RBC U.S. Discount Bond ETF · TSX:RUDB
RBC U.S. Discount Bond ETF — BlueBay Direct Lending Canadian Feeder Fund III — Investor Presentation (May 2018)
34 slides from RBC U.S. Discount Bond ETF's investor presentation, May 2018
Slide 1: Opportunities in European Direct Lending
Opportunities in European Direct Lending BlueBay Direct Lending Canadian Feeder Fund III, LP May 2018 For qualified investors only
Slide 2: BlueBay Private Debt Summary
BlueBay Private Debt Summary Opportunity • Attractive secured senior and subordinated loans to mid-sized European companies • Focused on high quality, market leading businesses with stable cash flows Leading European player in private debt, with over €8.5 billion of AuM • Highly experienced team of
Slide 3: BlueBay's Private Debt Platform
BlueBay’s Private Debt Platform Market-leading European Private Debt Business Direct Lending Fund I Direct Lending Fund II Senior Loan Fund I Direct Lending Fund III Fund vintage1 2011-2013 2014-2015 2016-2017 2017-2018 €5.0bn4 AuM2 €955m €2.8bn €3.2bn3 (Levered and unlevered) Geographical focus Nor
Slide 4: BlueBay Direct Lending Canadian Feeder Fund III, LP Proposed Terms
BlueBay Direct Lending Canadian Feeder Fund III, LP Proposed Terms Target return objectives Net IRR of 8-9%1 Private Placement of Canadian limited partnership, fixed term, committed capital Structure with multiple draw-downs to fund investments Currency CAD Hedged, CAD denominated Distribution of pr
Slide 5: Master Fund Investment Strategy
BlueBay Direct Lending Canadian Feeder Fund III, LP Master Fund Investment Strategy • Primarily senior secured / uni-tranche loans Primarily senior/uni-tranche loans • Selected subordinated / mezzanine loans • Equity participation where appropriate • Bilateral loans or small club deals Strong loan p
Slide 6: What is Direct Lending?
What is Direct Lending? Alternative lending source to banking system for medium-sized enterprises • Attractive pricing structure – cash yield, structuring and prepayment fees • Lender-friendly terms – with covenants (negotiated directly by lender) • Capture illiquidity premium Attractive for investo
Slide 7: European Private Debt: Factors Creating an Attractive Investment Opportunity
European Private Debt Factors Creating an Attractive Investment Opportunity Reduced availability of credit to medium-sized businesses continues to support private debt markets Supply side factors Demand side factors Increasing M&A volumes, European lending market though still some way below dominate
Slide 8: European Lending Remains Highly Dependent on Banks
European Lending Remains Highly Dependent on Banks High dependence of bank financing in Europe … … compared to developed US market 0.5% 15% 15% 20% 85% Bank Financing 65% Non-Bank Financing Direct Lending Funds1 Source: AIMA, “Financing the Economy 2016”. Note: (1) Direct Lending Funds includes busi
Slide 9: Bank Lending to European Corporates Remain at Low Levels
Bank Lending to European Corporates Remain at Low Levels Lending to non-financial corporations across the Eurozone 1 Annual growth % 16% 12% 8% 4% 0 (4%) Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Sources: (1) European Central Bank (ECB); Statistical D
Slide 10: Demand for Credit Outstripping Supply
Demand for Credit Outstripping Supply Solid M&A volumes in Europe 1 Eurozone corporate credit demand growing2 1600 Q4 Q3 Q2 Q1 80 Germany Spain France Italy Euro Area 1400 60 287 Net % reporting positive loan demand 40 1200 20 1000 385 217 0 US$bn 800 210 228 209 (20) 288 133 259 600 251 209 188 559
Slide 11: Alternative Lending Increasingly Accepted As Funding Source
Alternative Lending Increasingly Accepted As Funding Source Deals by alternative lenders are increasing1 Positive perception of private debt providers2 400 UK France Germany Other 347 350 4% 300 106 265 Negative 250 235 28% 67 29 200 203 53 Neutral 46 31 137 27 84 150 29 68% 22 50 68 Positive 100 13
Slide 12: Attractive Yields and Target Return Characteristics
Attractive Yields and Target Return Characteristics • Borrowers are generally prepared to pay a premium to get better deal deliverability, certainty and flexibility • A significant pricing premium is available at lower leverage multiples than high yield markets • Closer company relationship than in
