OCI Euro Fund I B.V. - Irish Stock Exchange

OCI Euro Fund I B.V.
(a private company with limited liability incorporated under the laws of The Netherlands, having its statutory seat in
Amsterdam)
€52,500,000 Class A1 Senior Secured Floating Rate Variable Funding Notes due 2024
€145,000,000 Class A2 Senior Secured Floating Rate Notes due 2024
€49,500,000 Class A3 Senior Secured Floating Rate Notes due 2024
€21,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2024
€21,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2024
€19,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2024
€22,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2024
€26,500,000 Class F Subordinated Notes due 2024
€15,000,000 Class P Combination Notes due 2024*
The assets securing the Notes will consist primarily of a portfolio of Senior Loans, High Yield Bonds, Mezzanine Obligations and Structured Finance
Obligations in respect of which Octagon Credit Investors (UK) Ltd is acting as investment manager (the "Investment Manager").
*Each Combination Note referred to above consists of "Components". The Components of the Class P Combination Notes correspond to the Class P
OAT Strips (as defined herein) and to the Class F Subordinated Notes.
OCI Euro Fund I B.V. (the "Issuer") will issue the Class A1 Notes, the Class A2 Notes, the Class A3 Notes, the Class B Notes, the Class C Notes, the
Class D Notes, the Class E Notes and the Class F Subordinated Notes (each as defined herein). The Issuer will also issue the Class P Combination
Notes (as defined herein).
The Class A1 Notes, the Class A2 Notes, the Class A3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F
Subordinated Notes and the Class P Combination Notes, are collectively referred to herein as the "Notes". The Notes will be issued and secured
pursuant to a trust deed (the "Trust Deed") dated on or about 10 July 2007 (the "Issue Date"), made between (amongst others) the Issuer and Deutsche
Trustee Company Limited, in its capacity as trustee (the "Trustee").
Payments on the Notes will be made semi-annually in arrear on 15 February and 15 August (as adjusted for non-Business Days (as provided herein)), in
each year, commencing on 15 February 2008 in accordance with the Pre-Enforcement Priority of Payments described herein.
The Notes will be subject to optional, mandatory and Special Redemption as described herein. See Condition 7 (Redemption).
See "Risk Factors" for a discussion of certain factors to be considered in connection with an investment in the Notes.
The Notes will be initially offered at the prices specified in the "Summary" or such other prices as may be negotiated at the time of sale. Application has
been made to the Irish Financial Services Regulatory Authority (the "IFSRA"), as competent authority (the "Competent Authority") under Directive
2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List
and trading on its regulated market. Such approval relates only to Notes which are to be admitted to trading on the regulated market of the Irish Stock
Exchange or other regulated markets for the purposes of Directive 93/22/EEC or which are to be offered to the public in any Member State of the
European Economic Area. It is anticipated that listing will take place on or about the Issue Date. There can be no assurance that such listing will be
granted. Upon approval of the Prospectus by the Irish Competent Authority, the Prospectus will be filed with the Company Registrations Office in
accordance with Regulation 38(1)(b) of the Prospectus (Directive 2003/71/EC) Regulations 2005.
This document constitutes a Prospectus for the purposes of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on
the prospectus to be published when securities are offered to the public or admitted to trading (the "Prospectus Directive").
It is a condition of the issue and sale of the Notes that the Notes (except for the Class F Subordinated Notes) be issued with at least the following ratings
from Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. ("S&P") and Moody’s Investors Service Inc. ("Moody’s" and,
together with S&P, the "Rating Agencies"): the Class A1 Notes: "AAA" from S&P and "Aaa" from Moody’s; the Class A2 Notes: "AAA" from S&P and
"Aaa" from Moody's; the Class A3 Notes: "AAA" from S&P and "Aaa" from Moody's; the Class B Notes: "AA" from S&P and "Aa2" from Moody’s; the Class
C Notes: "A" from S&P and "A2" from Moody's; the Class D Notes: "BBB" from S&P and "Baa3" from Moody's; and the Class E Notes: "BB" from S&P and
"Ba3" from Moody's. The Class P Combination Notes will be rated "Aaa" by Moody's. Please see "Ratings of the Notes" below for a description of what
such ratings address. The Class F Subordinated Notes being offered hereby will not be rated. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision, suspension or withdrawal at any time by the applicable Rating Agency.
