Credit Trends:

Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market
Global Fixed Income Research: Diane Vazza, Managing Director, New York (1) 212-438-2760; diane.vazza@standardandpoors.com Evan M Gunter, Associate Director, New York (1) 212-438-6412; evan.gunter@standardandpoors.com

Table Of Contents
Data Methodology

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Credit Trends:

Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market
Companies rated speculative grade ('BB+' and below) account for about one-third of U.S. corporate ratings by dollar amount of outstanding debt. Standard & Poor's Global Fixed Income Research conducted a study to estimate the size and structure of the rated U.S. speculative-grade corporate debt market. Our sample consists of 4,882 U.S. corporate instruments from speculative-grade issuers, totaling $2.2 trillion, as of March 31, 2013. Across rating categories, we rate 39% of outstanding debt 'BB', 55% 'B', and 6% 'CCC+' and lower (see chart 1 and table 1). The lowest rated issuers, 'B-' and lower, have $304.5 billion in outstanding rated debt. Nonfinancial issuers comprise 94% of the total outstanding speculative-grade debt, while financial issuers account for the remaining 6%. Some of the key findings of our study are: Across sectors, media and entertainment accounts for the largest portion of outstanding speculative-grade debt ($340.1 billion), followed by telecommunications ($274.9 billion), health care ($200.5 billion), and high technology ($190.2 billion) (see table 2). Media and entertainment has the greatest share of loans and revolvers outstanding, with $180.3 billion, while telecommunications has the largest share of bonds and notes outstanding, with $169.2 billion. Looking at the mix of loans to bonds by sector, consumer products has the highest share of loans as a percentage of total sector debt, with 61% of the debt outstanding in the form of loans and revolvers. The homebuilders and real estate sector has the highest share of bonds as a percentage of total sector debt. Of the debt outstanding for this sector, 85% is in the form of bonds, notes, and other. By broad instrument type, 46% of speculative-grade debt is in loans and revolvers, and 54% is in bonds, notes, and other (see chart 2). Bonds comprise the majority of debt outstanding in the 'BB' and 'CCC/C' categories, with 62% and 54%, respectively. Only in the 'B' category do loans and revolvers make up a majority of the debt outstanding (51%). Though the majority of debt from 'BB' and 'CCC/C' rated issuers is in the form of bonds, a much higher portion of 'CCC/C' rated issues are secured because lenders are more likely to demand collateral pledges from these lower-rated companies. A portion of 'CCC/C' debt, 25%, is in the form of secured bonds, compared with just 4% of 'BB' debt (see table 3). Senior unsecured bonds comprise the greatest share by asset type, with 39% of total speculative-grade debt outstanding. Senior secured loans follow with 35%. Through 2017, $1.1 trillion of speculative-grade debt in the U.S. is scheduled to mature. About 61% of this maturing amount is loans and revolvers, while 39% is bonds and notes. Maturities are scheduled to escalate up through 2017, when $367 billion comes due (see table 4). While we expect there to be sufficient liquidity overall to meet refinancing needs for this maturing debt, companies in the lowest rating levels of 'B-' and lower are the most susceptible to refinancing risk. Refinancing needs for these companies will climb to $64 billion in 2017 from $33 billion in 2014. The majority of speculative-grade debt was issued in 2011 or later. Only 43% of outstanding debt from 'BB' rated issuers and 40% from 'B' issuers was issued before 2011. In contrast, the majority of debt (57%) from issuers rated 'CCC+' and lower was issued before 2011 (see table 5). The majority (55%) of speculative-grade debt outstanding was issued with an original maturity length of seven to 13

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Credit Trends: Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market

years, while 31% of debt outstanding was issued with an original maturity length of five to seven years. The median maturity length was 10 years (see table 6). Loans and revolvers tend to have shorter maturities--52% had an original maturity length of five to seven years, while 74% of bonds and notes had an original maturity of seven to 13 years. Of the outstanding debt issued by foreign subsidiaries of U.S. companies or by U.S. companies in foreign currency, approximately $110 billion is from speculative-grade companies (see table 7). Nonfinancial companies issued 92% of this debt. The telecommunications sector has the greatest amount of foreign debt outstanding with $37.6 billion, followed by the forest products and building materials sector with $18.6 billion. Approximately 96% of the outstanding debt is issued by companies in the U.S. The remaining 4% is issued by foreign subsidiaries of U.S. companies. Most of these foreign subsidiaries are based in the Cayman Islands, the Netherlands, Luxembourg, or Bermuda.
Chart 1

Table 1

Outstanding Speculative-Grade Debt By Rating, Financial And Nonfinancial

--Debt outstanding (bil. $)-Financial Nonfinancial BB+ BB 2.1 9.0 232.3 297.9 Total 234.5 306.9 --Percentage of total outstanding (%)-Financial Nonfinancial 0 0 11 14 Total 11 14

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Credit Trends: Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market

Table 1

Outstanding Speculative-Grade Debt By Rating, Financial And Nonfinancial (cont.)

