Attentus CDO I Offering Circular - Irish Stock Exchange

purposes, and if the entity has taxable income connected with such U.S. trade or business, the entity
would be subject under the Internal Revenue Code to the regular U.S. corporate income tax on such
effectively connected taxable income (and possibly to a 30% branch profits tax as well). However, the
Issuer should not be treated as engaged in a trade or business in the United States for federal income tax
purposes by reason of its equity interest in or holding a note issued by, as applicable, the newly formed
entity.
Classification of the Senior Notes
The Issuer has agreed and, by its acceptance of a Senior Note, each Noteholder will be deemed to
have agreed, to treat each of the Senior Notes, to the extent that any such Notes are not retained by the
Issuer, as debt of the Issuer for U.S. federal income tax purposes. Upon the issuance of the Senior Notes,
Thacher Proffitt & Wood LLP will deliver an opinion generally to the effect that assuming compliance
with the Indenture (and certain other documents) and based on certain factual representations made by the
Issuer and the Collateral Manager, the Senior Notes (other than the Class E Notes) will be and the Class E
Notes should be characterized as debt. Prospective investors should be aware that opinions of counsel are
not binding on the IRS and there can be no assurance that the IRS will not seek to characterize any Class
of Notes as other than indebtedness. If the IRS were to successfully recharacterize the Class E Notes as an
equity interest in the Issuer, treatment of such notes would be equivalent to “Characterization of the
Subordinated Notes to U.S. Persons” below. The balance of this discussion assumes that the Senior Notes
are characterized as debt of the Issuer for federal income tax purposes.
For U.S. federal income tax purposes, the Issuer of the Notes, and not the Co-Issuer, will be
treated as the Issuer.
Original Issue Discount
While not absolutely certain, it appears that the Class C-1 Notes, Class C-2 Notes, Class D Notes
and Class E Notes will be issued with original issue discount (“OID”) and a U.S. Holder of a Class C-1
Note, Class C-2 Note, Class D Note and Class E Note will be required to include OID in gross income as
it accrues under a constant yield method, based on the original yield to maturity of the Note. Thus, the
Holder of such a Note will be required to include OID in income as it accrues, prior to the receipt of the
cash attributable to such income. U.S. Holders, however, would be entitled to claim a loss upon maturity
or other disposition of such a Note with respect to interest amounts accrued and included in gross income
for which cash is not received. Such a loss generally would be a capital loss.
Although there can be no assurance, the Senior Notes should not be “contingent payment debt
instruments” (“CPDIs”) within the meaning of Treasury Regulation section 1.1275-4. If any Class of
Senior Notes were considered such instruments, among other consequences, gain on the sale of such
Senior Notes that might otherwise be capital gain would be ordinary income. Prospective investors
should consult their own tax advisors regarding the possible characterization of the Notes as CPDIs.
The Senior Notes may be debt instruments described in section 1272(a)(6) of the Code (debt
instruments that may be accelerated by reason of the prepayment of other debt obligations securing such
debt instruments). Special tax rules principally relating to the accrual of OID, market discount and bond
premium apply to debt instruments described in section 1272(a)(6). Further, those debt instruments may
not be part of an integrated transaction with a related hedge under Treasury Regulation Section 1.1275-6.
Prospective investors should consult with their own tax advisors regarding the effects of section
1272(a)(6).
Treatment of Disposition of the Senior Notes
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