The Notes have not been and will not be registered under the Securities Act and may not be offered, sold or delivered within the United States or to, or for
the account or benefit of, U.S. Persons or to U.S. residents (as determined for purposes of the Investment Company Act) ("U.S. Residents") except in
certain transactions exempt from, or not subject to, the registration requirements of the Securities Act and in the manner so as not to require the
registration of the Issuer as an "investment company" pursuant to the Investment Company Act.
The Notes (save for the Class A1 Notes and certain of the Class F Subordinated Notes) are being offered by the Issuer through Deutsche Bank AG,
London Branch in its capacity as initial purchaser of such Notes, the "Initial Purchaser") subject to prior sale, when, as and if delivered to and accepted
by the Initial Purchaser, and to certain conditions. It is expected that delivery of the Notes will be made on or about the Issue Date.
The date of this Prospectus is 10 July 2007.
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NOTE DEFINITIONS
The Class A1 Senior Secured Floating Rate Variable Funding Notes due 2024 are referred to herein as
the "Class A1 Notes". The Class A2 Senior Secured Floating Rate Notes due 2024 are referred to
herein as the "Class A2 Notes". The Class A3 Senior Secured Floating Rate Notes due 2024 are
referred to herein as the "Class A3 Notes". The Class A1 Notes, the Class A2 Notes and the Class A3
Notes are collectively referred to herein as the "Class A Notes". The Class B Senior Secured
Deferrable Floating Rate Notes due 2024 are referred to herein as the "Class B Notes". The Class C
Senior Secured Deferrable Floating Rate Notes due 2024 are referred to herein as the "Class C Notes".
The Class D Senior Secured Deferrable Floating Rate Notes due 2024 are referred to herein as the
"Class D Notes". The Class E Senior Secured Deferrable Floating Rate Notes due 2024 are referred to
herein as the "Class E Notes". The Class A Notes, the Class B Notes, the Class C Notes, the Class D
Notes and the Class E Notes are collectively referred to herein as the "Senior Notes". The Class F
Subordinated Notes due 2024 are referred to herein as the "Class F Subordinated Notes". The Class
P Combination Notes due 2024 are referred to herein as the "Class P Combination Notes" or
"Combination Notes".
PRIORITIES OF NOTES
The Class A1 Notes will rank pari passu with the Class A2 Notes (except where specified as being
subject to the Pari Passu Provisions or the Class A1/A2 Note Redemption Method). The Class A1 Notes
and the Class A2 Notes will rank in priority to the Class A3 Notes. The Class A Notes will rank in priority
to the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F
Subordinated Notes. The Class B Notes will rank pari passu and rateably without any preference
among themselves for all purposes and in priority to the Class C Notes, Class D Notes, the Class E
Notes and the Class F Subordinated Notes. The Class C Notes will rank pari passu and rateably
without any preference among themselves for all purposes and in priority to the Class D Notes, the
Class E Notes and the Class F Subordinated Notes. The Class D Notes will rank pari passu and
rateably without any preference among themselves for all purposes and in priority to the Class E Notes
and the Class F Subordinated Notes. The Class E Notes will rank pari passu and rateably without any
preference among themselves for all purposes and in priority to the Class F Subordinated Notes. The
Class F Subordinated Notes will rank pari passu and rateably without any preference among themselves
for all purposes but subordinate to all other Classes of Notes. For the purposes of priority and
subordination, the Combination Notes will not be treated as a separate Class but will have the
respective levels of priority and subordination accorded to the respective Components thereof.
