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Houlihan Lokey Specialty Finance Market UpdateDear Clients and Friends,We are pleased to present our Specialty Finance Market Update for the summer of 2020.We hope that you and your families remain safe and healthy. We have continued adapting to this fluidmarket and are busy helping our clients navigate their financing, M&A, and other strategic alternatives.Please reach out to any of us if you would like to connect or brainstorm any current needs or relevanttopics with us.We have included select recent transaction announcements, a public markets overview, and industryinsights to help you stay ahead in our dynamic and constantly evolving industry. We hope you find thisquarterly update to be informative and that it serves as a valuable resource to you in staying abreast ofthe market. We look forward to staying in touch with you.Regards,Brent FerrinDirector,Financial Institutions GroupBFerrin@HL.com212.497.4203Additional Team ContactsJeffrey LevineManaging Director and Global Head,Financial Institutions GroupJMLevine@HL.com305.779.1177Jonathan SloanManaging Director,Financial and Valuation AdvisoryJSloan@HL.com212.497.4232Jeffrey LederFinancial Analyst,Financial Institutions GroupJLeder@HL.com212.497.4226Ben WilsonFinancial Analyst,Financial Institutions GroupBWilson@HL.com212.497.4289Oscar AartsDirector,Financial and Valuation AdvisoryOAarts@HL.com212.497.7869Specialty Finance Subverticals CoveredALTERNATIVE FINANCIAL SERVICESCREDIT CARDSFACTORINGASSET-BASED LENDINGDEBT BUYING/COLLECTIONFINANCIAL INFORMATIONFLEET LEASINGSMALL BUSINESS LOANSEQUIPMENT LEASINGFINANCIAL PROCESSORS AND SOFTWAREHEALTHCARE FINANCELITIGATION FINANCEAUTO LOANS/BHPHINSTALLMENT LOANSPAYDAY LENDING/PAWNSTUDENT LENDINGPAYMENTSTRANSPORTATION FINANCE

Houlihan Lokey is the trusted advisor tomore top decision-makers than any otherindependent global investment bank.No. 1 Advisor to Specialty Finance Companies2010–2019 M&A Advisory RankingsAll U.S. Specialty Finance Transactions2015–2019 M&A Advisory RankingsAll U.S. Specialty Finance TransactionsAdvisorDeals5Stifel/Keefe, Bruyette & Woods1966899Bank of America SecuritiesCitigroup Inc.Piper Sandler & Co.Morgan StanleyWells Fargo Securities, LLC16161514141234Houlihan Lokey, Inc.J.P. Morgan Securities LLCBarclays Capital Inc.Credit Suisse (USA), Inc.4829232212345678910AdvisorDealsHoulihan Lokey, Inc.J.P. Morgan Securities LLCStifel/Keefe, Bruyette & WoodsPiper Sandler & Co.Barclays Capital Inc.Credit Suisse (USA), Inc.Bank of America SecuritiesMorgan StanleyCitigroup Inc.Deutsche Bank Securities Inc.90433936352928242320Source: S&P Global Market Intelligence.Source: S&P Global Market Intelligence.Exceptional Qualifications in Specialty Finance (Select Transactions)2020 YTD2019has sold a 2.6bn sub- and nonperforming shipping loan portfolio toa subsidiary of:has sold a 49% stake tohas been acquired bySeries ASenior Secured Noteshas completed the sale of certainassets toGrowth Equity 40,000,000 Preferred Equity 50,000,000Sellside Advisorhas been acquired byGrowth CapitalExclusive Financial Advisor & Placement AgentExclusive Financial AdvisorExclusive Placement AgentSellside AdvisorSellside AdvisorSellside Advisor2018LenderLive Networka division ofhas been acquired byhas been acquired byhas acquiredhas merged withhas been acquired byhas been acquired bySellside AdvisorSellside AdvisorSellside AdvisorBuyside AdvisorSellside AdvisorSellside Advisor2016 / 2017Certain equipment finance assetsand operations ofa subsidiary ofhas been acquired byhas acquiredhas been acquired byhas been acquired by affiliates ofhave been acquired byHitachi Capital America Corp.Buyside AdvisorSellside AdvisorSellside AdvisorSellside AdvisorSellside Advisor2

Recent Transactions–Case Studies19th Capital’s Sale to Hilco GlobalClient Profile19th Capital Group (“19th Capital” or the “Company”), a wholly owned subsidiary of Element FleetManagement Corp (TSX:EFN; “Element”), provides asset financing and fleet management solutions foroperators of Class 8 fleets across the North American trucking industry. The Company’s strategicnetwork of partners includes financial institutions, OEMs, and other capital providers. The Company ownsand manages Quality Co., a leading truck leasing and sales company, which has locations in theIndianapolis and Dallas markets.a subsidiary of:Transaction Snapshothas completed the sale of certainassets toHilco Global (“Hilco”), through its operating business H19 Capital LLC, has acquired the assets of 19thCapital Group, including trucks, leases, and associated fleet services. The transaction closed on May 1,2020.Sellside AdvisorIn October 2019, Element Fleet Management Corp announced that it was pursuing strategicalternatives with regards to 19th Capital Group and retained Houlihan Lokey to assist in evaluatingstrategic alternatives, including a potential sale of the business. Houlihan Lokey assisted inmarketing, structuring, and negotiating the transaction with Hilco Global and successfully navigated achallenging market environment amid COVID-19 and significant trucking market headwinds to achievea desirable outcome for all parties involved. This transaction highlights Houlihan Lokey's continuedposition as a leading advisor within the specialty finance and transportation and logistics sectors.HoulihanLokey’sRoleMerchants Automotive Group’s Growth FinancingClient ProfileMerchants Automotive Group (“Merchants” or the “Company”), a privately owned family business, is oneof the largest and fastest-growing fleet management companies in the United States. The Companyprovides a comprehensive selection of fleet management and leasing solutions to a wide spectrum ofindustries. Merchants also sells, services, and finances pre-owned cars, operating as one of the largestpre-owned dealers in New England. The Company was founded in 1962 and is headquartered inHooksett, New Hampshire.Series ASenior Secured NotesTransaction SnapshotGrowth CapitalBain Capital Credit provided 50 million of Series A senior secured notes to Merchants. Proceeds fromthe transaction were used to fund the Company’s accelerated growth, as well as to pay transactionrelated fees and expenses. The transaction closed on March 13, 2020. 50,000,000Exclusive Financial Advisor & Placement AgentHoulihanLokey’sRoleDue to several recent large contract wins that required significant upfront investment, Merchants decidedto explore various capital alternatives to fund its growth and engaged Houlihan Lokey as its exclusivefinancial advisor and placement agent. The financing achieved Merchants’ primary objectives, including(i) providing a runway to support the company’s accelerated growth over the next several years, (ii)limiting any governance restrictions on operations, (iii) minimizing equity dilution among the ownershipgroup, and (iv) providing payment flexibility to maximize reinvestment in the business.Houlihan Lokey assisted the Company in arranging, structuring, and negotiating the financing, includingnavigating multiparty, inter-creditor negotiations and documentation. In spite of the significant marketvolatility during the final stages of the transaction, the Company was not required to make any changes tothe pricing or terms of the financing, highlighting the strength of the partnership between allstakeholders.3

Update on the Implementation of CECLIn June 2016, the Financial AccountingStandards Board (FASB) issued ASU 2016-13,which changes the way credit losses arerecognized for most financial assets. Under thenew standard, current expected credit losses(CECL) requires recognition to be made whenlosses can be reasonably expected for thelifetime of the exposure, as opposed to whenlosses are incurred or probable of occurring.CECL went into effect for most public companieswith fiscal years after December 15, 2019.Pre-CECLPost-CECLIncurred Loss ModelExpected CreditLoss ModelRecognize loss whenit is incurred or isprobable to occurRecognize currentestimate not expectedto be collected atorigination and eachreporting dateThe initial impact of CECL on public company financial statements seems to be mixed. Many companiesreportedlittle to no impact on their financial statements, likely due to product type and typical loss levels.Other companies with products typically associated with higher loss levels were impacted more. Forexample, net shareholders’ equity for consumer lender OneMain Holdings, Inc., decreased byapproximately 19% as a result of increases in allowance for credit losses attributable to CECL.As a way to provide additional transition relief for companies implementing CECL, the FASB issued Topic326 under the CECL guidance, which allows for companies to elect to record financial assets at fair value.Fewer companies seem to have elected to account for financial assets under this guidance, and the onesthat have also show a varying level of impact. For example, LendingClub Corp. stated in its most recentForm 10-Q that “adoption of Topic 326 did not have an impact on the company’s financial position, resultsof operations, and cash flows.” Conversely, Enova International, Inc., also elected the fair value optionunder Topic 326 but had an increase in net shareholders’ equity of approximately 33% as a result of theadoption.The biggest change to come from CECL is likely presenting itself now in the current economicenvironment. Many public companies have increased their loss reserves on existing and new issuancesmaterially to account for expected losses related to COVID-19. Whereas these losses may have previouslybeen delayed until they became probable of occurring before the implementation of CECL, companiesmust now accelerate these losses to when they are reasonably expected. This economic crisis had aninitial impact on Q1 earnings and will likely continue to have additional effects in the coming quarters ascompanies put their new CECL models to the test.Leading Provider of Financial and Valuation Advisory ServicesHoulihan Lokey’s Specialty Finance team is a cross-functional team incorporating M&A advisory, capitalraising, financial and tax due diligence, valuation, technical accounting, tax structuring, and structuredproduct and loan valuation. The team works together to seamlessly deliver solutions for your transactional,corporate planning, financial reporting, and tax needs. The team has performed valuation of whole loanpools and securitized tranches for NAV purposes, risk retention exercises, and diligence before making anew investment.4

Public Company ValuationPerformance vs. S&P 500 (June 2018–June 2020)S&P 500Consumer LendersCommercial -19Sep-19Dec-19Mar-20Median Trailing (LTM) P/E (June 2018–June 2020)40.0xConsumer Lenders2-Year Avg.Commercial FinanceA gap is beginning to form asimplied commercial comp P/Emultiples are clearly aboveconsumer comps (as is commonin more uncertain times).30.0x20.0xConsumer Lenders11.4xCommercial dian Forward (NTM) P/E (June 2018–June 2020)30.0xConsumer LendersJun-202-Year Avg.Commercial Finance20.0xConsumer Lenders10.1xCommercial 015.8x10.1xSep-18Dec-18Note: Public company constituents can be seen on page 7.Source: S&P Capital IQ data as of 6/30/2020.Mar-19Jun-19Sep-19Dec-19Mar-20Jun-205

Public Company Valuation (cont.)Consumer LendersMedian Forward (NTM) P/E10.8xCommercial Finance15.8x10.8x10.1xJune 30, 2020July 1, 2019Consumer LendersMedian Price/Tangible Book Value1.1x0.5xCommercial Finance1.1xJune 30, 20190.6xJune 30, 2020Consumer LendersMedian Revenue Growth Rate16.9%Commercial Finance3.6%7.1%2019A–2020E (8.8%)2018A–2019AConsumer LendersMedian ROE (LTM)15.0%10.5%Commercial Finance12.2%5.2%June 30, 2019Note: Public company constituents can be seen on page 7.Source: S&P Capital IQ data as of 3/25/20.June 30, 20206