194 912 648 264 1.3 x 0.4 x 7.3 x 15.2%
4,060 635 (102) (57) (147) 132 824 828 (4) 1.3 x 0.0 x 6.2 x 15.6%
911 95 (26) (33) (32) (15) 619 833 (214) 1.0 x -0.4 x 6.0 x 10.4%
937 98 (13) 9 (17) 7 447 625 (178) 0.9 x -0.3 x 5.9 x 10.4%
1,020 160 (13) (33) (15) 65 445 667 (222) 0.8 x -0.4 x 7.1 x 15.7%
3,913 548 (77) (61) (91) 202 445 667 (222) 0.8 x -0.4 x 7.1 x 14.0%
Comps
Leverage
Coverage
Ratings
JDAS SGS
1.9x 3.0x
7.1x 2.8x
B1/BBB1/B+

Size
Debt to EBITDA
Liquidity
12.75% Sr Sec Notes due 2014 14.25% Sr Sec Notes due 2015 Other 8.0% Sr Unsec Notes due 2012 12.5% Sr Unsec Notes due 2016
Total Debt Market Cap Enterprise Value
216 26 (13) 66 150

445
0.4 x 0.4 x 0.4 x 0.8 x 0.8 x

0.8 x 1.2 x
Revolver Size A/R securitization facility Cash Total Liquidity
0 150 667
817
886
664
Maturities:
250 200 150 100 50 0 2012 2013 2014 2015 After
190
January 26, 2012
High Yield
United Continental Holdings, Inc. (UAL)

OUTPERFORM/IN-LINE/UNDERPERFORM
Bond Summary Size (MM) $506 $87 $378 $219 $703 $345 Coupon (%) 10.400 12.000 6.636 7.875 5.983 9.000 Priority EETC EETC EETC EETC EETC EETC Maturity 1-Nov-16 15-Jan-16 2-Jul-22 2-Jul-18 19-Apr-22 8-Jul-16 Agency Ratings Baa2/BBB+ Ba2/BB+ Baa2/BB+ Ba3/B Baa1/ABaa2/BBB+ NC NC NC NC NC NC
Updated 1/24/2012
212-357-6711 212-357-9774
Next Call Price Date NC NC NC NC NC NC
Bid Price 113.75 #N/A N/A 102.75 99.25 106.31 113.25
YTW (%) 4.74% #VALUE! 6.13% 8.13% 4.97% 5.14%
STW bp 444 #N/A N/A 481 783 365 484
Company Description
United Continental is the world's largest airline, offering service to approximately 375 locations through its mainline United and regional United Express offerings. It is a member of the Star Alliance, the world's largest airline alliance. The company is focused on its main hub cities of Chicago, Denver, Los Angeles, San Francisco, Washington Dulles, Newark, Houston, and Cleveland. Of the major network carriers, United (along with Delta) has some of the largest exposure to the Pacific region. United and Continental announced their merger in 2010 and received a single operating certifcate at the end of 2011. Key Dates/Catalysts: UAL is expected to report earnings on January 26.
Investment Strengths: - Size: United is the wordl's largest airline and it has now received a single operating certifcate with Continental, allowing it to further integrate its operations and achieve synergies. - Asia routes: United (along with Delta) is the major US carrier to Asia. Its operations in Los Angeles and San Francisco give it hubs close to Asia. It also enjoys fifth freedom rights in Japan. - While December monthly PRASM was up by less than expected (up 4-5% yoy), PRASM trends have been decent for the airlines despite macroeconomic concerns. Investment Risks: - High fuel prices are a continued risk for airlines. - Limited unencumbered collateral: United has limited unencumbered assets that it could use to raise additional secured debt. - Risk to routes/slots bond refinancing depending on the outcome of the AMR bankruptcy. UAL has $700 million of routes/slots bonds maturing in 2013 and another $800 million of routes/slots bonds maturing in 2015. Its $1.2 billion credit facility matures in 2012.
FY10 34,013 6,498 (993) 5 (779) 2,421 15,133 8,717 6,416 6.5 x 2.3 x 19.1%
2Q11 9,702 1,484 (237) (4) (177) 576 13,598 8,625 4,973 6.3 x 15.3%
3Q11 10,171 1,694 (211) (7) (211) 174 13,157 8,407 4,750 8.0 x 16.7%
4Q11E 8,773 946 (212) 0 (300) (25) 12,771 8,025 4,746 4.5 x 10.8%
FY11E 36,848 4,876 (904) (13) (931) 1,487 12,771 8,025 4,746 5.4 x 2.6 x 13.2%
FY12E 36,935 4,944 (838) (76) (1,909) 739 12,718 8,711 4,007 5.9 x 2.6 x 13.4%
Leverage 2.6x 3.9x 2.1x 4.5x 3.6x
Coverage 5.4x 4.1x 9.9x 4.6x 3.9x
Capitalization Description Old CAL secured debt UAUA Fixed rate secureds 6.636% due 7/2/22 (2007-1, A) 7.336% due 7/2/19 (2007-1, B) L + 225 due 7/2/14 (2007-1, C) 10.4% due 11/1/16 (2009-1, A) 9.75% due 1/15/17 (2009-2, A) Other Total debt Market Cap Enterprise Value Size 4,384 455 378 84 74 599 621 6,562 13,157.0 7,176.2 11,926.2 2.4 x 2.7 x Cash Total Liquidity 8,407 8,586 Debt to EBITDAR Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 405 226 0 179
Maturities: 6,000 5,000 4,000 3,000 2,000 1,000 0 2012 2013 2014 2015 Thereafter
191
January 26, 2012
High Yield
United Surgical Partners Intl (USPI)

OUTPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate USPI Outperform, as we view USPI and ambulatory surgery centers as well positioned to benefit in a cost-conscious healthcare environment. In addition, with less than 20% of revenue from Medicare, reimbursement risk is lower than other providers. Over the longer term, we believe USPI is well positioned to be a consolidator of ambulatory surgery centers. Bond Summary Size (MM) $240 $198 Coupon (%) 8.875% 9.25% Priority Sr. Sub.
Sub. PIK Toggle
Agency Maturity 1-May-17 1-May-17 Ratings Caa1/CCC+ Caa1/CCC+ Price
Next Call Date 5/1/2012 5/1/2012 104.438 104.625
Bid Price 103.000 101.000
YTW (%) 7.81% 8.88%
STW bp 748 855 Investment Strengths: - Well-positioned industry owing to trend toward outpatient settings. Outpatient procedures are on the rise as a result of technological advances that allow less-invasive procedures and cost saving of shorter hospital stays. - Partnerships with local hospital systems allow USPI to benefit from hospital rate setting, with managed care resulting in better rates. - Good growth prospects. Industry is ripe for consolidation, with the top five chains controlling less than 15% of the market. Investment Risks: - Centers are not wholly owned and equity minority owners are paid dividends prior to debt service. The average USPI ownership is roughly 35%.
USPI operates 186 multi-specialty ambulatory surgery centers (ASC) across the US, and five surgical hospitals in the UK. Centers are owned in partnership with doctors and, in many cases, local hospital systems. ASCs present a powerful value proposition to payers (procedures performed at ASCs cost less than the same procedures performed at a general hospital), doctors (better scheduling and equity ownership), and patients (less intimidating setting than hospital). USPI is differentiated from its competitors by its strong relationships with hospital systems which translate into higher reimbursement rates from managed care and facility concentration in select cities. Key Dates/Catalysts: - Quarterly earnings announcements (An improving trend in ss case growth is key. Recent quarters have been around 2% compared with the 4% historical level.) - Potential acquisitions, reflecting our view that the industry is likely to consolidate.
Company Description
2009A $622 201 $71 (0) 32 90
2010A $598 203 $70 33 40 74
2011E $603 201 $68 40 31 79
4Q10A $154 55 $17 8 11 7
3Q11A $149 48 $16 9 15 35
4Q11E $155 52 $18 10 9 11
- Rate pressure from managed care.
Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolver 4/19/2013* Term Loan--US due 4/19/2014 Term Loan--UK due 4/19/2014
$1,146 35 1,111 0.6x 5.5x 2.8x 32.3%
$1,144 60 1,084 0.5x 5.3x 2.9x 33.9%
$1,131 52 1,079 0.5x 5.4x 3.0x 33.3%
$1,144 60 1,084
$1,116 56 1,061
$1,131 52 1,079
LTM Comps USPI SCAFF Sr SCAFF Sub VANGUA IAS
Leverage 5.2x 4.8x 6.0x 4.3x 6.0x
Coverage 3.0x NA 1.3x 2.9x 2.1x
Agency Ratings Caa1/CCC+ B3/BCaa1/CCC+ B3/BCaa1/CCC+
3.2x 35.9%
3.0x 31.9%
3.0x 33.8%
Size $16 504 51 47 619 $0 $240 $198 438 $2 1,058 NA NA
Debt to LTM EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $85 2 16 67 $0 0 0 $56 123
Secured debt at Consolidated Subsidiaries Total Sr Sec debt Total Sr bonds 8.875% Snr Sub Notes due 2017 9.25% Snr Sub PIK Toggle Notes due 2017 Total Sub debt Other Total Debt Market Cap Enterprise Value *$16mn was borrowed on the revolver after quarter end. Maturities: 600 500 400 300 200 100 0 2012 2013
3.0x 3.0x
3.1x A/R facility 3.1x Borrowings A/R Availability Cash
5.2x
5.3x
Total Liquidity
5.2x
5.3x
Plus $150 mm incremental credit facility available under certain conditions
2014
2015+
192
January 26, 2012
High Yield
Universal Health Services (UHS)