LIMITED RECOURSE
The Notes are limited recourse obligations of the Issuer which are payable solely out of amounts
received by or on behalf of the Issuer in respect of the Collateral. The net proceeds of the realisation of
the security over the Collateral following an Event of Default or the aggregate proceeds of liquidation of
the Collateral may be insufficient to pay all amounts due to the Noteholders after making payments to
other creditors of the Issuer ranking prior thereto or pari passu therewith. In the event of a shortfall in
such proceeds, the Issuer will not be obliged to pay, and the other assets (including the rights of the
Issuer under the Management Agreement) of the Issuer will not be available for payment of such
shortfall and all claims in respect of the Notes shall be extinguished. See Condition 4 (Security).
RESPONSIBILITY
The Issuer accepts responsibility for the information contained in this document (save for the information
contained in the sections of this document headed "The Investment Manager" and "Description of the
Collateral Administrator — General"). To the best of the knowledge and belief of the Issuer (which has
taken all reasonable care to ensure that such is the case), the information contained in this document is
in accordance with the facts and does not omit anything likely to affect the import of the information.
The delivery of this Prospectus at any time does not imply that the information herein is correct at any
time subsequent to the date of this Prospectus. The Investment Manager accepts responsibility for the
information contained in the section of this document headed "The Investment Manager". To the best of
the knowledge and belief of the Investment Manager (which has taken all reasonable care to ensure that
such is the case), the information is in accordance with the facts and does not omit anything likely to
affect the import of the information. The Collateral Administrator accepts responsibility for the
information contained in the section of this document headed "Description of the Collateral Administrator
— General". To the best of the knowledge and belief of the Collateral Administrator (which has taken all
reasonable care to ensure that such is the case), the information is in accordance with the facts and
does not omit anything likely to affect the import of the information. Except for the sections of this
document headed "The Investment Manager" in the case of the Investment Manager and "Description of
the Collateral Administrator — General", in the case of the Collateral Administrator, none of the
Investment Manager, the Collateral Administrator, the Initial Purchaser, any Derivative Counterparty, the
10:21\10 July 2007\LONDON\CWM\4369396.02
ii

Trustee, the Custodian nor any Agent accepts any responsibility for the accuracy and completeness of
any information contained in this Prospectus.
DISCLAIMER
None of the Initial Purchaser, the Trustee, the Investment Manager (save in respect of the section
headed "The Investment Manager"), the Collateral Administrator (save in respect of the section headed
"Description of the Collateral Administrator — General"), any Agent, any Derivative Counterparty or any
other party has separately verified the information contained in this Prospectus and, accordingly, none
of the Initial Purchaser, the Trustee, the Custodian, the Investment Manager (save as specified above),
the Collateral Administrator (save as specified above), any Agent, any Derivative Counterparty or any
other party (save for the Issuer as specified above in relation to the acceptance of responsibility) makes
any representation, recommendation or warranty, express or implied, regarding the accuracy, adequacy,
reasonableness or completeness of the information contained in this Prospectus or in any further notice
or other document which may at any time be supplied in connection with the Notes or their distribution or
accepts any responsibility or liability therefor. None of the Initial Purchaser, the Trustee, the Custodian,
the Investment Manager, the Collateral Administrator, any Agent, any Derivative Counterparty or any
other party undertakes to review the financial condition or affairs of the Issuer during the life of the
arrangements and transactions contemplated by this Prospectus nor to advise any investor or potential
investor in the Notes of any information coming to the attention of any of the aforementioned parties
which is not included in this Prospectus.
IRISH REGULATORY POSITION
Copies of this Prospectus will be filed with and approved by the Irish Financial Services Regulatory
Authority (the "Financial Regulator") as required by the Irish Prospectus (Directive 2003/71/EC)
Regulations 2005 (the "Prospectus Regulations").
The Issuer is not and will not be regulated by the Financial Regulator as a result of issuing the Notes.