Slide 13: Risk Characteristics of Private Debt
Risk Characteristics of Private Debt • Similar default history with attractive recovery rates • Senior Secured nature and close company relationship reduce loss risk Av. annual European default rates1 Nominal av. European recovery rates1 3.0% 2.7% 70.0% 58.0% 2.5% 2.5% 60.0% 45.1% 50.0% 2.0% 40.0% 1
Slide 14: Capital Called Over Time
Capital Called Over Time Illustrative Capital Flows Illustrative Capital Flows (EUR MM) 600 DLF I 400 Illustrative Profile: 200 • Capital called over time - • Expect 15-35% per year1 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Feb-13 Feb-14 Feb-15 Feb-1
Slide 15: BlueBay Private Debt Team
BlueBay Private Debt Team Large Team With 12 Years Average Experience Leveraged BlueBay Private Debt Group Finance Germany Head of Private France Spain Portfolio Investor UK Switzerland Nordic US$9.9bn AuM Debt Benelux Italy Monitoring Relations Austria Anthony Fobel Benjamin Harrild Mark Jochims Ch
Slide 16: Building a High Quality Portfolio
Building a High Quality Portfolio Strong Deal Flow Allows For Disciplined Investing Reviewed over 2,450 investment opportunities, 2011 to April 2018: same origination network to source deals for DLF III Deals by investment stage/due diligence stage Deals by geography 32% 46% 6% 23% 100% 100% 28% 13%
Slide 17: Covenant Policy Remains Disciplined
Covenant Policy Remains Disciplined Takes Lead in Majority of Transactions Average covenant per company remains stable Consistently acts as lead or co-lead lender 100% 100% 4% 7% 19% 31% 33% 33% 75% 53% 75% 33% 50% 50% 42% 45% 89% 67% 33% 25% 25% 48% 27% 22% 14% 0% 0% DLF I DLF II SLF I DLF I DLF II
Slide 18: Overview of Portfolios
Overview of Portfolios Credit Metrics Direct Lending Fund I Direct Lending Fund II European Lev. Loans1 Total pricing 8.9% 7.8% 3.0 – 4.0% Upfront fees / OID 3.8% 3.6% 0.00 – 1.0% OID Senior deals2 78% 98% c. 100% Net opening leverage 4.5x 5.2x c. 5.0x Current net leverage 3.4x 4.9x c. 5.0x Loan-to-
Slide 19: Direct Lending Fund I Portfolio Overview – March 2018
Direct Lending Fund I Portfolio Overview – March 2018 Total BlueBay LTM Net Net Margin Pricing BlueBay Total Loan Size Loan Size EBITDA Opening Current LTV Tenor Base Over Excl. Upfront % of Security Date of Investment (EURm) (EURm) (EURm) Leverage Leverage (%) (yrs) Rate/Floor Base Fees Fees /OID E
Slide 20: Direct Lending Fund I: key portfolio statistics
Direct Lending Fund I: key portfolio statistics Overview of deals by borrower Overview of deals by geography Investment 1 (6%) Investment 2 (3%) Investment 3 (5%) Investment 4 (7%) United Kingdom (53%) Investment 5 (3%) Investment 6 (3%) Investment 7 (4%) Investment 8 (6%) Germany (35%) Investment 9
Slide 21: Direct Lending Fund II Portfolio Overview – March 2018
Direct Lending Fund II Portfolio Overview – March 2018 BlueBay LTM Net Net Total BlueBay Total Loan Size Loan Size EBITDA Opening Current LTV Tenor Base Margin Pricing Upfront % of Security Date of Investment (EURm) (EURm) (EURm) Leverage Leverage (%) (yrs) Rate/Floor Over Base Excl. Fees Fees /OID
Slide 22: Direct Lending Fund II: key portfolio statistics
Direct Lending Fund II: key portfolio statistics Overview of deals by borrower Overview of deals by geography Investment 1 (2%) Investment 2 (3%) Investment 3 (2%) Investment 4 (4%) United Kingdom (41%) Investment 5 (2%) Investment 6 (2%) Germany (28%) Investment 7 (4%) Investment 8 (2%) Investment
Slide 23: Investment Process – Due Diligence and Execution
BlueBay Private Debt Investment Process – Due Diligence and Execution Time and suitability screening Stage 1: • Preliminary Investment Memorandum (PIM): industry and company Business Review overview, credit analysis (including screening on ESG sensitive sectors) • Industry overview Preliminary • Go/
Slide 24: Investment Process – Monitoring and Portfolio Management
BlueBay Private Debt Investment Process – Monitoring and Portfolio Management Hands-On Approach • Board representation where appropriate • Monthly financial information (income statement, balance sheet, cash-flow statement, KPI analysis, covenant compliance) Stage 5: • Monthly financial performance
Slide 25: Why BlueBay?