UNDERPERFORM (secureds)/IN-LINE(unsecureds)
Updated 01/25/12
212-855-7718 212-902-9758
We are In-Line on the seniors and we are Underperform on the secureds. The secureds trade tightest of the hospitals by a wide margin despite mid-3x leverage. We see the modest benefits of the behavioral business as offset by the company's very urban portfolio. Though behavioral health is well positioned relative to acute care owing to a favorable supply/demand mismatch of beds, its exposure to state Medicaid funding is a risk. Bond Summary Size (MM) $400 $250 Coupon (%) 7.125 7.00 Priority Sr Sec Notes Sr Uns Maturity 30-Jun-16 1-Oct-18 Agency Ratings Baa3/BB+ B1/B+ Next Call Price T+30 103.5 Date MW 1-Oct-14 Bid Price $110.000 $104.000 YTW (%) 4.596% 6.002% STW bp 427 520 Investment Strengths: - Opportunity for de-levering through synergies from the PSYS acquisition. - Behavioral health business improves margins and diversifies risk. EBITDA margin is higher in this segment than in acute care (low 20%s compared with low teens % for acute care), and bad debt risk is much lower, as most admissions are made only after pre-approval from the payer. However, behavioral health is more dependent on state Medicaid dollars. Investment Risks: - Medicare and Medicaid reimbursement could be reduced - Integration risk: UHS plans to roll the acquired PSYS facilities into its existing regional management structure. - Concentration in Las Vegas, which has experienced higher-than-average unemployment. - Acute care volumes have been weak across the industry and are expected to remain so for the near term. - Management maintains voting control (84%). 5-Year Uns 195 / 205
Company Description
UHS is a mid-sized hospital operator with 25 acute care hospitals, 179 behavioral health centers, and 7 other facilities (surgical hospitals, ambulatory surgery centers, and radiation oncology centers). The companys footprint is concentrated in the west and southwest regions of the country, with five acute care facilities in the Las Vegas, Nevada, area. In November 2010, UHS closed its acquisition of Psychiatric Solutions (PSYS) for $3.1 bn. Pro forma for the acquisition, UHS's behavioral health segment (psychiatric hospitals and boarding schools) will contribute about 58% of EBITDA, up from 40% before the acquisition. In November 2011, UHS signed a definitive agreement to acquire Knapp Medical Center, which has annual revenue of approximately $140 mn. The acquisition is expected to close in 1Q12. Key Dates/Catalysts: - Quarterly earnings announcements, including progress on planned synergies. - Potential for additional large, debt-funded acquisitions, as management has suggested this possibility at recent investor events. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals.
Financial Profile Revenue EBITDA Rent Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt+8*rent/EBITDAR Net Debt+8*rent/EBITDAR EBITDAR/Interest+rent EBITDA margin
2009A $5,202 702 70 $46 170 380 137 $1,052 9 1,042
2010A $5,568 761 77 $78 152 239 243 $3,916 29 3,886
2011E $7,545 1,190 94 $201 251 323 379 $3,642 47 3,595
4Q10A $1,559 223 22 $41 38 62 35 $3,916 29 3,886
3Q11A $1,849 271 23 $48 52 96 106 $3,688 39 3,649
4Q11E $1,884 283 24 $46 58 100 54 $3,642 47 3,595
Comps UHS sec 2.1x 2.1x 6.7x 13.5% 5.4x 5.4x 5.4x 13.7% 3.4x 3.4x 4.4x 15.8% 3.8x 14.3% 4.1x 14.6% 4.4x 15.0% UHS uns HMA 1st Lien HCA 1st ln HCA sr uns
Leverage 2.9x 3.2x 3.0x 2.8x 4.2x
Coverage NA 0.2x NA NA NA
Agency Ratings Baa3/BB+ B1/B+ --/BBBa3/BB B3/B-
Capitalization
Debt to PF LTM EBITDA Debt to 2011E EBITDA
Description Revolving Credit Facility 11/15/2015* AR Revolver 10/25/2013 Revenue bonds + mortgage payables Term Loan A due 11/15/2015 Term Loan B due 1115/2016 Old PSYS debt Total bank debt 6.75% Sr. Sec. Notes due 11/15/2011* 7.125% Sr. Sec. Notes due 6/30/2016 Total Secured debt 7.000% Sr. Notes due 10/1/2018 Total Sr debt Total Debt Market Cap Enterprise Value Rent-adjusted leverage
*Assumes 2011 notes were repaid with revolver borrowings. LTM PF includes PSYS EBITDA.
Size $250 $240 $5 $1,023 $1,459 $24 $3,002 0 400 400 250 $250 $3,652 4,042 $7,655 4,398
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility $800 64 250 $486 $240 240 $0 $39 $525
2.6x
2.5x
Borrowings A/R Availability Cash
2.9x
2.9x
Total Liquidity
3.2x 3.2x 6.6x 3.5x
2.7x 3.1x 6.4x 3.4x
Maturities: 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015+
193
January 26, 2012
High Yield
US Airways Group, Inc. (LCC)

IN-LINE
Bond Summary Size (MM) $254 $73 Coupon (%) 6.250 8.500 Priority EETC EETC Maturity 22-Apr-23 22-Apr-17 Agency Ratings Ba2/BBB B2/B+ Price MW MW
Updated 1/24/2012
212-357-9774 212-357-6711
Next Call Date MW MW
Bid Price 95.75 95.50
YTW (%) 7.07% 10.13%
STW bp 575 982
Company Description
US Airways is the fifth largest airline in the US and the smallest of the mainline carriers. It has hubs in Charlotte, Philadelphia and Phoenix and operates the US Airways Shuttle between La Guardia, Boston and Washington National. It is a member of the Star Alliance. It is the only major US airline that does not currently hedge any of its fuel needs. It is one of the larger Airbus customers in the US.
Investment Strengths: - High proportion of leased aircraft. LCC has the highest proportion of leased aircraft of all the airlines we cover. This should increase its flexibility to return older aircraft and reduce capacity if necessary.
- Solid express business. US Airways Express makes up about 17% of LCC's total ASMs. Express flights generally have a higher PRASM which helps LCC's overall PRASM numbers.
Key Dates/Catalysts: US Airways is expected to report earnings January 25.
Investment Risks: - Consolidation. US Airways has been a persistent advocate for further consolidation in the US airline industry and has been linked to a possible bid for AMR in recent press reports.
- Weak hub markets. With hubs in Charlotte, Philadelphia and Phoenix, US Airways lacks a presence in the largest cities and business markets in the US. - Unhedged. US Airways is the only major US carrier that does not hedge fuel, which could expose it to large swings in costs if fuel prices rise. - Limited international operations. US Airways flies to Europe and Latin America but does not serve any destinations in the Pacific.
(thousands of dollars) Financial Profile Revenue EBITDAR Interest Expense Income Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics EBITDA/Interest Leverage EBITDA margin 5.2 x 2.6 x 14.3% 11.6% 12.0% 8.0% 5.1 x 4.8 x 2.9 x 3.9 x 3.6 x 9.6% 3.7 x 3.6 x 10.2% FY10 11,908 1,699 (329) 0 (201) 603 4,400 1,859 2,541 2Q11 3,503 405 (79) 0 (66) 158 4,342 2,247 2,095 3Q11 3,436 411 (85) (21) (210) (314) 4,471 2,043 2,428 4Q11E 3,108 250 (85) 3 (188) (304) 4,512 1,780 2,732 FY11E 13,008 1,254 (322) (18) (504) (155) 4,512 1,780 2,732 FY12E 13,089 1,335 (362) (4) (778) (493) 4,787 1,562 3,225
Leverage 2.6x 3.9x 2.1x 4.5x 3.6x
Coverage 5.4x 4.1x 9.9x 4.6x 3.9x
Capitalization Description Size 1,136.0 1,609.0 1,245.0 77.0 200.0 165.0 29.0 10.0 4,471.0 1,265.0 3,693.0 2.9 x 3.6 x Cash Total Liquidity 2,043 2,043 Debt to EBITDAR Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability 0 0 0 0
Termloan,matures2014 Equipmentnotespayable EETCs Othersecureddebt PrepaidMiles AirbusAdvance Industrialdevelopmentbonds Otherdebt

Total debt Public Market Cap Enterprise Value
Maturities:
1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015 Thereafter
194
January 26, 2012
High Yield
Valeant Pharmaceuticals (VRXCN)

OUTPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate VRX Outperform as we think the bonds trade cheap enough to offset what we see as a small risk of VRX making a multi-billion, levering acquisition. Fundamentally, we like VRXs (1) highly diversified revenue base with the largest product only 6% of sales, (2) minimal patent exposure, and (3) solid free cash flow. While the company has been acquisitive and shareholder friendly in the past 12 months, we find that leverage has actually not increased since the close of the BVF merger. Bond Summary Size (MM) $500 $700 Coupon (%) 6.75 7.00 Priority Sr Nts Sr Nts Maturity 1-Oct-17 1-Oct-20 Agency Ratings B1/BBB1/BBPrice $103.375 $103.500 Next Call Date 10/1/2014 10/1/2015 Bid Price $101.500 $101.000 YTW (%) 6.371% 6.808% STW bp 562 550 Investment Strengths: - Diversified product offering and geographic mix. No one product is more than 10% of revenue. - Strong free cash flow generation: VRX generates strong FCF (17% LTM), as it benefits from modest capex and low R&D. - Favorable tax rate due to BVF's Barbados subsidiary. VRX expects to reduce its cash tax rate to less than 10% from 36% for 2011. Investment Risks: - Most of the company's top drugs are maturing and facing declining sales profiles. - Potential for share repurchases. Management is strongly focused on EPS growth. - The "virtual R&D" business model requires VRX to be a continual acquirer, which could mean repeat bond issuances. VRX's recent acquisitions have been focused on dermatology as well as European branded generics.
Company Description
Valeant Pharmaceuticals (VRX) is a specialty pharmaceutical company that acquires, manufactures, and markets a broad range of pharmaceutical products, including branded products in the US, Canada, and Australia and "branded" generics in Eastern Europe and Latin America. Branded generics are products that are bioequivalent to original products, but marketed under company brand names. The company's key products are Wellbutrin, Zovirax, Xenazine (all acquired with BVF) and Benzaclin (acquired with Dermik). Key new epilepsy drug retigabine (brand names Potiga and Trobalt) was recently approved in Europe and in the US. On September 28, 2010, specialty pharma company Biovail (BVF) and VRX merged. In November 2010, February 2011, and March 2011, VRX issued a total of $3.15 bn of debt, the proceeds of which it used to repurchase shares, pay down all of term loan A, repay the 4% convertible notes, and fund two acquisitions, PharmaSwiss and the rights to Zovirax for US and Canada. In March 2011, VRX announced a bid to acquire Cephalon (CEPH), which would have been all debt funded for a total of $6.7 bn. CEPH's board rejected the bid. CEPH was later acquired by TEVA for $81.50 per share. Between June 2011 and January 2012, VRX closed the licensing agreement for Elidel and Xerese for $76 mn, the roughly $500 mn acquisition of Sanitas, the $425 mn acquisition of Dermik, the $345mn acquisition of Ortho Dermatologics, the Zuacta distribution agreement, the $91mn acquisition of Afexa, and the A$625mn acquisition of iNova. The company has put in place a $2.225 bn term loan in order to finance all the acquisitions and has previously indicated that it intends to repay 50% of the roughly $1 bn it would raise to fund recently announced acquisitions within two years. In December 2011, VRX also made a hostile bid for ISTA for $6.50 a share and later increased it to $7.50 a share for an acquisition price of roughly $370 mn. The offer expires January 31, 2012. Key Dates/Catalysts: -Possible debt repayment in accordance with July comments that would repay about half of the new debt - Possible acquisition announcements ; acquisitions have been historically purely debt funded. - Potential share repurchase. - Potential sale of Potiga. Financial Profile Revenue EBITDA Interest paid Taxes paid Capex Free Cash Flow Total Debt Cash & marketable securities Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin 7.6x 6.7x 5.0x 39.8% 4.2x 4.1x 4.6x 47.9% 5.4x 5.2x 3.8x 50.6% 4.7x 48.0% 3.6x 51.2% 4.0x 51.2% 2010A $1,210 482 $96 (0) 0 0 $3,641 394 3,246 PF LTM* $3,306 1,585 $346 0 38 1,124 $6,714 258 6,456 2011E** $2,443 1,236 $321 (39) 52 653 $6,714 323 6,391 4Q10A $515 247 $52 (103) 0 0 $3,641 394 3,246 3Q11A $601 307 $86 (29) 10 164 $5,250 258 4,992 4Q11E $668 342 $85 6 8 210 $6,714 323 6,391
Comps Valeant Pharma (VRX) Warner Chilcott (WCRX) Mylan (MYL) Endo (ENDP)
Agency Ratings B1/BBB3/B+ B1/BBBa3/BB-
* PF LTM includes a full year of all recently closed acquisitions but not future projected synergies. ** 2011 estimates is not pro forma for a full year of acquisitions.
Capitalization pro forma for 4% convert redemption and new revolver. PF for convert/ revolver $220 $2,225 $2,445 $500 $690 $19 $945 $650 $916 $550 $4,269 $68 $6,782 14,808 $21,183 4.3x 13.4x 4.3x 13.3x 4.2x 4.2x Cash & marketable securities Total Liquidity $258 $313 1.5x 1.5x Debt to PF LTM EBITDA* Debt to PF 2011E EBITDA*
Description Revolving Credit Facility 4/20/2016 Term Loan A 4/20/2016 Total sr sec debt 6.750% Sr Notes due 2017 7.000% Sr Notes due 2020** 5.375% BVF converts due 2014** 6.875% Sr Notes due 12/1/2018** 6.75% Sr Notes due 8/15/2021 6.5% Sr Notes due 7/15/2016** 7.25% Sr Notes due 7/15/2022 Total sr bonds Other debt Total Debt Market Cap Enterprise Value
Liquidity Revolver Size Letters of credit Borrowings Revolver Availability 275 0 220 55
* PF LTM EBITDA and PF 2011E is pro forma for a full year of all recently closed acquisitions but not future projected synergies. ** PF for additional repurchase of BVF converts and $100mn face value repurchase of HY bonds in 4Q11.
Maturities: 8000 7000 6000 5000 4000 3000 2000 1000 0 2012 2013 2014 2015+
195
January 26, 2012
High Yield
Vanguard Health (VHS)

UNDERPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate Vanguard Underperform due to (1) the risk of Medicare cuts, as Vanguard's low margins magnify the effect of revenue cuts on EBITDA; (2) risk to growth in Detroit in a tough economy as well as capital commitments weighing down on FCF; and (3) our view that the Arizona Medicaid plan is likely to be a drag for now. Bond Summary Size Coupon (MM) $950 (%) 8.00 Priority Sr Maturity 01-Feb-18 Agency Ratings B3/BNext Call Price $104.000 Date 01-Feb-14 Bid Price $104.000 YTW (%) 6.841% STW (bp) 651 Investment Strengths: - Market concentration improves the hospitals' negotiating position with managed care payers. - Opportunity for growth due to recent large acquisitions.
Company Description
Smaller hospital operator with 28 facilities concentrated in five markets: San Antonio, the greater Phoenix area, Chicago, Massachusetts, and Detroit. VANGUA is differentiated from its peers based on its high market concentrations. As a result of its market-concentration strategy, acquisitions have been "lumpy," consisting of several facilities in one area. The acquisition of Detroit Medical Center (eight facilities with a $417 million purchase price) was completed December 31, 2010, and the acquisitions of Arizona Heart Hospital (59 beds) and Avera Heart Hospital of South Dakota (55 beds) closed on October 4, 2010. In September 2011, VHS acquired a 51% interest in Valley Baptist, which is expected to generate $525 mn of revenues. In June 2011, VHS issued 25 mn shares in an initial public offering at $18 a share or approximately 6.5x EV/EBITDA. In July 2011, the underwriters exercised in full the over-allotment option and issued an additional 3.75 mn shares at $18 per share. To date, the company has redeemed $628.8 mn and another $95.2 mn of the 10.375% discount notes, leaving 3% of the principal left. Proceeds of the discount holdco notes were for a dividend to the sponsors of $447 mn. Blackstone and Morgan Stanley Capital Partners are the sponsors. Key Dates/Catalysts: - Quarterly earnings announcements (commercial volumes have been weak industry-wide, although bad debt expense has been relatively stable). DMC performance will be key, as the Detroit market will now comprise more than a third of VHS revenues. - Potential acquisition announcements. - Election results (November 2012) and potential Supreme Court decision on the constitutionality of the individual mandate could determine the fate of the Affordable Care Act (ACA). We view the ACA as a net positive for hospitals.
Investment Risks: - Medicare and Medicaid reimbursement could be reduced - Integration risk associated with Detroit Medical Center. The deal also includes a $850 million capex commitment and the assumption of a $228 million pension liability. - Volumes have been weak across the industry and are expected to remain so for the near term. - The health plan is likely to post declining revenue in the near term due to reduced enrollment.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolving Credit Facility 1/29/2015 Term Loans due 1/29/2016 Total Sr Sec debt 8% Senior Notes due 2018 7.75% Senior Notes due 2/1/2019 Total Sr bonds 10.375% Holdco notes due 2/1/2016 Other Debt and Capital Leases Total Debt Market Cap Enterprise Value
*LTM is pro forma for acquisitions.
FY2011
PF LTM
FY2012E
Dec 10 2Q $961 85 $35 10 35 (8) $1,968 58 1,909
Sept 11 1Q $1,570 122 $46 (14) 63 (151) $2,346 155 2,192
Dec 11 2QE $1,650 136 $42 12 80 101 $2,344 253 2,091 LTM Comps VANGUA THC uns IAS Leverage 4.3x 3.9x 6.0x Coverage 2.9x 2.7x 2.1x Agency Ratings B3/BCaa1/CCC+ Caa1/CCC+
$4,896 418 $171 9 207 70 $2,788 937 1,851 6.7x 4.4x 2.4x 8.5%
$6,561 534 $183 (2) 263 90 $2,346 155 2,192 4.4x 4.1x 2.9x 8.1%
$6,555 537 $172 25 383 (68) $2,340 232 2,108 4.4x 3.9x 3.1x 8.2%
2.4x 8.8%
2.7x 7.8%
3.2x 8.3%
Size $0 805 805 1,157 350 $1,507 $15 $20 $2,346 870 $3,061
Debt to PF LTM EBITDA*
Debt to FY12E EBITDA
Liquidity Revolver Size Letters of Credit $260 34 0 226 $155 $380
1.5x
1.5x
Borrowings Revolver Availability Cash
4.3x
4.3x
Total Liquidity
4.4x 5.7x
4.4x 5.7x
Maturities: 2,800 2,400 2,000 1,600 1,200 800 400 0 2012 2013 2014 2015+
196
January 26, 2012
High Yield
Venoco Inc. (VQ)

IN-LINE
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Bid Price $103.00
YTW (%) 10.66%
STW bp 1036 Investment Strengths: Largest natural gas producer in California Significant growth opportunities in Sac Basin, W Montalvo, and S Ellwood fields 83% of 2012E production hedged Investment Risks: Weak operating history as a public company Limited exposure to high visibility plays; high average cost production Equity-friendly management appears to have higherthan-peer-average sustained leverage targets High capex needs relative to cash flow Key Dates/Catalysts: Monterey shale well results Management expects to sell its Hastings Field interest for $250-400 mn Take private transaction and subsequent strategy
Company Description
Venoco is a California-focused E&P and probably the largest gas producer in the state. VQ produces from four primary regions: Sacramento Basin, offshore California, Southern CA onshore, and Texas. The company's strategy has been to acquire and enhance under-invested properties. Following operational missteps in 2007, however, we believe management has become more internally focused, making execution the near-term priority. Formerly a petroleum engineer at Unocal, CEO Tim Marquez co-founded Venoco in 1992. The company acquired interests in its "workhorse" Willows and Grimes fields near Sacramento from Mobil in 1996. In 1998, VQ acquired Sacramento Delta fields from Chevron. VQ purchased TexCal in 2006 for $456 mn in cash, which created both Sacramento Basin and Hastings Field exposure. VQ also owns three platforms offshore Santa Barbara (Gail, Holly, and Grace), which the company acquired in the late 1990s. The company went public in November 2005 and remains closely held by Marquez (60%). In March 2007, VQ acquired the Manvel (TX) and West Montalvo (coastal CA) fields for $106 mn. In April 2010, the company announced the sale of three assets in Texas for $100 mn. On August 29, 2011 Venoco received a proposal from CEO Timothy Marquez to take the company private at $12.50/share ($770 mn). In January 2012, VQ announced it would go through with the offer by Marquez.
2008A $463 $261 ($106) $319
2009A $342 $189 ($58) $177
2010A $333 $188 ($51) $212
2011E $339 $183 ($151) $245
2012E $389 $242 ($79) $256
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2017-2019 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $644 $644 $682 $0 $40 $722 3.7x Size $0 $38 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $200 $4 $38 $158 $0 $158 2008A 3.1x 4.6x 120% 2009A 3.7x 4.6x 134% 2010A 3.4x 4.6x 115% 2011E 3.9x 3.0x 94% 2012E 3.2x 3.6x 85% VQ SGY MMR WTI
Leverage ('11E) 3.9x 1.0x 2.0x 1.2x
Coverage ('11E) 3.0x 33.5x 15.5x 15.8x
Agency Ratings Caa1/B Caa2/CCC+ Caa1/B Caa1/B
Maturities:
600
500 400 300 200 100 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
197
January 26, 2012
High Yield
Viasystems, Inc. (VIASYS)