Any investment in Notes does not have the status of a bank deposit and is not within the scope of the
deposit protection scheme operated by the Financial Regulator.
OFFER/INVITATION/DISTRIBUTION RESTRICTIONS
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF, OR AN INVITATION BY OR ON
BEHALF OF THE ISSUER, THE INITIAL PURCHASER OR ANY OF THEIR AFFILIATES, THE
INVESTMENT MANAGER, THE COLLATERAL ADMINISTRATOR OR ANY OTHER PERSON TO
SUBSCRIBE FOR OR PURCHASE ANY OF THE NOTES. THE DISTRIBUTION OF THIS
PROSPECTUS AND THE OFFERING OF THE NOTES IN CERTAIN JURISDICTIONS MAY BE
RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE
REQUIRED BY THE ISSUER AND THE INITIAL PURCHASER TO INFORM THEMSELVES ABOUT
AND TO OBSERVE ANY SUCH RESTRICTIONS. IN PARTICULAR, THE COMMUNICATION
CONSTITUTED BY THIS PROSPECTUS IS DIRECTED ONLY AT PERSONS WHO (I) ARE OUTSIDE
THE UNITED KINGDOM AND ARE OFFERED AND ACCEPT THIS PROSPECTUS IN COMPLIANCE
WITH SUCH RESTRICTIONS OR (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D)
(HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS ETC.) OF THE FINANCIAL
SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 OR WHO
OTHERWISE FALL WITHIN AN EXEMPTION SET FORTH IN SUCH ORDER SO THAT SECTION
21(1) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 DOES NOT APPLY TO THE
ISSUER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").
THIS COMMUNICATION MUST NOT BE DISTRIBUTED TO, ACTED ON OR RELIED ON BY
PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY
TO WHICH THIS COMMUNICATION RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND
WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. FOR A DESCRIPTION OF CERTAIN
FURTHER RESTRICTIONS ON OFFERS AND SALES OF NOTES AND DISTRIBUTION OF THIS
PROSPECTUS, SEE "PLAN OF DISTRIBUTION" AND "TRANSFER RESTRICTIONS" BELOW.
UNAUTHORISED INFORMATION
IN CONNECTION WITH THE ISSUE AND SALE OF THE NOTES, NO PERSON IS AUTHORISED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORISED BY OR ON BEHALF OF THE ISSUER,
THE INITIAL PURCHASER, THE TRUSTEE, THE INVESTMENT MANAGER OR THE COLLATERAL
ADMINISTRATOR. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION CONTAINED IN IT IS CORRECT AS AT ANY TIME SUBSEQUENT TO ITS
DATE.
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iii

GENERAL NOTICE
EACH PURCHASER OF THE NOTES MUST COMPLY WITH ALL APPLICABLE LAWS AND
REGULATIONS IN FORCE IN EACH JURISDICTION AT ANY TIME AT WHICH IT PURCHASES,
OFFERS OR SELLS SUCH NOTES OR POSSESSES OR DISTRIBUTES THIS PROSPECTUS AND
MUST OBTAIN ANY CONSENT, APPROVAL OR PERMISSION REQUIRED FOR THE PURCHASE,
OFFER OR SALE BY IT OF SUCH NOTES UNDER THE LAWS AND REGULATIONS IN FORCE IN
ANY JURISDICTIONS TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES,
OFFERS OR SALES, AND NONE OF THE ISSUER, THE INITIAL PURCHASER (OR ANY OF ITS
AFFILIATES), THE INVESTMENT MANAGER, THE TRUSTEE OR THE COLLATERAL
ADMINISTRATOR SPECIFIED HEREIN SHALL HAVE ANY RESPONSIBILITY THEREFOR.
THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER APPLICABLE UNITED
STATES FEDERAL AND STATE SECURITIES LAWS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EACH OFFEREE (AND EACH
EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF SUCH OFFEREE) MAY DISCLOSE TO
ANY AND ALL OTHER PERSONS, WITHOUT LIMITATION OF ANY KIND, THE TAX TREATMENT
AND TAX STRUCTURE OF THE TRANSACTIONS DESCRIBED HEREIN (INCLUDING THE
OWNERSHIP AND DISPOSITION OF THE NOTES) AND ALL MATERIALS OF ANY KIND
(INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO THE OFFEREE
RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. HOWEVER, ANY SUCH
DISCLOSURE OF THE TAX TREATMENT, TAX STRUCTURE AND OTHER TAX-RELATED
MATERIALS SHALL NOT BE MADE FOR THE PURPOSE OF OFFERING TO SELL THE NOTES
OFFERED HEREBY OR SOLICITING AN OFFER TO PURCHASE ANY SUCH NOTES. FOR
PURPOSES OF THIS PARAGRAPH, THE TERMS "TAX TREATMENT" AND "TAX STRUCTURE"
HAVE THE MEANING GIVEN TO SUCH TERMS UNDER UNITED STATES TREASURY
REGULATION SECTION 1.6011-4(c) AND APPLICABLE U.S. STATE AND LOCAL LAW. IN
GENERAL, THE TAX TREATMENT OF A TRANSACTION IS THE PURPORTED OR CLAIMED U.S.
TAX TREATMENT OF THE TRANSACTION, AND THE TAX STRUCTURE OF A TRANSACTION IS
ANY FACT THAT MAY BE RELEVANT TO UNDERSTANDING THE PURPORTED OR CLAIMED U.S.
TAX TREATMENT OF THE TRANSACTION.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN
APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER
421-B OF THE NEW HAMPSHIRE REVISED STATUTES (THE "RSA")
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED
IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE
SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY
UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
INFORMATION AS TO PLACEMENT WITHIN THE UNITED STATES
THE REGULATION S NOTES (WITH EACH CLASS P COMBINATION NOTE CONSTITUTING A
SEPARATE "CLASS" FOR SUCH PURPOSE) OF EACH CLASS (OTHER THAN THE CLASS A1
NOTES) (THE "REGULATION S NOTES") SOLD OUTSIDE THE UNITED STATES TO NON-U.S.
10:21\10 July 2007\LONDON\CWM\4369396.02
iv

PERSONS IN RELIANCE ON REGULATION S ("REGULATION S") UNDER THE SECURITIES ACT
WILL EACH BE REPRESENTED ON ISSUE BY BENEFICIAL INTERESTS IN ONE OR MORE
GLOBAL CERTIFICATES OF SUCH CLASS (EACH, A "REGULATION S GLOBAL CERTIFICATE"
AND TOGETHER, THE "REGULATION S GLOBAL CERTIFICATES"), IN FULLY REGISTERED
FORM, WITHOUT INTEREST COUPONS OR PRINCIPAL RECEIPTS, WHICH WILL BE DEPOSITED
ON OR ABOUT THE ISSUE DATE WITH, AND REGISTERED IN THE NAME OF BT GLOBENET
NOMINEES LIMITED AS NOMINEE FOR DEUTSCHE BANK AG, LONDON BRANCH, AS COMMON
