Gresham Capital CLO IV B.V. - Irish Stock Exchange

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.
Securities Lending. The Collateral Manager may from time to time and on an ancillary basis, lend
Collateral Debt Securities comprising part of the Portfolio to banks, broker dealers or other financial institutions
that qualify as a professional market party for Dutch regulatory purposes and have a short term senior unsecured
debt rating of at least “F1” by Fitch and “A-1+” by S&P and a long term senior unsecured debt rating of at least
“A+” by Fitch (in such capacity, a “Securities Lending Counterparty”) pursuant to one or more agreements in
pre-agreed forms to be entered into between the Issuer and the Securities Lending Counterparty from time to
time (each, a “Securities Lending Agreement”). Such loans will be required to be secured by collateral in an
amount equal to at least 102 per cent. of the market value of the Collateral Debt Securities, determined daily.
However, in the event that the borrower of a loaned Collateral Debt Security defaults on its obligation to return
such loaned Collateral Debt Security because of insolvency or otherwise, the Issuer could experience delays and
costs in gaining access to the collateral posted by the borrower (and in extreme circumstances could be restricted
from selling the collateral). In the event that the borrower defaults, the Noteholders could suffer a loss to the
extent that the realised value of the cash or securities securing the obligation of the borrower to return a loaned
Collateral Debt Security (less expenses) is less than the amount required to purchase such Collateral Debt
Securities in the open market. This shortfall could be due to, among other things, discrepancies between the
mark to market and actual transaction prices for the loaned Collateral Debt Securities arising from limited
liquidity or availability of the loaned Collateral Debt Securities and, in extreme circumstances, the loaned
Collateral Debt Securities being unavailable at any price. The Rating Agencies may downgrade any of the
Senior Notes or the other Rated Notes if a borrower of a Collateral Debt Security or, if applicable, the entity
guaranteeing the performance of such borrower, has been downgraded by any of the Rating Agencies such that
the Issuer is not in compliance with the Securities Lending Counterparty required ratings. In the event that
either of the Initial Purchaser and/or one or more of any of their Affiliates, with acceptable credit support
arrangements borrow Collateral Debt Securities, this may create certain conflicts of interest.
PIK Securities. PIK Securities may not pay current interest in cash; all or part of a PIK Security’s interest
may be deferred or capitalised and added to principal or paid by the issuance of a further obligation.
Collateral Reinvestment Provisions
During the Reinvestment Period, the Collateral Manager will have discretion to reinvest Principal Proceeds,
Sale Proceeds, Uninvested Proceeds, amounts standing to the credit of the Initial Proceeds Account, the
Additional Collateral Account and the Sterling Additional Collateral Account and, in certain circumstances,
Interest Proceeds in Additional Collateral Debt Securities and additional Eligible Investments, in each case in
compliance with the Reinvestment Criteria. The ability of the Issuer to obtain Additional Collateral Debt
Securities, and the interest rates and terms on which such Additional Collateral Debt Securities can be obtained,
as well as the interest rates and other terms in connection with the investment of funds in Eligible Investments,
may affect the timing and amount of payments to the holders of the Notes. Any adverse impact of such
reinvestment (or lack thereof) of such amounts and the interest rates on such Additional Collateral Debt
Securities and Eligible Investments will be borne first by the holders of the Class N Notes, then by holders of
the Class E Notes, then by the holders of the Class D Notes, then by the holders of the Class C Notes, then by
the holders of the Class B Notes and then by the holders of the Senior Notes. The impact, including any adverse
impact, of such disposal or potential reinvestment on the holders of the Class N Notes will be magnified by the
leveraged nature of the Class N Notes. See “Description of the Portfolio”.
37