UNDERPERFORM
Bond Summary Size (MM) $214 Coupon (%) 12.0 Priority Sec Maturity 15-Jan-15 Agency Ratings B2/BB106
Updated 1/26/2012
212-902-7537 212-357-2769
Next Call Price Date 7/15/2012
Bid Price 108.13
YTW (%) 6.8%
STW bp 668 Investment Strengths: - Low-cost manufacturing footprint enhances competitive position: VIAS is one of the largest manufacturers of complex high quality PCBs in China, with over 3 million square feet of low-cost manufacturing capacity. - Merix merger has enhanced customer diversity and scale: The merger has helped VIAS expand its OEM and CEM customer base from 125 at the end of 2009 to over 800 today, with product solutions spanning all relevant PCB market segments. Investment Risks: - Margin pressure: Higher copper and material costs, coupled with increased Chinese labor costs, have pressured margins. - Customer concentration: In 2010, sales to its 10 largest customers accounted for approximately 58% of the companys net sales (down from 74% in 2009). - Maintenance covenant: VIAS must comply with a minimum fixed charge coverage ratio of 1.1x if excess availability under its ABL facility is less than $15 million.
Company Description
Viasystems, Inc., is a leading international provider of complex multi-layer PCBs and electro-mechanical solutions (E-M Solutions). A printed circuit board (PCB) is a rigid or flexible substrate made of layers of copper circuit patterns separated by insulating material. PCBs form the backbone of most electronic devices, and provide the surface on which electronic components and connections are mounted. Viasystems primarily competes against other Asian and US PCB manufacturers, including TTM, Ibiden, Kingboard, Compeq and Gold Circuit Electronics. The company also competes with EMS providers like Jabil and Flextronics. The company merged with Merix on February 16, 2010, to enhance Viasystems PCB capabilities and help further diversify its customer base. Merix generated $254 million of revenues and $5 million of EBITDA in 2009. Key Dates/Catalysts: - Viasystems is expected to report 4Q2011 earnings in February2012.
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description $75 mm ABL facility Foreign credit facilities Capital leases 12% 2nd lien notes due 2015 Other Total Debt Less cash Net Debt
FY08 713 92 (24) (6) (49) 5 221 83 138 2.4 x 1.5 x 3.9 x 12.9%
FY09 496 66 (36) (6) (22) 102 331 109 222 5.0 x 3.4 x 1.8 x 13.3%
FY10 929 142 (33) (13) (57) 18 225 104 122 1.6 x 0.9 x 4.3 x 15.2%
FY11E 1,055 137 (31) (15) (110) (43) 226 60 166 1.6 x 1.2 x 4.4 x 13.0%
FY12E 1,157 156 (31) (15) (110) (33) 226 27 199 1.5 x 1.3 x 5.0 x 13.5%
Comps AMKR SANM
Leverage 2.3x 3.6x
Coverage 6.6x 3.6x
Ratings Ba3/BB B1/B
Size 0 10 1 214 1 226 71 155
Debt to EBITDA 0.1 x 0.1 x 0.1 x 1.6 x 1.6 x 1.6 x -1.1 x
Liquidity US ABL facility US ABL facility availability - Amt Drawn - LCs Drawn Amt Unutilized Foreign credit facilities - Amt Drawn Amt Unutilized Cash Liquidity 75 40 0 0 39 45 10 35 71 145
Maturities: 250 200 150 100 50 0 2011 2012 2013 2014 Thereafter
198
January 26, 2012
High Yield
Videotron Ltd. (QBRCN)

Updated 1/20/12
212-902-2233 212-902-4427
NOT COVERED
$715
9.125
Sr Nts
15-Apr-18
Ba1/BB
104.563
15-Apr-13
110.75
3.68
335
Company Strengths: (1) Strong operational momentum: Videotron has posted impressive growth rates in recent years, driven by triple-play bundles. The recent launch of facility-based wireless service can add to its growth and further reduce churn through product bundling.
Company Description
Videotron is the largest cable operator in the Province of Quebec and the third largest in Canada. In addition to cable TV service, Videotron provides Internet, cable telephony, and mobile wireless telephony services in the Province of Quebec. Videotrons cable network covers roughly 90% of Quebecs approximately 3.3 million residential and commercial premises that are passed by cable. Videotron is a wholly owned subsidiary of Quebecor Media, which is one of Canadas leading media companies, with activities in cable distribution, business, residential and mobile wireless telecommunications, newspaper publishing, television broadcasting, book, magazine, and video retailing, publishing and distribution, music recording, production and distribution, and new media services.
Key Dates/Catalysts: March 2012: 4Q2011 earnings.
(2) Solid credit profile: Videotron has strong credit metrics, with low leverage (2.0x LTM), C$575 million of unused revolver, and no debt maturities until 2014.
Company Risks: (1) Wireless: Videotron is making an agressive push into the wireless space, which puts pressure on margins given the heavy upfront costs.
(C$, millions)
Financial Profile FY09A FY10A 1Q11A 2Q11A 3Q11A LTM
(2) Distributions to parent Quebecor Media: Videotron has distributed C$1.9 billion of cash to its parent, Quebecor Media, since 2004. Quebecor Media has been fairly acquisitive in the past, and it could use Videotron's strong balance sheet to help it fund future deals within the confines of the restricted payment capacity of the Videotron bonds. We estimate that Videotron currently has restricted payment capacity of about C$2.4 billion, and the basket grows by approximately C$800 million per year. (3) Large acquisitions. 1,777,025 1,084,100 1,170,570 1,014,038 82,813 C$2,001 973 365 C$1,833 150 1,683 1.9x 1.7x
48.6%
Basic Subscribers Digital Subscribers Data Subscribers Phone (VoIP) Subscribers Wireless Subscribers Revenue EBITDA Free Cash Flow Total Debt Cash Net Debt
1,811,600 1,219,600 1,252,100 1,114,300 136,100 C$2,209 1,036 58 C$2,133 96 2,037 2.1x 2.0x
46.9%
1,808,600 1,243,700 1,263,600 1,129,800 164,700 C$578 251 (7) C$2,133 65 2,068 2.1x 2.0x
43.4%
1,800,700 1,270,400 1,266,500 1,141,600 210,600 C$601 274 27 C$2,133 37 2,096 2.0x 2.0x
45.6%
1,844,200 1,348,100 1,306,400 1,179,400 258,100 C$612 275 87 C$2,109 89 2,021 2.0x 1.9x
45.0%
1,844,200 1,348,100 1,306,400 1,179,400 258,100 C$2,377 1,060 42

Agency
C$2,109 89 2,021 2.0x 1.9x

44.6%
Comps
Leverage
Coverage
Ratings
CSC Holdings DISH DBS Corporation Virgin Media Finance PLC
3.1x 2.4x 3.5x
3.2x 6.9x 3.4x
Ba3/BB Ba3/BBBa2/BB-
Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin

Capitalization *
Debt to Description Size EBITDA Liquidity
Revolver
Total Sr Sec Debt
C$0 C$0 503 206 800 300 300 C$2,109 NA NA 2.0x
Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity
C$575 C$575 C$89 C$664
6.875% Sr Nts due 2014* 6.375% Sr Nts due 2015* 9.125% Sr Nts due 2018* 7.125% Sr Nts due 2020 6.875% Sr Nts due 2021
Total Debt Market Cap Enterprise Value Maturities:
* Includes the impact of foreign exchange swaps to convert USD debt into CAD. 1,500 1,400
1,000
500 206 0 2012 2013 2014 2015 2016+
199
January 26, 2012
High Yield
Visant Corp. (VISANT)
Updated: 1/23/12
212-357-9918 212-902-4751
Contact analyst or see latest research for updates to ratings, estimates, and other information. IN-LINE: We continue to believe that the school affinity sector is sustainable over the long term. We believe VISANT is a solid credit with a solid managem we prefer the more attractive yield, security interest, and tighter covenant package in the AMEACH senior secured notes. Bond Summary Size Coupon Agency Bid YTW STW Z-Spd Next Call (MM) (%) Priority Maturity Ratings Price Date Price (%) bp bp $750 10.00 Sr Notes 1-Oct-17 Caa1/B- $107.50 1-Oct-13 90.00 12.51 1,174 1,138
Company Description
Visant Corp. is a specialty publishing and marketing company that operates in three segments: Memory Book, Scholastic, and Marketing & Publishing Services. Memory Book includes Visants yearbook and memory book services, while Scholastic includes class rings, varsity and chenille letters, caps and gowns, diplomas, and other graduate products. Through its Marketing & Publishing Services segment, Visant also provides fragrance and cosmetics samples and other direct marketing materials to corporations, and educational and trade book covers to publishers. Visant was founded in 2004 following the completion of a transaction between KKR and DLJ Merchant Banking Partners where they merged the businesses of Jostens, Arcade, and Von Hoffman. KKR and DLJ maintain a 45% ownership stake, with management and directors owning the majority of the remaining portion. Key Dates/Catalysts: - 3Q2011: announced lost yearbook contracts will result in revenue decline of 4% yoy in the Memory Book segment. Management expects to offset the lost revenue with expense reductions. - December 2011: Voluntarily repaid $60 million of term loans outstanding.
Investment Strengths: - Leading market positions across its product lines 35% market share in yearbooks, 30% share of class rings, over 50% share of book component production, and 70% share in flat fragrance sampling. - Marketing and Publishing Services stand to benefit from macro rebound owing to its long-standing, leading customer relationships. - Strong operating leverage with $1 of incremental revenue flowing through 50% to EBITDA. - Proactive management team. - Strong free cash flow generation: generated over $750 million in FCF from 2006 to 2011. - International growth opportunities: Current footprint in Canada and France and is looking to expand next in Brazil and China. Investment Risks: - Elevated gold prices hurting class ring margins, although this is partially offset by entering into forward contracts to hedge the price of gold. - Educational publishing exposed to muni budgets, could feel pressure from cutbacks in education funding. - Further economic slowdown could cause customers to trade down or delay the purchase of yearbooks and other products. - Shift toward internet away from direct marketing could impact its fragrance and cosmetic sampling businesses. - Lack of a clear exit strategy for current sponsors: an IPO may prove challenging due to no clear public Comps VISANT AMEACH MGM (srs) Leverage Coverage 6.2x 2.8x 6.9x 1.5x 9.2x 1.7x Ratings Caa1/BB3/B B3/B-
FY10A 1,240.9 339.4 120.2 27.5 50.2 141.4 2,012.4 60.2 5.9x 5.8x 2.8x 27.3%
1Q11A 250.7 48.8 42.6 (12.7) 12.8 6.0 1,985.5 25.2 5.9x 5.8x 1.1x 19.5%
2Q11A 493.2 191.2 39.6 49.7 14.6 87.2 1,982.7 53.0 6.0x 5.9x 4.8x 38.8%
3Q11A 227.7 45.4 39.5 (12.2) 14.8 3.2 2,031.6 37.3 6.2x 6.0x 1.1x 19.9%
4Q11E 245.9 39.3 40.2 (11.6) 7.0 3.7 1,919.6 114.0 5.9x 5.6x 1.0x 16.0%
FY11E 1,217.5 321.3 162.0 13.3 49.3 96.7 1,919.6 114.0 6.0x 5.6x 2.0x 26.4%
3Q11A 52.0 1,216.4 13.2 1,281.6 750.0 2,031.6
Debt to EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability A/R facility Borrowings A/R Availability Cash Total liquidity
Revolver due Dec 2015 ($175 mn) Term Loan due Dec 2016 (L+400, 125 Capital leases & equipment financings Total Secured Debt 10% Senior notes due Oct 2017 Total debt
3.9x 6.2x
3Q11A 175.0 12.3 52.0 110.7 NA NA NA 37.3 148.0
Maturities: 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016+
200
January 26, 2012
High Yield
VWR Funding (VWRINT)

OUTPERFORM
Updated 01/25/12
We rate VWR Outperform due to (1) the low-risk profile of the business and (2) positive momentum on top-line growth. The bonds are currently callable at $105.125, but management comments suggest a refinancing is not imminent. Therefore, because of the high coupon, we see the bonds as attractive short-duration paper. Bond Summary Size (MM) $713 Coupon (%) 10.25 Priority Sr. PIK Tog Maturity 15-Jul-15 Agency Ratings Caa1/BPrice $102.563 Next Call Date 15-Jul-12 Bid Price $103.750 YTW (%) 7.352% STW bp 725 Investment Strengths: - Diversified customer base and end markets: pharma and biotech (together 35%), universities (12% of revenue), chemicals, food, and consumer product companies. No customer accounts for more than 2.6% of revenue. - Opportunities to enhance EBITDA growth particularly growth in higher-margin private-label products, sourcing from India and China, and outsourcing back office to low-cost countries. - International exposure and diversity of VWR's customer base offset the company's exposure to the US recession. - Largest customer group is relatively recession-resistant: Laboratory spending by the pharmaceutical industry VWRs largest customer group has historically increased even during a recession. Investment Risks: - Economic recession could continue to affect customer spending and hurt VWR's revenues. - Low-margin, low-barriers-to-entry distribution business. - Highly levered. Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Revolving Credit Facility due 2013 AR Facility 11/4/2014 ($200 size) Term Loans--US due 2014 Term Loans--Euro due 2014 Total Sr Sec debt 10.25% Snr Uns PIK Toggles due 2015 Total Sr debt 10.75% Sub PIK Toggles due 2017--Dollar 10.75% Sub PIK Toggles due 2017--Euro Total Sub debt Capital Leases and Other Total Debt 8% Pref Equity Total Book Capitalization Maturities: 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015+ Size 119 0 601 792 $1,513 713 $713 359 171 $530 $17 $2,773 1,400 $4,173 7.0x 6.9x 7.0x 6.9x 5.6x 5.5x 3.8x 3.8x A/R facility* Borrowings A/R Availability Cash Total Liquidity *Only $165mn is available. $200 0 200 $109 $427
Debt to LTM EBITDA Debt to 2011E EBITDA
CompanyDescription
VWR is a global distributor of laboratory supplies and equipment (including chemicals, glassware, and protective clothing). The company also provides ancillary services such as calibration and inventory management, in many cases with a VWR employee on the customer site. The supply chain is highly fragmented, with many specialized suppliers and many customers. The average order size is less than $500. Major competitors are Thermo Fisher and Sigma Aldrich. VWR was purchased by CDR in April 2004 and by Madison Dearborn in June 2007. Year to date, VWR has made several acquisitions, including EBOS and Alfalab (a distributor in Poland) in 3Q2010; Amresco (a domestic distributor, $50 mn of sales) in 1Q2011; Trenka ($10 mn of sales) and BioExpress during 2Q2011; Anachemia ($65 mn of sales) which closed in 3Q2011 and LabPartners, which is expected to close in 4Q2011. Management has commented that its acquisition pipeline is still robust despite the recent increased pace. Management expects to fund future acquisitions out of CFO, as it has done recently. In November 2011, VWR entered into a new $200 mn A/R securitization facility ($165 mn is available, currently undrawn) in order to provide additional liquidity. Key Dates/Catalysts: - Quarterly earnings - Possible refinancing
Financial Profile Revenue EBITDA
2009A $3,561 329 $227 (26) 24 145 2,767 124 2,642 8.4x 8.0x 1.4x 9.2%
2010A $3,639 353 $205 28 42 81 2,672 142 2,530 7.6x 7.2x 1.7x 9.7%
2011E $4,175 401 $207 20 38 49 2,771 127 2,644 6.9x 6.6x 1.9x 9.6%
4Q10A $979 100 $47 15 15 43 2,672 142 2,530
3Q11A $1,066 105 $52 11 9 5 2,774 109 2,664
4Q11E $1,076 106 $55 8 13 24 2,771 131 2,640
- Sponsor equity is in the form of a preferred, with an 8% dividend yield that can be paid in cash at the discretion of the board (though it is limited by the credit agreement).
LTM Comps VWR (VWRINT) snr 2.1x 10.2% 2.0x 9.8% 1.9x 9.8% Catalent (PTSAC) snr IMS Health (RX)
Coverage 2.0x NA 2.5x
Agency Ratings Caa1/BCaa1/B B3/B
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability $250 13 119 118
201
January 26, 2012
High Yield
W&T Offshore (WTI)

OUTPERFORM
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Next Call Price 6/15/2015 Date $0.000
Bid Price $105.75
YTW (%) 7.19%
STW bp 642 Investment Strengths: Track record of consistency in the Gulf of Mexico, with 78%/90% average exploration/development success rates Commitment to funding capex with cash flow Management has historically issued equity when necessary to preserve balance sheet strength High insider ownership: CEO Tracy Krohn holds a 51% stake Investment Risks: Exposure to GOM, which is facing increased regulation following the Macondo oil spill Company has historically made cash-financed acquisitions Drillbit F&D costs have been very high Key Dates/Catalysts: Additional acquisitions, particularly onshore Results from Permian activity
Company Description
W&T Offshore is focused on exploration and production activities in the US Gulf, particularly in the conventional shelf. The company acquired its first deepwater interest in 2000, and has continued to increase its deepwater exposure over time. W&T Offshore was founded in 1983 with $12,000 by CEO Tracy Krohn. Krohn still owns over 50% of the shares. The company has made six significant acquisitions since 1999. In August 2006, WTI purchased 362bcf of proven gas reserves from Anadarko/Kerr-McGee for approximately $1 bn. The Kerr-McGee transaction included interests in 100 fields on 242 offshore blocks, 88 of which are undeveloped. The majority of the acreage is in water depths <1,000'. Following the addition of 1.1 mn acres from the acquisition, WTI became the third-largest shelf acreage holder in the US Gulf. Prior to the KMG transaction, WTI's largest acquisitions had been divestitures from ConocoPhillips (2003; 95bcfe) and Burlington (2002; 120bcfe). In January 2008, WTI closed the acquisition of Apache's Ship Shoal lease blocks for $116 mn. In November 2010, W&T announced that it would acquire interest in six offshore fields in the Gulf of Mexico from Shell for $450 mn. Subsequently, BP exercised its preferential rights to purchase on two of the four fields. As a result, WTI paid $193 mn for the other four fields. In April 2011, W&T announced the acquisition of 21,500 net acres in the Permian Basin for $366 mn, marking the company's first foray onshore.
2008A $1,185 $820 $220 $663
2009A $606 $314 ($118) $274
2010A $696 $430 $285 $179
2011E $944 $600 $277 $275
2012E $1,001 $606 $222 $359
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2019 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $600 $600 $694 $0 $546 $1,240 1.2x Size $8 $94 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $575 $1 $94 $481 $8 $488 2008A 0.8x 16.5x 53% 2009A 1.4x 6.7x 56% 2010A 1.0x 10.0x 52% 2011E 1.2x 15.8x 54% 2012E 1.1x 151.6x 48% WTI SGY MMR
Coverage ('11E) 15.8x 33.5x 15.5x
Agency Ratings Caa1/B Caa2/CCC+ Caa1/B
Maturities:
700 600
500 400 300 200 100 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
202
January 26, 2012
High Yield
Warner Chilcott (WCRX)

