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January 26, 2012

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One-PagersCredit Research

A reference book for high yield investorsThis 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 [email protected] Goldman, Sachs & Co. Gregory J. Chwatko (212) 902-0673 [email protected] Goldman, Sachs & Co. Kevin Coyne (212) 357-9918 [email protected] 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

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Goldman Sachs Credit Research

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Table of contentsCompany 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


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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.


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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 DescriptionAccellent 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+


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Advanced Micro Devices, Inc. (AMD)OUTPERFORMBond 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 DescriptionAMD 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


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AES Corporation (AES)IN-LINEBond 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 DescriptionAES 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


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Aircastle Ltd. (AYR)IN-LINEBond 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 DescriptionAircastle 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


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Alcatel-Lucent (ALUFP)Contact analyst or see latest research for updates to ratings, estimates, and other information.

Updated 1/26/2012


212-902-7537 212-357-2769

OUTPERFORM / IN-LINEBond 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 DescriptionAlcatel-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


9

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 DescriptionAlere 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 DescriptionAmerican 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-LINEBond 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 DescriptionAmerican 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

AmerigroupOUTPERFORM

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

Debt to 2011E EBITDA

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

Kevin Coyne Celeste Everett

212-357-9918 212-902-4751

NOT COVEREDBond 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 DescriptionAmeristar 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)

Leverage 5.0x 2.8x 7.4x 9.2x

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-LINEBond 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 DescriptionAmkor 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 2.7xDebt to 2011E EBITDA

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-LINEBond 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 DescriptionAshland 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)UNDERPERFORMBond 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 DescriptionAvis 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-LINEBond Summary Size (MM) $542 Coupon (%) 7.000 Priority Sr. Sec Maturity 15-Oct-16 Agency Ratings Ba2/BBBPrice 103.5

Updated 1/24/2012

Joshua Pinkerton Justine Fisher

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 DescriptionAWAS 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 NonrecoursefixedrateTotal 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-LINEBond 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 DescriptionBall 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-LINEBond 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 DescriptionBAS 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 01/25/12Erin 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 DescriptionBausch + 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

Kristen McDuffy Adam Goodwin

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, t

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