ALBA 2007 – 1 plc - Irish Stock Exchange

the Mortgage Rate for each of which is calculated by reference to a LIBOR rate which may be different
from Note LIBOR, the Issuer will on the Issue Date enter into the LIBOR Basis Swap Transaction with
the Swap Counterparty under the Interest Rate Swap Agreement.
In order to address the interest rate and currency risk associated with the Issuer receiving payments
from the Interest Rate Swap Counterparty (for so long as the Interest Rate Swap Agreement is in place)
and otherwise under the Mortgage Loans in sterling and making payments due under the Euro Notes in
euros, the Issuer will enter into the Cross Currency Swap Agreement with the Cross Currency Swap
Counterparty.
There can be no assurance that the Interest Rate Swap Transactions or the Cross Currency Swap
Transaction will adequately address the interest rate risks or the currency risk (described above),
respectively. A failure by the Issuer to make timely payments of amounts due under the Interest Rate
Swap Transactions or the Cross Currency Swap Transaction will constitute a default thereunder and
entitle the Interest Rate Swap Counterparty or the Cross Currency Swap Counterparty to terminate the
Interest Rate Swap Transactions or the Cross Currency Swap Transaction, respectively as described
below. To the extent that either of the Swap Counterparties is not obliged to provide, or otherwise
defaults in its obligations to provide, the Issuer with an amount equal to the full amount due under the
Interest Rate Swap Transactions or the Cross Currency Swap Transaction, the Issuer may have
insufficient funds to make payments due on the Notes.
Each Swap Agreement will provide that, upon the occurrence of certain events, the relevant Swap
Agreement may terminate and a termination payment by either the Issuer or the applicable Swap
Counterparty may be payable. Any termination payment due from the Issuer in respect of the Interest
Rate Swap Agreement (except where such termination arises as a result of a default by the Interest Rate
Swap Counterparty or the downgrade or withdrawal of its credit rating) will rank ahead of payments
owing to the Noteholders (to the extent not satisfied out of the proceeds of collateral provided by the
Interest Rate Swap Counterparty or any premium received by the Issuer upon entering into any
replacement interest rate swap transaction). Payments of such amounts to the Interest Rate Swap
Counterparty may reduce funds that would otherwise be available to make payments on the Notes.
Upon any early termination of the Interest Rate Swap Agreement or the Cross Currency Swap
Agreement, the Issuer will either (i) be paid a net termination amount by the Interest Rate Swap
Counterparty, if any, due to it pursuant to the terms of the Interest Rate Swap Agreement (which it will
apply to acquire a replacement interest rate swap if the Notes are to remain outstanding following any
such early termination) or, as the case may be, by the Cross Currency Swap Counterparty, if any, due
to it pursuant to the terms of the Cross Currency Swap Agreement (which it will apply to acquire a
replacement cross currency swap if the Notes are to remain outstanding following any such early
termination), or (ii) be required to pay a net termination amount to the Interest Rate Swap
Counterparty, if any, due from it pursuant to the terms of the Interest Rate Swap Agreement (which it
may fund from collateral provided by the Interest Rate Swap Counterparty and any amount paid to it by
a replacement interest rate swap counterparty in relation to any replacement interest rate swaps entered
into) or, as the case may be, be required to pay a net termination amount to the Cross Currency Swap
Counterparty, if any, due from it pursuant to the terms of the Cross Currency Swap Agreement (which
it may fund from collateral provided by the Cross Currency Swap Counterparty and any amount paid to
it by a replacement cross currency swap counterparty in relation to any replacement cross currency
swaps entered into). To the extent any net termination amount payable by the Interest Rate Swap
Counterparty or the Cross Currency Swap Counterparty together with any collateral provided by such
Swap Counterparty is insufficient to enable the Issuer to acquire the replacement interest rate swaps or
the replacement cross currency swaps, respectively, the Issuer will be required to utilise, inter alia,