UNDERPERFORM
Updated 01/25/12
212-855-7718 212-902-9758
We rate WCRX Underperform as we believe re-levering is likely. We believe the company may be reaching a peak in its credit cycle. We see growth in new products as unlikely to offset revenue declines in legacy products, making debt-funded acquisitions more likely. In addition, on its recent investor call, WCRX stated that it could raise up to another 2 turns of EBITDA, and if for an acquisition, up to several billion of debt. Bond Summary Size (MM) $1,250 Coupon (%) 7.750% Priority Sr Maturity 15-Sep-18 Agency Ratings B3/B+ Next Call Price $103.875 Date 9/15/2014 Bid Price $105.000 YTW (%) 6.479% STW bp 575 Investment Strengths: - Solid PF FCF/debt at 30% as of 3Q2011. - WCRX focuses on products that target therapeutic areas with established regulatory guidance. This results in less development and regulatory risk, and thus shorter timelines to market. - WCRX has exhibited good product life cycle management by extending patent life through next-generation versions of its existing products (e.g., Asacol HD, Atelvia). Investment Risks: - Approximately 60% of WCRX's top line depends on two drugs (Actonel and Asacol), which are in competitive therapeutic categories. - WCRX may be considered shareholder friendly, having paid a debt-funded $2.14 billion special dividend. In a recent conference call, WCRX also indicated that it would consider re-levering to return cash to shareholders if it deemed that the company was underutilizing its balance sheet.
Warner Chilcott is a global specialty pharmaceutical that focuses on gastroenterology, women's healthcare, dermatology, and urology in North America and Western Europe. WCRX's main drug is Actonel, which contributes 34% to the top line. Its second-largest drug, Asacol, is 25% of revenues. Actonel is a non-injectable drug for osteoporosis, while Asacol (400mg and 800mg) is used to treat ulcerative colitis. WCRX acquired the Prescription Drug Business of P&G in October 2009, acquiring Actonel and Asacol, and issued over $2.5 bn of term loans in order to fund the deal. In August and September 2010, WCRX issued a total of $2.75 bn in term loans and bonds in order to fund a $2.14 bn special dividend, as well as to fund the purchase of the US rights to Enablex from Novartis for $400 mn. In mid-March 2011, WCRX refinanced $3 bn of its credit facility, reducing its interest payments and effectively paying down another $200 mn of principal. In September 2011, WCRX received a PIV challenge from Zydus on Asacol HD. WCRX also recently obtained approval of dual scored Doryx 150mg and a motion from the District court of New Jersey for a preliminary injunction (PI) against MYL from launching a generic. The court later vacated the PI. Key Dates/Catalysts: - Quarterly earnings. Focus will be on top-line growth of new products. - Potential debt-financed acquisitions or shareholder-friendly re-levering. At a recent conference, management stated that it sees the ability to lever up 1-2x EBITDA (roughly $3 bn) and perhaps more if it is for an acquisition. - Potential litigation outcomes related to patent challenges.
Company Description
2009A $1,436 704 $125 45 44 458
2010A $2,826 1,383 $284 136 95 852
2011E $2,743 1,410 $348 116 60 957
4Q10A $694 359 $108 45 21 312
3Q11A $655 352 $63 43 8 243
4Q11E $661 322 $65 23 24 210 Agency Ratings B3/B+ B1/BBB1/BBB2/B B3/BBa3/BB-
Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization
3,039 539 2,500 4.3x 3.6x 5.6x 49.0%
4,669 402 4,267 3.4x 3.1x 4.9x 49.0%
3,848 490 3,357 2.7x 2.4x 4.1x 51.4%
4,669 402 4,267
3,883 316 3,567
3,848 490 3,357
LTM Comps Warner Chilcott (WCRX) Valeant (VRX) Mylan (MYL) Elan (ELN) Alere (ALR) sub Endo (ENDP)
Leverage 2.7x 4.3x 3.1x 4.8x 5.0x 3.6x
Coverage 5.8x 4.6x 4.6x 2.4x 3.4x 4.9x
3.3x 51.6%
5.6x 53.7%
5.0x 48.8%
Description Revolver New TLA due 3/3/2016 New TLB due 3/3/2018 Total Sr Sec debt 7.75% Sr Notes due 2018 Total Sr debt
Other
Size 0 1,188 1,446 2,633 1,250 1,250 0 3,883 4,207 7,774
Debt to LTM EBITDA*
1.8x
1.9x
Revolver Availability Cash
2.7x
2.8x
Total Liquidity
Total Debt Market Cap Enterprise Value Maturities: 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2012 2013
2.7x 5.4x
2.8x 5.5x
2014
2015+
203
January 26, 2012
High Yield
Whiting Petroleum (WLL)

OUTPERFORM
Updated:
1/26/12
(212) 902-3585 (212) 357-5869
Next Call Price 10/1/2014 Date $0.000
Bid Price $106.00
YTW (%) 5.04%
STW bp 427 Investment Strengths: Strong leverage to crude oil (around 80% of production) Long life production associated with CO2 oil fields; RP of 14 years Bakken Oil Shale and Piceance gas provide production growth potential Good asset diversity for the rating 38% hedged on 2012E production Investment Risks: CO2 projects require long lead time capital spending F&D costs have been above peer group average Management has historically been acquisitive Key Dates/Catalysts: Potential bolt-on acquisitions; Eagle Ford Shale may be of interest Continued Bakken lateral well results; results of Three Forks wells Updates on horizontal oil projects
Company Description
Whiting Petroleum is an E&P based in Denver, with oil and gas properties in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan, with the focus on the Permian and Bakken. After making numerous acquisitions in 2005/2006, Whiting is focused on the development of its Bakken Shale, and CO2 floods at Postle and North Ward Estes (TX/OK) fields. Whiting Petroleum was founded in 1980 by Ken Whiting and Bert Ladd. In 1992, the company was acquired by Alliant Energy, a utility, for $30 mn. In November 2003, Alliant decided to monetize its non-regulated operations through the 100% IPO of Whiting for $230 mn. Whiting has historically been acquisitive and focused on longlived, high PDP properties. In 2005/2006, Whiting closed five acquisitions for $924 million. During that time, WLL also recorded negative reserve revisions of 14 mmboe. Historically, Whiting has allocated 75% of capital spending toward development and 25% toward exploration. The company has maintained balance sheet discipline, with a debt/cap target of 40% and widespread use of hedges to protect cash flows. In April 2008, the company completed the IPO of Whiting USA Trust I, a royalty trust in which WLL retains 16% unit ownership. In May 2008, the company announced the acquisition of 11.5k net Uinta Basin acres (Flat Rock field) from Chicago Energy Associates for $365 mn in cash.
2008A $1,213 $790 ($129) $892
2009A $912 $568 $28 $407
2010A $1,458 $1,022 $258 $739
2011E $1,811 $1,294 ($532) $1,700
2012E $2,078 $1,540 $140 $1,224
Comps Credit Ratios Total Debt/EBITDA (LTM) EBITDA/Interest Expense (LTM) Debt to Capitalization % Capitalization Description Cash and equivalents Revolving Credit Facility Long Term Debt Senior notes 2014-18 Total Long Term Debt Total Debt Preferred Equity Common Equity Total Capitalization $600 $600 $1,200 $0 $2,964 $4,164 0.9x Size $6 $600 Debt to EBITDA Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash Total Liquidity $1,100 $1 $600 $499 $6 $505 2008A 1.6x 12.2x 41% 2009A 1.4x 8.8x 26% 2010A 0.8x 17.3x 24% 2011E 1.2x 22.0x 33% 2012E 1.0x 26.5x 29% WLL FST PXP DNR
Leverage ('11E) 1.2x 2.8x 4.0x 1.9x
Coverage ('11E) 22.0x 4.0x 7.0x 7.9x
Agency Ratings Ba3/BB+ B1/B B1/BB B1/BB-
Maturities:
500 450
400 350 300 250 200 150 100 50 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
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Windstream Corporation (WIN)

