ALBA 2007 – 1 plc - Irish Stock Exchange

Principal Deficiencies will be recorded in the following manner: (a) firstly to the F Principal
Deficiency Sub-Ledger, until the amount on such sub-ledger is equal to the F Note Principal Deficiency
Limit; (b) secondly to the E Principal Deficiency Sub-Ledger, until the amount on such sub-ledger is
equal to the E Note Principal Deficiency Limit; (c) thirdly to the D Principal Deficiency Sub-Ledger,
until the amount on such sub-ledger is equal to the D Note Principal Deficiency Limit; (d) fourthly to
the C Principal Deficiency Sub-Ledger, until the amount on such sub-ledger is equal to the C Note
Principal Deficiency Limit; (e) fifthly to the B Principal Deficiency Sub-Ledger, until the amount of
such sub-ledger is equal to the B Principal Deficiency Limit; and (f) thereafter, to the A Principal
Deficiency Sub-Ledger (see "Credit Structure – Principal Deficiency Ledger").
In the event that, after the application of the Available Revenue Funds, there are insufficient amounts
available for distribution to meet the Revenue Shortfalls, the Issuer may make drawings up to the
Liquidity Facility Amount pursuant to the Liquidity Facility Agreement. In the event that, on any
Payment Date prior to the enforcement of the Security by the Trustee, after the application of the
Available Revenue Funds and amounts standing to the credit of the Liquidity Ledger, there are
insufficient amounts to make payments of interest on the classes of Notes junior to the Most Senior
Class of Notes, then such payments of interest will be deferred until the following Payment Date in
accordance with Condition 4(f). There will be no deferral of any payment of interest or any other
amount due and payable on the Most Senior Class of Notes.
Subordination of the Instruments
To the extent set forth in Subordinated Note Condition 2, prior to the enforcement of the Security by
the Trustee, the payment of interest and principal of the Subordinated Notes will rank behind the
payment of interest on the Notes but in priority to payments on the R Certificates.
In the event that, after the application of the Available Revenue Funds available to the Issuer there are
insufficient amounts to make payments of interest on the Subordinated Notes, then such payments of
interest will be deferred until the following Payment Date in accordance with Subordinated Note
Condition 4(f).
In respect of the interests of the Instrumentholders, the Trust Deed contains provisions requiring the
Trustee not to have regard to the interests of the Instrumentholders as regards all powers, trusts,
authorities, duties and discretions of the Trustee and requiring the Trustee, other than in limited
circumstances, to have regard only to the interest of the Most Senior Class of Notes.
Interest Rate and Currency Mismatch on the Notes
In order to address the interest rate risk associated with the Fixed Reverting to SVR Mortgage Loans
and the Fixed Reverting to LIBOR Mortgage Loans, the Mortgage Rate for each of which is calculated
by reference to certain fixed rates (within the fixed rate period in respect of such Mortgage Loans), the
Issuer will on the Issue Date enter into the Fixed – LIBOR Swap Transaction with the Interest Rate
Swap Counterparty pursuant to the Interest Rate Swap Agreement.
In order to address the interest rate basis risk associated with the Bank of England Repo Rate-Linked
Mortgage Loans (save for the Fixed Reverting to SVR Mortgage Loans, to the extent they accrue a
fixed rate of interest), the Mortgage Rate for each of which is calculated by reference to the Bank of
England repo rate, the Issuer will on the Issue Date enter into the BBR–LIBOR Basis Swap Transaction
with the Swap Counterparty pursuant to the Interest Rate Swap Agreement.
In order to address the interest rate basis risk associated with the LIBOR-Linked Mortgage Loans (save
for the Fixed Reverting to LIBOR Mortgage Loans, to the extent they accrue a fixed rate of interest),