BBB+ B BCCC/Below Total 28.6 50.1 11.6 19.3 8.4 129.1 291.6 492.6 484.6 159.4 117.3 2,075.8 320.2 542.7 496.2 178.8 125.7 2,204.9 1 2 1 1 0 6 13 22 22 7 5 94 15 25 23 8 6 100

Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

Table 2

Speculative-Grade Outstanding Debt By Sector

--Debt outstanding (bil. $)-Sector Media and entertainment Telecommunications Health care High technology Utility Oil and gas Consumer products Automotive Financial institutions Retail/restaurants Chemicals, packaging and environmental services Transportation Capital goods Metals, mining, and steel Forest products & building materials Aerospace and defense Insurance Homebuilders/real estate co. -Total nonfinancials Total financials Grand total 968.0 43.6 1,011.6 1,107.8 85.5 1,193.3 2,075.8 129.1 2,204.9 Loans/Revolvers Bonds/Notes/Other 180.3 105.6 118.5 111.7 65.8 30.1 83.8 61.1 35.7 59.5 51.8 26.5 29.3 13.1 12.1 16.8 7.9 1.9 159.7 169.2 82.1 78.5 87.4 121.5 54.0 70.9 75.2 50.9 45.1 53.3 28.1 43.8 39.2 12.8 10.3 11.2 Total 340.1 274.9 200.5 190.2 153.2 151.7 137.8 131.9 110.9 110.4 96.9 79.9 57.4 57.0 51.3 29.6 18.2 13.1

Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

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Credit Trends: Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market

Chart 2

Table 3

Debt Outstanding By Instrument Type And Rating Category

--bil. $-Instrument Type Loans and revolving credit facilities Revolving credit facility Loans (senior secured) Loans (second lien) Loans (unsecured or subordinated) Total loans and revolving credit facilities Bonds/notes/other Senior secured Senior unsecured Subordinated Preferred Total bonds/notes/other 36.1 462.4 31.7 1.6 531.8 169.6 360.0 37.0 27.2 593.9 31.3 32.8 3.6 0.1 237.0 855.2 72.2 28.9 4.2 53.7 3.7 0.2 61.7 13.9 29.6 3.0 2.2 48.8 24.9 26.1 2.8 0.1 53.8 10.8 38.8 3.3 1.3 54.1 115.5 199.8 4.0 10.3 329.7 84.7 518.5 19.5 1.2 623.8 5.9 51.0 1.2 206.1 769.3 24.7 11.5 58.0 1,011.6 13.4 23.2 0.5 1.2 38.3 7.0 42.6 1.6 0.1 51.2 4.7 40.6 0.9 0.0 46.2 9.3 34.9 1.1 0.5 45.9 BB B CCC/C Total --% of rating category outstanding-BB B CCC/C Total

67.7 1,193.3

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Credit Trends: Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market

Table 3

Debt Outstanding By Instrument Type And Rating Category (cont.)

Total 861.5 1,217.7 125.7 2,204.9 100.0 100.0 100.0 100.0

Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

Table 4

U.S. Speculative-Grade Debt Maturing Through 2017 By Rating

--Debt scheduled to mature (bil. $)-2013 Loan/revolver BB+ BB BBB+ B BCCC/C Total loan/revolver Bond/note BB+ BB BBB+ B BCCC/C Total bond/note Total 6.5 8.5 4.2 8.7 3.3 3.6 1.5 36.3 73.21 9.8 13.1 12.9 18.8 12.9 2.6 3.3 73.4 187.31 10.9 7.5 11.0 23.3 24.0 13.5 10.2 100.5 191.82 12.9 14.3 15.2 20.1 12.9 11.9 7.4 94.6 286.53 17.7 16.4 21.6 25.9 23.1 17.2 10.0 131.8 367.17 57.8 59.7 64.9 96.8 76.2 48.9 32.3 436.6 1,106.0 2.4 9.5 5.0 12.5 6.0 0.8 0.7 36.9 7.6 9.4 12.4 24.8 32.3 13.7 13.7 113.9 27.3 13.7 12.8 14.3 10.7 8.6 4.0 91.3 17.5 29.4 26.1 61.4 33.3 7.5 16.8 191.9 15.4 23.8 34.0 67.1 58.6 18.4 17.9 235.4 70.3 85.9 90.3 180.1 140.8 49.0 53.0 669.5 2014 2015 2016 2017 Total

Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

Table 5

Original Issue Year For Currently Outstanding Speculative-Grade Debt

--Debt outstanding (bil. $)-BB Prior to 2009 2009 2010 2011 2012 2013 Total 168.8 61.4 141.6 178.8 243.3 67.5 861.5 B 238.3 71.2 177.1 261.7 347.1 122.3 1,217.7 CCC/C 53.6 4.6 13.4 11.5 38.8 3.8 125.7 Total 460.7 137.3 332.1 452.1 629.2 193.6 2,204.9 --Debt outstanding (% of rating category)-BB 19.6 7.1 16.4 20.8 28.2 7.8 100.0 B 19.6 5.8 14.5 21.5 28.5 10.0 100.0 CCC/C 42.6 3.7 10.7 9.2 30.9 3.0 100.0 Total 20.9 6.2 15.1 20.5 28.5 8.8 100.0

Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

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Credit Trends: Analyzing The Size And Structure Of The U.S. Speculative-Grade Corporate Debt Market

Table 6

Debt Outstanding By Rating Designation And Original Maturity Length

--Debt outstanding (bil. $)-Less than 2 years Loan/revolver BB B CCC/C Total Loan/revolver Bond/note BB B CCC/C Total bond/note Total outstanding 0.6 0.8 0.0 1.3 13.0 21.8 14.9 1.4 38.1 176.0 57.6 81.4 14.8 153.8 676.7 389.5 448.9 43.1 881.5 1,220.5 12.8 20.5 1.2 34.4 34.4 49.5 27.5 7.2 84.2 84.2 9.1 2.4 0.2 11.7 43.0 74.0 20.9 137.9 204.6 308.1 10.2 523.0 72.9 239.3 26.8 338.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2-5 years 5-7 years 7-13 years 13-20 years More than 20 years

Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research.

Table 7

Total Debt Outstanding For Foreign Subsidiaries Of U.S. Companies Or U.S. Companies Issuing In Foreign Currency
Sector Telecommunications Forest products and building materials Media and entertainment Health care Oil and gas Chemicals, packaging and environmental services Automotive Transportation Consumer products High technology Insurance Homebuilders/real estate co. Capital goods Financial institutions Utility Metals, mining, and steel Retail/restaurants Aerospace and defense -Total nonfinancials Total financials 101.3 8.2 Debt outstanding (bil. $) 37.6 18.6 10.5 6.5 6.4 5.9 4.3 3.6 3.1 2.9 2.3 2.2 2.1 1.5 1.0 0.8 0.2 -

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Table 7

Total Debt Outstanding For Foreign Subsidiaries Of U.S. Companies Or U.S. Companies Issuing In Foreign Currency (cont.)
Grand total Data as of March 31, 2013. Source: Standard & Poor's Global Fixed Income Research. 109.5

Data Methodology
In our analysis, we investigate the corporate financial and nonfinancial debt that Standard & Poor's rates. In the U.S. region (which includes Bermuda and the Cayman Islands), we include all U.S. companies and their foreign subsidiaries. We count the debt of all of these companies, regardless of the currency or market in which the debt was issued. We converted any non-U.S. dollar-denominated debt to U.S. dollars based on the end-of-day exchange rates on March 31, 2013. We did not include in our totals the foreign companies issuing debt in the U.S. market or foreign companies issuing debt through their U.S.-based subsidiaries, unless otherwise noted. The issue types include loans, revolving credit facilities, bank notes, bonds, debentures, convertible bonds, covered bonds, intermediate notes, medium-term notes, index-linked notes, and equipment pass-through certificates. In the case of revolving credit facilities, the amount usually represents the original facility limit, not necessarily the amount that has been drawn. We do not always have amortization schedules for loans, so we tallied the total amounts outstanding by the maturity date. We exclude individual issues that are not currently rated at the instrument level, as well as instruments from issuers that are currently rated 'D' or 'SD' (selective default). We aggregate the issue-level data by the issuer credit rating or by the issuer rating on the issuer's corporate parent. We also aggregate sector-specific data according to the subsector of the issuer's corporate parent. We define the financial sector as all banks, brokers, insurance companies, asset managers, mortgage companies, and other financial institutions. We aggregate the financial arms of nonfinancial companies with their nonfinancial parents. We also exclude government-sponsored agencies and public finance issuers.

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