IN-LINE
Updated 1/20/12
212-902-2233 212-902-4427
We believe WIN's current trading levels fairly reflect its industry-leading operational metrics and solid profile, offset by the relatively acquisitive nature of the management team's strategy. Bond Summary Size (MM) $700 Coupon (%) 7.750 Priority Sr Nts Maturity 15-Oct-20 Agency Ratings Ba3/B+ Next Call Price 103.875 Date 15-Oct-15 Bid Price 107.25 YTW (%) 6.40 STW bp 567 Investment Strengths: (1) Industry-leading operating metrics: WIN exhibits some of the best access line loss rates, revenue trends, and EBITDA margins in the RLEC/ILEC space. (2) Attractive rural footprint: WIN has less than 20 access lines per square mile versus approximately130 for non-rural LEC. This means WIN faces less cable competition than most of its peers. (3) Strong management team: WIN's management team has a strong track record of carrying out innovative marketing plans and of integrating acquisitions successfully. Investment Risks: (1) Competitive pressure from cable and wireless substitution. (2) Regulatory changes: WIN derived 14% of its revenues from revenues tied to regulation (USF and ICC). Since status quo is probably the best-case scenario for WIN, we believe regulatory reforms would likely affect WIN's revenue and EBITDA negatively. FY10A 3,046 (4.3%) 1,303 6.5% 3,314 (3.7%) $4,139 2,064 215 $7,363 42 7,321 3.6x 3.5x 49.9% 2Q11A 2,986 (4.3%) 1,337 4.8% 3,261 (3.6%) $1,030 513 76 $7,388 52 7,336 3.6x 3.6x 49.8% 3Q11A 2,948 (4.5%) 1,346 4.3% 3,224 (3.9%) $1,023 508 28 $7,357 34 7,323 3.6x 3.6x 49.6% 4Q11E 2,912 (4.4%) 1,359 4.3% 3,193 (3.6%) $1,021 517 135 $7,213 20 7,193 3.5x 3.5x 50.6% 2011E 2,912 (4.4%) 1,359 4.3% 3,193 (3.6%) $4,098 2,050 164 Agency Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA Margin $6,334 1,063 5,272 3.7x 3.4x 48.9% $7,213 20 7,193 3.5x 3.5x 50.0% FTR Charter - CCOH CVC Corp 3.3x 4.3x 4.0x 3.7x 2.8x 3.2x Ba2/BB B1/BBB1/B+ Comps Leverage Coverage Ratings (3) Acquisitive management team and execution risk from integrating PAETEC.
Company Description
Windstream Corporation (Windstream) was formed from the spin-off of Alltel Corporations landline business and the merger with VALOR Communications Group in 2006. Headquartered in Little Rock, Ark., Windstream has operations in 29 states and the District of Columbia. It has about $4 billion in annual revenues and provides services to approximately 3.2 million total access lines and 1.3 million high-speed data customers. The companys product offerings include voice, high-speed data, and digital television services to residential customers located primarily in rural areas, IP-based voice and data services, MPLS networking, data center and managed hosting services, and communication systems to businesses and government agencies. Windstream operates a local and long-haul fiber network spanning approximately 60,000 route miles. On December 1, 2011, Windstream completed its $2.3bn acquisition of PAETEC Holding Corp. Windstream assumed approximately $1.4bn of net debt from PAETEC in the deal. Key Dates/Catalysts: February 22, 2012: 4Q2011 earnings.
Financial Profile * Voice Access Lines ('000s) YoY % Change HSD Customers ('000s) YoY % Change Total Access Lines ('000s) YoY % Change Revenue EBITDA FCF Post Dividends/Sh Rep.
FY09A 3,182 NA 1,224 NA 3,440 NA $4,231 2,069 264
* Operating metrics, revenue and EBITDA figures shown are pro forma for the latest acquisitions as of the reported period. Capitalization * Debt / Description Subsidiary Debt Total Subsidiary / Other Debt Secured RC ($1.25bn Facility)** Secured Term Loan A-2 Secured Term Loan B Secured Term Loan B-2 Total Secured Debt Sr Nts Total WIN Debt Net Debt Market Cap Enterprise Value *Pro forma for November 2011 refinancing. Maturities:
5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 4,360
Size $132 $132 662 177 285 1,056 $2,312 $5,050 $7,362 $7,328 $6,009 13,337
EBITDA
Liquidity Revolver Size Letters of Credit Borrowings Revolver Availability Cash $1,250 (11) (662) $578 $34 $612
1.1x 3.6x 3.6x 6.5x
Total Liquidity
*Capitalization reflects Windstream's stand-alone based on LTM 3Q2011.
1,683 1,276 32 11
2012
2013
2014
2015
2016+
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Wynn Las Vegas (WYNN)
Updated 1/23/12
212- 357-9918 212-902-4751
IN-LINE: We believe WYNN is one of the best global gaming operators, but we believe this is priced into the notes at current levels. We believe the bonds are fairly
priced vs. MGM secured notes. We believe the first lien secured gaming paper of Caesars Ent. Operating Company (HET, OP) provides better risk/reward for investors. Bond Summary Size (MM) $1,320 Coupon (%) 7.750 Priority Sr Sec Maturity 15-Aug-20 Agency Ratings Ba2 / BBBNext Call Price 103.875 Date 15-Aug-15 Bid Price 112.500 YTW (%) 4.88 STW (bp) 458 Z Spread (bp) 418 5-year CDS 395
Company Description
Wynn Resorts is a luxury hotel and destination hotel operator. It owns and operates Wynn Las Vegas on the Las Vegas Strip and Wynn Macau in the Macau Special Administrative Region of the People's Republic of China. Between the two locations, Wynn Resorts maintains 3,316 rooms and 222,000 square feet of gaming floor. The locations also feature 76,000 square feet of high-end retail space, including on-site Ferrari and Maserati dealerships. Significant equity holders include Universal Entertainment (20%), Waddell & Reed (15%), Steve Wynn (8%), Elaine Wynn (8%), and Marisco Capital (6%), according to Bloomberg. Key Dates/Catalysts: - 3Q2010 conference call: Expects to spend $2.5 bn on a Cotai property, which is expected to open in 2015. The casino is expected to include 1,500 rooms, and a convention, retail, restaurants, and entertainment space. In September 2011, WYNN paid $193 mn to Macau government for rights to build on 52 acres. - November 2011: Declared special cash dividend of $5.00 per share, or $625 mn in total. - December 2011: WYNN in talks to partner with New England Patriots owner Robert Kraft in bidding on a Massachusetts gaming license and building a new casino near Gillette Stadium in Foxboro, MA. - January 2012: Former Director Kazuo Okada files lawsuit against the company seeking more access to the books and records of the company. WYNN called the lawsuit "preposterous." Consolidated Results of Wynn Resorts (includes Macau): Financial Profile Net revenues EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash (excl. restricted) Net Debt Key Credit Statistics Total Debt/LTM EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description Wynn Las Vegas LLC 7.875% first mortgage notes due 2017 7.875% first mortgage notes due 2020 7.75% first mortgage notes due 2020 Wynn LV revolver due 2013 / 2015 Wynn LV term loan due 2013 / 2015 Note payable due April 2017 & other Total Wynn Las Vegas debt Macau term loan due 2014 Macau revolver (US$1 billion) due 2012 Total Wynn Resorts Ltd. debt 3Q11A 500 352 1,320 371 48 2,591 513 3,104 1.9x Cash (non-Las Vegas) Restricted cash Total liquidity 1,753 3,258 Wynn LV cash Wynn LV liquidity Wynn Macau revolver Borrowings Revolver availability 157 504 1,000 1,000 Debt to EBITDA 2.8x 1.7x 5.2x 27.8% 2.4x 1.3x 7.0x 32.1% 2.1x 1.0x 7.7x 32.7% 1.9x 0.8x 6.6x 29.4% 2.0x 0.7x 6.9x 27.0% Liquidity Source Wynn LV revolver Letters of Credit Borrowings Revolver Availability 3Q11A 367 20 347 2.0x 0.7x 7.0x 30.3% FY10A $4,185 1,163 223 1 284 655 3,268 1,258 2,009 1Q11A $1,260 405 58 32 314 3,167 1,447 1,720 19 370 3,146 1,784 1,362 2Q11A $1,367 447 58 35 289 3,104 1,910 1,193 3Q11A $1,298 381 57 4Q11E $1,314 355 51 5 55 244 3,103 2,049 1,053 FY11E $5,240 1,588 225 5 141 1,217 3,103 2,049 1,053
Investment Strengths: - Visionary industry leader, proven track record. - Successfully launched expansion plans to capture robust growth in Macau. - Solid asset coverage and security interest supported by excess land occupied by the golf course. - Macau IPO frees up additional capital at the holdco to support the US business, which may be used for expansion efforts. - Between 3Q10 and 1Q11, renovated all 2,700 rooms and villas at Las Vegas property. - Strong liquidity position. - Manageable near-term maturities. Investment Risks: - Competitive Las Vegas operating environment. CityCenter opened in 4Q2009; Cosmopolitan Casino opened in December 2010. - History of paying special dividends. - Cash at parent company could be used to fund other projects outside of the bond restricted group. Potential projects include expansion in Asia or new US jurisdictions such as Massachusetts, if gaming is legalized. - Macau government might limit expansion opportunities in Cotai.
Comps WYNN HST PENN IGT BORGAT
Leverage 1.9x 5.7x 2.8x 2.3x 5.2x
Coverage 6.6x 3.9x 6.5x 6.0x 1.8x
Ratings Ba2 / BBBBa1/BB+ B1/BB Baa2/BBB B2/BB-
Enterprise Value (Wynn Resorts) Source Shares OS (mm) Stock Price Market Cap Net Debt Minority interest Enterprise Value EV/ LTM EBITDA $ Size 125.0 120.42 15,047 1,193 287 16,527 10.3x
Maturities (Consolidated): 2500 2000 1500 1000 500 0 2012 2013 2014 2015 2016 2017+
Wynn Las Vegas Segment Results $mm 4Q10A Revenue EBITDA EBITDA margin Interest Expense Cash Taxes CapEx Free Cash Flow Debt Cash Leverage Net leverage 325.1 68.3 21.0% 50.7 1.0 48.4 (31.7) 2,621.5 52.5 9.7x 9.5x
1Q11A 395.0 132.1 33.4% 50.3 1.0 22.0 58.8 2,621.5 87.2 7.7x 7.4x
2Q11A 391.0 132.7 33.9% 50.3 2.0 12.7 67.6 2,601.4 138.5 6.3x 6.0x
3Q11A 347.3 85.1 24.5% 50.3 2.0 10.1 22.7 2,597.4 157.0 6.2x 5.8x
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The Yankee Candle Co. (YCC)

