EFTA Document EFTA01385278

3 January 2018 HY Corporate Credit HY Multi Sector,Media, Cable & Satellite Building Product Outlook Andrew Casella, (+ Building Products Outlook: Another Positive Yea' Ahead In the text below we discuss not only our outlook for various construction end- markets in 2018 but also recap 2017 both from an end-market and HY performance perspective. Overall, with macro data momentum continuing into the remaining weeks of 2017, we expect another year of positive growth across a majority of construction end-markets. Residential R&R Market: Another Year Above Long-Term Trend In 2018, we think the residential R&R market will grow about 5%, about 1% above its longer-term trend line of 4%. We think these numbers could be conservative as the economy is expected to accelerate in 2018 and recovery funding from Irma/Harvey could also provide a small tailwind. New Re.r iciontial Market: Path to Not moll anon Continues, SF Leads tha Wav In 2018, we are estimating new residential construction should accelerate and grow at 6% y/y versus 2017 with the driver being solely from single-family construction (+10%) offset by multi-family construction down about 2%. With the general economy and many of the new residential construction metrics (i.e. permits, sentiment) also accelerating, we think 2018 should outperform 2017. Infrastructure. Turnaround Alyael in 2018 2017 was a disappointing year for infrastructure spending but we think the market can get back to a more normal growth trajectory of +3% in 2018. With funding from the FAST Act in place, and constraints on the transmission mechanism (i.e. state level DOT delays) abating, the market should grow at least in-line with its longer-term growth rate. Non-Resi (Commercial): Steady As She Goes Given the favorable economic backdrop, and acceleration in residential construction, we expect another solid year for non-residential (commercial) construction +3.5% in 2018. 2017 Year in Review. We discuss the performance of our 2017 one-stop Outlook estimates in the pages below but on a summary level, the sub-market performances were mostly in-line with our expectations. In summary, we had estimated residential R&R would grow 4-5% a figure slightly below LTM figures reported by the JCHS at Harvard University of +6.4% y/y through 3017 (and projected at +6.3% for 2017). Based on YTD housing starts, new housing construction was +3.1% y/y (versus our +4%) with single and multi-family +8.7% and down -8.2% y/y, respectively. We were looking for single-family +7% and multi- family -1%. Non-residential construction (total) was +2.6% y/y through October 2017. Infrastructure spending was disappointing, down about 3% in 2017. Overall, HY performance (in additional to the underlying equities) outperformed the broader market indices. 2017 marked another robust year for capital markets activity with total deal volume of $27bn in building products and $8bn in homebuilders, increases of 23.3% and 207% y/y, respectively. Deutsche Bank Securities Inc. Page 3 CONFIDENTIAL - PURSUANT TO FED. R. CRI M. P. 6(e) DB-SDNY-0086562 CONFIDENTIAL SDNY_GM_00232746 EFTA01385278