PROSPECTUS DUCHESS VI CLO BV CITIGROUP Dated 17 August ...

Issuer would, in such case, have the right to receive payments of principal and interest to which it is entitled
only upon receipt by the Selling Institution of such payments from the borrower. In purchasing Participations,
the Issuer generally will have no right to enforce compliance by the borrower with the terms of the applicable
loan agreement, nor any rights of set-off against the borrower and the Issuer may not directly benefit from the
collateral supporting the loan in respect of which it has purchased a Participation. As a result, the Issuer will
assume the credit risk of both the borrower and the Selling Institution selling the Participation. In the event of
the insolvency of the Selling Institution selling a Participation, the Issuer may be treated as a general creditor of
the Selling Institution and may not benefit from any set-off between the Selling Institution and the borrower and
the Issuer may suffer a loss to the extent that the borrower may set-off claims against the Selling Institution.
The Collateral Manager, on behalf of the Issuer may purchase a Participation from a Selling Institution that does
not itself retain any economic exposure in respect of the loan and, therefore, may have limited interest in
monitoring the terms of the loan agreement and the continuing creditworthiness of the borrower. When the
Issuer holds a Participation in a loan it generally will not have the right to vote to waive enforcement of any
covenants breached by a borrower. However, most participation agreements provide that the Selling Institution
may not vote in favour of any amendment, modification or waiver that forgives principal or interest, reduces
principal or interest that is payable, postpones any payment of principal (other than a mandatory prepayment) or
interest or releases substantially all of the collateral without the consent of the participant at least to the extent
the participant would be affected by any such amendment, modification or waiver. A Selling Institution voting
in connection with a potential waiver of a restrictive covenant may have interests which are different to those of
the Issuer and such Selling Institutions are not required to consider the interest of the Issuer in connection with
the exercise of its votes. An investment by the Issuer in a Synthetic Security related to a Collateral Debt
Security involves many of the same considerations relevant to Participations. See “Synthetic Securities” below.
Special Debt Securities. The Collateral Debt Securities in the Portfolio will include Special Debt
Securities (including Synthetic Securities the Reference Obligations of which are Special Debt Securities),
which Special Debt Securities will be issued by a variety of predominantly European issuers. The Special Debt
Securities will consist of loans or debt securities (excluding high yield bonds) that do not pay a fixed rate of
interest (including, without limitation, a senior or subordinated unsecured loan obligation or unsecured floating
rate note), including a Synthetic Security similar to the foregoing other than (a) a Bank Loan, (b) a Mezzanine
Loan; and (c) a Structured Finance Security.
Special Debt Securities rated below investment grade will have greater credit and liquidity risk than
investment grade obligations. Special Debt Securities may be unsecured and may be subordinated to other
obligations of the Issuer thereof. The lower ratings of obligations in the non-investment grade market reflect a
greater possibility that adverse changes in the financial condition of an issuer of such obligations or in general
economic conditions or both may impair the ability of such issuer to make payments of principal and interest.
Special Debt Securities are likely to experience greater default rates than have investment grade
securities. Although studies have been made of historical default rates in the non-investment grade market, such
studies do not necessarily provide a basis for drawing definitive conclusions with respect to default rates and, in
any event, do not necessarily provide a basis for predicting future default rates. Should increases in default rates
occur with respect to this type of collateral, the actual default rates of the Collateral Debt Securities in the
Portfolio may exceed the hypothetical default rates assumed by investors in determining whether to purchase
any of the Notes.
Risks of Special Debt Securities may include (among others): (a) limited liquidity and secondary
market support, (b) substantial market price volatility resulting from changes in prevailing interest rates,
(c) subordination to the prior claims of banks and other senior lenders, (d) the operation of mandatory sinking
fund or call/redemption provisions during periods of declining interest rates that could cause the Issuer to
reinvest premature redemption proceeds in lower yielding Collateral Debt Securities, (e) the possibility that
earnings of the Special Debt Security issuer may be insufficient to meet its debt service and (f) the declining
creditworthiness and potential for insolvency of the Issuer of such Special Debt Security during periods of rising
interest rates and economic downturn. An economic downturn or an increase in interest rates could severely
disrupt the market for Special Debt Securities and adversely affect the value of outstanding Special Debt
Securities and the ability of the issuers thereof to repay principal and interest.
Issuers of Special Debt Securities may be highly leveraged and may not have available to them more
traditional methods of financing. The risk associated with acquiring the securities of such issuers generally is
greater than is the case with highly rated securities. The prices of Special Debt Securities are likely to be more
sensitive to adverse economic changes or individual corporate developments than higher rated securities. For
example, during an economic downturn or a sustained period of rising interest rates, issuers of Special Debt
42