IN-LINE
Bond Summary Size (MM) $325 $200 Coupon (%) 8.50 9.75 Priority Sr Notes Sr Sub Maturity 15-Feb-15 15-Feb-17 Agency Ratings B2/B B3/CCC+
Updated: 1/26/12
212-902-6957 212-357-7875
Next Call Price $102.13 $104.88 Date 15-Feb-12 15-Feb-12
Bid Price 102.25 98.50
YTW (%) 6.23% 10.14%
STW bp 575 912
Company Description
Yankee Candle designs, manufactures, and distributes premium scented candles and home fragrances under the Yankee Candle brand. It offers a wide range of products in over 400 fragrances, including jar candles, votives, pillars, electric home fragrances, scented oils, reed diffusers, and room sprays. Its products are sold through company-owned retail stores (over 500 stores throughout the US) and through a diversified base of third-party retailers (over 19,000 stores, including more than 2,500 international stores). Yankee operates two flagship stores: one in South Deerfield, MA, and the other in Williamsburg, VA. Products are also sold directly to consumers through direct mail catalogs and the company's web sites. Yankee Candle became a private company through its acquisition by Madison Dearborn Partners in February 2007. Key Dates/Catalysts: Early March quarterly earnings release
Investment Strengths: - Well-known brand with a leading market share in premium-scented candle industry - Consumable nature of products and loyal customer base enable recurring sales - Diversified wholesale customer base, with no one retailer accounting for more than 5% of sales Investment Risks: - Narrow product focus, with broad exposure to economic downturns given discretionary/home/gift-related products; mall/retail traffic trends and buying patterns/credit quality of wholesale accounts can influence results - Exposure to raw materials (fuel, wax) - Highly competitive home fragrance and giftware industries, with low barriers to entry; competing products sold by premium retailers, smaller premium competitors, mass-market competitors, and large consumer goods companies - Highly seasonal business, with majority of sales coming in the fourth quarter
Financial Profile Revenue EBITDA Interest Expense Cash Taxes CapEx Free Cash Flow Total Debt Cash Net Debt Key Credit Statistics Total Debt/EBITDA Net Debt/EBITDA EBITDA/Interest EBITDA margin Capitalization Description L+200 Revolver due 2013 L+200 Term Loan due 2014 Total Sr Sec debt 8.5% Sr Notes due 2015 9.75% Sr Sub due 2017 Total Sr debt 10.25%/11% Holdco Sr Nts due 2/15/16 Total Holdco debt Total Debt Market Cap Enterprise Value Maturities: 1,200 1,000 800 600 400 200 0 2012 2013
FY09A 688.0 179.5 86.1 15.4 15.9 62.1 989.1 9.1 980.0 5.5x 5.5x 2.1x 26.1%
FY10A 750.3 194.0 75.6 23.7 17.4 77.2 901.1 12.7 888.4 4.6x 4.6x 2.6x 25.9% 2011E
FY11E 792.2 188.6 99.6 30.1 24.7 34.2 1,158.2 5.1 1,153.1 6.1x 6.1x 1.9x 23.8%
4Q10A 291.6 108.4 16.9 29.7 3.8 58.1 901.1 12.7 888.4
4Q11E 323.1 112.8 23.9 33.8 5.0 50.1 1,158.2 5.1 1,153.1 Comps Michaels Neiman Yankee
Yield 8.27% 7.66% 10.14%
Ratings Caa2/CCC Caa1/BB3/CCC+
6.4x 37.2%
4.7x 34.9%
Size 0.0 336.1 336.1 325.0 188.0 513.0 309.1 309.1 1,158.2 NA NA
Debt to EBITDA
Liquidity 3Q11A Revolver Size Letters of Credit 140.0 2.1 117.0 20.8
1.8x 3.5x 4.5x 4.5x
6.1x Cash 6.1x Total Liquidity 4.3 25.1
2014+
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Director of Credit Research Anne Brennan, CFA 1-212-902-9757
High Yield Research Airlines, Metals & Mining, Shipping Justine Fisher Joshua Pinkerton Autos Brian Jacoby, CFA Cody Sauer, CFA Building Materials Carly Mattson Mike Adler Cable, Satellite & Towers, Telecom Jason Kim Satya Tagat Chemicals, Homebuilders Kristen McDuffy Adam Goodwin Energy Jason Gilbert Sarah Yanes Food & Beverage, Retail, Restaurants Karen Eltrich Jordan Hughes Gaming, Lodging & Leisure, Consumer & Apparel Kevin Coyne Celeste Everett Healthcare Erin Blum Cindy Guan Industrials James Kitchell Paper & Forest Products, Packaging & Containers Joseph Stivaletti James Kitchell 1-212-902-3299 1-212-902-9813 US Credit Strategy Technology, Rental Services, Auto Suppliers Franklin Jarman Karl Blunden Utilities, Power & Project Finance Raymond M. Leung Abayomi A. Adigun, Ph.D. 1-212-357-5764 1-212-902-9355 1-212-902-7537 1-212-357-2769 Charlie Himmelberg Lotfi Karoui Annie Chu US Economics Jan Hatzius Andrew Tilton 1-212-902-0394 1-212-357-2619 1-917-343-3218 1-917-343-1548 1-212-357-5522 Credit Strategy and Economics 1-212-902-9813 1-212-855-7718 1-212-902-9758 1-212-357-9918 1-212-902-4751 Telecom, Media & Cable Scott Marchakitus, CFA Scott Wipperman, CFA Utilities, Power & Project Finance Raymond M. Leung Abayomi A. Adigun, Ph.D. 1-212-357-5764 1-212-902-9355 1-212-902-9760 1-212-357-9922 1-212-902-6957 1-212-357-7875 Retail, Consumer, Technology Gregory Chwatko Annalee Bloomfield 1-212-902-0673 1-212-902-8028 1-212-902-3585 1-212-357-5869 Life and Non-Life (Re)Insurance, and Managed Care Donna Halverstadt Amanda Lynam, CPA 1-212-902-3281 1-212-902-9238 1-212-357-6157 1-212-902-0459 Healthcare REITs Erin Blum Cindy Guan 1-212-855-7718 1-212-902-9758 1-212-902-2233 1-212-902-4427 1-212-902-6712 1-212-902-9761 1-212-902-3258 1-212-855-8553 1-212-357-6711 1-212-357-9774 Brian Jacoby, CFA Cody Sauer, CFA Basic Industries, Building Materials Carly Mattson Mike Adler Energy Jason Gilbert Sarah Yanes Global Banks & Finance, Real Estate (REITs) Louise Pitt Ron Perrotta Healthcare Amanda Lynam, CPA 1-212-902-3644 1-212-902-7885 1-212-902-3585 1-212-357-5869 1-212-902-6712 1-212-902-9761 Investment Grade Research
Aerospace & Defense, Autos, Capital Goods, Diversified Industrials, Transportation(Rails)
1-212-902-3258 1-212-855-8553
1-212-902-9238
Administrator Maria Lipes 1-212-902-9759
Production Lisa Messemer William Tompkins 1-212-902-0097 1-212-902-6415
E-mail: firstname.lastname@gs.com
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Financial advisory disclosures

Goldman Sachs is acting as financial advisor to another party in an announced strategic transaction which may be material to Pharmerica Corporation. Goldman Sachs is acting as financial advisor to another party in an announced strategic transaction which may be material to Alcatel Lucent.
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Disclosure Appendix
Reg AC
We, Erin Blum, Gregory J. Chwatko, Kevin Coyne, Karen Eltrich, Justine Fisher, Jason Gilbert, Brian Jacoby, CFA, Franklin Jarman, Jason Kim, Raymond M. Leung, Amanda Lynam, CPA, Kristen McDuffy, Joshua Pinkerton, Joe Stivaletti and Scott Wipperman, CFA, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Each equity, credit and strategy research report excerpted herein was certified under Reg AC by the analyst primarily responsible for such report as follows: I, Name of Analyst, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
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Credit Research assigns ratings to designated on-the-run ("OTR") debt securities of issuing companies. Definitions of Ratings: OP = Outperform. We expect the total return to outperform the median total return for the analyst's coverage group over the next 6 months. IL = In-Line. We expect the total return to perform in line with the median total return for the analyst's coverage group over the next 6 months. U = Underperform. We expect the total return to underperform the median total return for the analyst's coverage group over the next 6 months. TB = Trading Buy. We expect the total return to outperform in the short term (3 months). TS = Trading Sell. We expect the total return to underperform in the short term (3 months).
NR = Not Rated. The investment rating, if any, has been removed pursuant to Goldman Sachs policy when to Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. NC = Not Covered. Goldman Sachs does not cover this company. RS = Rating Suspended. Goldman Sachs Research has suspended the investment rating for this credit, because there
is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating. The previous investment rating is no longer in effect for this credit and should not be relied upon. CS = Coverage Suspended. Goldman Sachs has suspended coverage of this company. NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
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to the coverage group's historical fundamentals and/or valuation.
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January 26, 2012

A reference book for high yield investors

The Goldman Sachs Group, Inc.

Global Investment Research

January 26, 2012

This Page Intentionally Left Blank

Goldman Sachs Credit Research

January 26, 2012

Goldman Sachs Credit Research

January 26, 2012

Goldman Sachs Credit Research

January 26, 2012

Erin Blum Cindy Guan

4Q10A $132 28 $19 1 9 6 $715 41 674

3Q11A $133 24 $17 2 8 2 $715 23 692

DJO Global (DJO)

Amount $0 $400 400 $315 315 $0 $715 NA NA

Debt to LTM EBITDA

Debt to 2011E EBITDA

Letters of Credit Borrowings Revolver Availability

7.0x Cash & marketable securities Total Liquidity

Goldman Sachs Credit Research

January 26, 2012

Advanced Micro Devices, Inc. (AMD)

Franklin Jarman Karl Blunden

Next Call Price 104.06 Date 12/15/2013

Bid Price 107.88

YTW (%) 5.7%

Leverage 3.2x 2.3x 5.8x 3.3x 3.6x

Coverage 4.5x 6.6x 2.0x 3.7x 3.6x

Sr. Unsec Ratings WR/B Ba3/BB Caa1/CCC+ Caa1/B B1/B

AMKR FSL NXP SANM

Size 485 500 630 500 (55) 2,060 4,781 5,034

Debt to EBITDA 2.3 x 2.3 x 2.3 x 2.3 x 2.3 x 2.3 x 5.7 x

Goldman Sachs Credit Research

January 26, 2012

AES Corporation (AES)

Raymond M. Leung Abayomi A. Adigun

Next Call Price MW+50 Date --

Bid Price 108.750

YTW (%) 6.14

Leverage 4.1x 6.7x 10.2x 8.5x 7.8x 4.7x 4.7x

Coverage 3.6x 2.0x 1.1x 1.4x 1.1x 3.7x 2.4x

Agency Ratings Ba3/BBB1/BB/D Caa1/BB3/B Ba1/BB+ B1/BB-

Goldman Sachs Credit Research

January 26, 2012

Aircastle Ltd. (AYR)

Joshua Pinkerton Justine Fisher

Next Call Price 104.88 Date 1-Aug-14

Bid Price 110.63

YTW (%) 6.88%

Comps AYR AWAS

Leverage 5.6x 6.4x

Coverage 2.7x 2.5x

Ratings Ba3/BB+ Ba3/BB

Goldman Sachs Credit Research

January 26, 2012

Franklin Jarman Karl Blunden

Revenues by Region North America Europe Asia Pacific ROW

FY2010 36% 32% 18% 14%

3Q2011 1,400 1,400 0 0 1,400 3,757 5,157

ALU (USD) 5 Yr CDS Performance: