Sponsor Based Leveraged Acquisition Market Overview

1. Sponsor Based Leveraged AcquisitionMarket Overview Joseph V. Rizzi Amsterdam Institute of Finance June, 2010

2. Credit Markets Update – ECB and EURO The euro has fallen 3.9 percent to $1.2358 in the past seven days. It traded for $1.2311 at 9:14 a.m. Central European Time. German Chancellor Angela Merkel said May 14 that Europe is in a “very, very serious situation,” even after a rescue package for the region’s most indebted nations. The Spanish newspaper El Pais reported the same day that French president Nicolas Sarkozy threatened to withdraw his country from the euro. Finance Minister Christine Lagarde and other government officials denied the report. (Bloomberg, 17 May 2010) Amsterdam Institute of Finance June, 2010

3. Post September 15, 2008 Lessons Nominal interest rates can be negative There is no risk free asset Equity risk premiums can change dramatically even in mature markets Large investment grade firms in developed markets cannot always raise new capital Diversification across asset classes does provide protection Debt is a double edge sword Cash balances are not wasting assets, but protection against danger Ignore liquidity at your peril Risk is not a number If something cannot last for ever it ends The only perfect hedge is in a Japanese garden Most dangerous words in Finance Leverage Hedge Arbitrage This time is different Risk management is somewhere between alchemy and astrology Amsterdam Institute of Finance June 2010

4. A Typical Private Equity Structure Diagram US Investors Fund manager US Exempt Investors General Partner Carried interest partner LP A LP B LP C Non-US Investors FUND Nominee Investment Investment Investment Investment CLO Hedge funds High Yield Investors Leverage finance syndicate participants Hold Co. Bank Hold Co. Mezzanine Investors FLL Bridge finance Syndicate participants Operating Entity SLL Amsterdam Institute of Finance June, 2010

5. Private Equity LBO Transaction Economics - $ millions - NowIn 5 yrs EBITDA of Acquired Firm 125 188 (c) Sale value @ 8 x EBITDA 1,000 1,500 Financing Plan: Equity @ .20 200 Debt @ .80 800 Total Capital Raised 1,000 Fees 30 50 Net Sale Proceeds on Exit 1,450 Original Debt 800 Less: Debt pay down over 5 years 260 Debt at end of 5 years -540 540 Return of Original Equity -200 Net gain to be allocated 710 10% to mgmt options 71(a) 20% to general partner 142 70% to limited partners 497 (b) Total 710 • Share to CEO 2% points or $14.2 x 1 = $14.2 • Share to next 4 senior officers 1% points or $ 7.1 x 4 = $28.4 • Share to next 8 key players 1/2% points or $ 3.6 x 8 = $28.4 • Total Management share $71.0 (b) Equals a 28.4% compound annual rate of return on investment. (c) Assumes $12 taken out of cost structure immediately and 6.5% growth/year in EBITDA thereafter. Source: Casewriter – The Role of Private Equity Firms in Mergers & Acquisitions Transaction Harvard Business School case 9-206-1 Rev 10/16/06 Amsterdam Institute of Finance June, 2010

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7. Private Equity Value Added • Increased Debt (lower taxes) • Bargain Purchase • Operating Improvements • Improved Governance • Bondholder Value transfer • Opportunistic Sale Amsterdam Institute of Finance June, 2010

8. Different Investor Bases – Loan Market • Banks (Relationship Driven) • Typically invest in the pro-rata portion of bank facilities (Revolver and Term Loan A) • Seek first priority claim on assets • Preference for price stability over liquidity • Institutional Investors (Yield Driven) • Primarily looking for high coupon/yield. Embedded option and subordination translate to higher coupons • Cross over investors (relative value between bank loans and high yield bonds) • Hedge Funds (unknown impact) Amsterdam Institute of Finance June, 2010

9. Movement on Transactions and Fundraising 2003-2009 (U.S.) 200320072009 Fundraising $30B $244B $102B Purchase Price Multiple 7X 9.6X 7.7X Funded Debt EBITDA Multiple 4.6X 6.2X 3.8X LBO Volume $47B $433B $81B Average Deal Size $716M $2.1B $722 Percent of P2P LBO Volume 15% 45% 15% Dry Powder $200B $500B $500B IRR Mediuan 25% 2% <9%> Amsterdam Institute of Finance June, 2010

10. Asset Class Returns 20082009 Merrill Lynch $ HY (26.4%) 57.5% Credit Suisse Leveraged Loan (28.73%) 44.87% NASDAQ (39.98%) 45.36% LBOs (18%) 3% Financials (29%) 64% Activity 1Q10 USEurope Vol $26.3B €9B LBO $10.3B € 6B HYB $13B € 12.8B FDX 4X 4X PPX 8.8X 9,3X CLO - - Institutional 80% 30% Amsterdam Institute of Finance June, 2010

11. PE Industry Issues Credit Accounting Tax Regulation Excess Capacity Fundraising Fund Structure Returns LPs Public 6Ps Amsterdam Institute of Finance June, 2010

12. Disclosure This information has been prepared solely for informational purposes and is not intended to provide or should not be relied upon for accounting, legal, tax, or investment advice. The factual statements herein have been taken from sources believed to be reliable, but such statements are made without any representation as to accuracy or completeness. Opinions expressed are current opinions as of the date appearing in this material only. These materials are subject to change, completion, or amendment from time to time without notice and CapGen Financial is not under any obligation to keep you advise of such changes. All views expressed in this presentation are those of the presenter, and not necessarily those of CapGen Financial. Amsterdam Institute of Finance June, 2010