Why BlueBay? Key strengths Why it matters Advantages • Few multi-billion AUM Direct Lending funds in Europe • Less competition Size and scale • ‘One stop shop’ – loans up to €300m • Achieve better pricing and terms • Funding gap most acute at larger end of market • Higher quality businesses • Develo
Slide 26: Overview of selected transactions to date
BlueBay Private Debt Overview of selected transactions to date Accelya Amber Bibliotheca Cartonplast A-Gas DSD DFG Duran EDM ESE Taverns Senior Secured / Subordinated Senior Secured Senior Secured Senior Secured Subordinated Senior Secured Financing Financing Financing Senior Secured Senior Secured
Slide 27: Sample Deals
Sample Deals Sample Deals For qualified investors only 27
Slide 28: Direct Lending Fund I: Dennis Eagle
Direct Lending Fund I: Dennis Eagle Company Dennis Eagle Fund I investment €56.6 million Industry Industrials Investment date April 2013/July 2014 Geography United Kingdom Ranking First Lien Headquarters Warwick Security Senior Secured Financial sponsor RosRoca Group Status Realised. Gross IRR/MM of
Slide 29: Direct Lending Fund I: Trainline
Direct Lending Fund I: Trainline Company Trainline Fund I investment €47.3 million Industry Travel/Transport Investment date September 2013 Geography United Kingdom Ranking First Lien Headquarters London Security Senior Secured Financial sponsor Exponent Private Equity Status Realised. Gross IRR/MM
Slide 30: Direct Lending Fund II: Schuberth
Direct Lending Fund II: Schuberth Company Schuberth GmbH Fund II investment €40.0 million Industry Consumer Products Investment date December 2015 Geography Germany Ranking First Lien Headquarters Magdeburg Security Senior Secured Financial sponsor Perusa Partners Status Unrealised Schuberth is a pr
Slide 31: Direct Lending Fund II: Accelya
Direct Lending Fund II: Accelya Company Accelya Fund II investment €105.6 million Industry SaaS Investment date March 2017 Geography Spain Ranking First Lien/Second Lien/Equity Headquarters Barcelona Security Senior Secured (debt)/Subordinated (equity) Financial sponsor Warburg Pincus & Co Status Un
Slide 32: Appendix
Appendix For qualified investors only 32
Slide 33: Notes to overviews of portfolio
Notes to overviews of portfolio Direct Lending Fund I, LP 1. Key Deal Metrics reflect levels at closing and to the level of BlueBay’s investment. Net current leverage based on latest monthly figures available (leverage at exit for realised deals). Non-EUR loans converted at actual exchange rates at
Slide 34: Disclaimer
Disclaimer This information is not intended to be an offer or solicitation to buy or sell securities or to participate in or subscribe for any service. No securities are being offered, except pursuant and subject to the respective offering documents and subscription materials, which may be provided
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