DEPOSITARY FOR EUROCLEAR BANK S.A./N.V., AS OPERATOR OF THE EUROCLEAR SYSTEM
("EUROCLEAR") AND CLEARSTREAM BANKING, SOCIÉTÉ ANONYME ("CLEARSTREAM,
LUXEMBOURG"). THE REGULATION S NOTES OF THE CLASS A1 NOTES WILL BE SOLD
OUTSIDE THE UNITED STATES TO NON-U.S. PERSONS IN RELIANCE ON REGULATION S
UNDER THE SECURITIES ACT AND WILL BE ISSUED AND SETTLED PHYSICAL DEFINITIVE
CERTIFICATES (EACH, A "CLASS A1 REGULATION S DEFINITIVE CERTIFICATE") REGISTERED
IN THE NAMES OF THE PURCHASERS. NEITHER U.S. PERSONS NOR U.S. RESIDENTS (AS
DETERMINED FOR THE PURPOSES OF THE INVESTMENT COMPANY ACT) ("U.S. RESIDENTS")
MAY HOLD AN INTEREST IN A REGULATION S GLOBAL CERTIFICATE OR A CLASS A1
REGULATION S DEFINITIVE CERTIFICATE. THE RULE 144A NOTES OF EACH CLASS (WITH
EACH CLASS P COMBINATION NOTE CONSTITUTING A SEPARATE "CLASS" FOR SUCH
PURPOSE) (THE "RULE 144A NOTES") WILL BE SOLD ONLY TO "QUALIFIED INSTITUTIONAL
BUYERS" (AS DEFINED IN RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT) THAT ARE
ALSO "QUALIFIED PURCHASERS" FOR PURPOSES OF SECTION 3(C)(7) OF THE INVESTMENT
COMPANY ACT. RULE 144A NOTES OF EACH CLASS (OTHER THAN THE CLASS A1 NOTES)
WILL EACH BE REPRESENTED ON ISSUE BY BENEFICIAL INTERESTS IN ONE OR MORE
PERMANENT GLOBAL CERTIFICATES OF SUCH CLASS (EACH, A "RULE 144A GLOBAL
CERTIFICATE" AND TOGETHER, THE "RULE 144A GLOBAL CERTIFICATES"), IN FULLY
REGISTERED FORM, WITHOUT INTEREST COUPONS OR PRINCIPAL RECEIPTS, WHICH WILL
BE REGISTERED IN THE NAME OF DEUTSCHE BANK TRUST COMPANY AMERICAS AS
CUSTODIAN FOR CEDE & CO. AS NOMINEE FOR THE DEPOSITORY TRUST COMPANY ("DTC").
OWNERSHIP INTERESTS IN THE REGULATION S GLOBAL CERTIFICATES AND THE RULE 144A
GLOBAL CERTIFICATES (TOGETHER, THE "GLOBAL CERTIFICATES") WILL BE SHOWN ON, AND
TRANSFERS THEREOF WILL ONLY BE EFFECTED THROUGH, RECORDS MAINTAINED BY
EUROCLEAR, CLEARSTREAM, LUXEMBOURG AND DTC, RESPECTIVELY, AND THEIR
RESPECTIVE PARTICIPANTS. NOTES (OTHER THAN THE CLASS A1 NOTES) IN DEFINITIVE
CERTIFICATED FORM WILL BE ISSUED ONLY IN LIMITED CIRCUMSTANCES. THE RULE 144A
NOTES OF THE CLASS A1 NOTES WILL BE ISSUED AS PHYSICAL DEFINITIVE REGISTERED
CERTIFICATES (EACH, A "CLASS A1 RULE 144A DEFINITIVE CERTIFICATE") REGISTERED IN
THE NAME OF THE PURCHASER. IN EACH CASE, PURCHASERS AND TRANSFEREES OF
NOTES WILL BE DEEMED TO HAVE MADE CERTAIN REPRESENTATIONS AND AGREEMENTS.
THE CLASS A1 RULE 144A DEFINITIVE CERTIFICATE WILL BE EXCHANGED FOR A CLASS A1
NOTE IN GLOBAL FORM IN THE CIRCUMSTANCES DESCRIBED IN CONDITION 2(j) (EXCHANGE
OF CLASS A1 NOTES). SEE "FORM OF THE NOTES", "BOOK-ENTRY CLEARANCE
PROCEDURES", "PLAN OF DISTRIBUTION" AND "TRANSFER RESTRICTIONS" BELOW.
THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT
COMPANY ACT. EACH PURCHASER OF AN INTEREST IN THE NOTES WILL BE DEEMED TO
HAVE REPRESENTED AND AGREED (UNLESS IT IS A NON U.S. PERSON) THAT IT IS A QIB/QP
AND WILL ALSO BE DEEMED TO HAVE MADE THE REPRESENTATIONS SET OUT IN "TRANSFER
RESTRICTIONS" HEREIN. THE PURCHASER OF ANY CLASS A1 NOTE WILL BE REQUIRED TO
MAKE CERTAIN PURCHASER REPRESENTATIONS AS DESCRIBED IN "TRANSFER
RESTRICTIONS" HEREIN.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE ISSUER AND THE TERMS OF THE NOTES AND THE OFFERING THEREOF DESCRIBED
HEREIN, INCLUDING THE MERITS AND RISKS INVOLVED.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH,
OR APPROVED BY, ANY UNITED STATES FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENCE.
THIS PROSPECTUS HAS BEEN PREPARED BY THE ISSUER SOLELY FOR USE IN CONNECTION
WITH THE OFFERING OF THE NOTES DESCRIBED HEREIN (THE "OFFERING") AND THE
ADMISSION TO TRADING OF THE NOTES ON THE REGULATED MARKET OF THE IRISH STOCK
EXCHANGE. EACH OF THE ISSUER AND THE INITIAL PURCHASER RESERVES THE RIGHT TO
REJECT ANY OFFER TO PURCHASE THE NOTES IN WHOLE OR IN PART FOR ANY REASON, OR
10:21\10 July 2007\LONDON\CWM\4369396.02
v

TO SELL LESS THAN THE STATED INITIAL PRINCIPAL AMOUNT OF ANY CLASS OF NOTES
OFFERED HEREBY. THIS PROSPECTUS IS PERSONAL TO EACH OFFEREE TO WHOM IT HAS
BEEN DELIVERED BY THE ISSUER, THE INITIAL PURCHASER, OR ANY AFFILIATE THEREOF
AND DOES NOT CONSTITUTE AN OFFER TO ANY OTHER PERSON OR TO THE PUBLIC
GENERALLY TO SUBSCRIBE FOR OR OTHERWISE ACQUIRE THE NOTES. DISTRIBUTION OF
THIS PROSPECTUS TO ANY PERSONS OTHER THAN THE OFFEREE AND THOSE PERSONS, IF
ANY, RETAINED TO ADVISE SUCH OFFEREE WITH RESPECT THERETO IS UNAUTHORISED
AND ANY DISCLOSURE OF ANY OF ITS CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT
OF THE ISSUER, IS PROHIBITED, SAVE AS OTHERWISE AUTHORISED UNDER "UNITED STATES
FEDERAL INCOME TAXATION — TAX RETURN DISCLOSURE AND INVESTOR LIST
REQUIREMENTS". EACH PROSPECTIVE PURCHASER IN THE UNITED STATES, BY ACCEPTING
DELIVERY OF THIS PROSPECTUS, AGREES TO THE FOREGOING AND TO MAKE NO COPIES OF
THIS PROSPECTUS OR ANY DOCUMENTS RELATED HERETO.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EACH OFFEREE (AND EACH
EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF SUCH OFFEREE) MAY DISCLOSE TO
ANY AND ALL OTHER PERSONS, WITHOUT LIMITATION OF ANY KIND, THE TAX TREATMENT
AND TAX STRUCTURE OF THE TRANSACTIONS DESCRIBED HEREIN (INCLUDING THE
OWNERSHIP AND DISPOSITION OF THE NOTES) AND ALL MATERIALS OF ANY KIND
(INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO THE OFFEREE
RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. HOWEVER, ANY SUCH
INFORMATION RELATING TO THE TAX TREATMENT OR TAX STRUCTURE IS REQUIRED TO BE
KEPT CONFIDENTIAL TO THE EXTENT REASONABLY NECESSARY TO COMPLY WITH
APPLICABLE FEDERAL OR STATE LAWS. FOR THE PURPOSES OF THIS PARAGRAPH, THE
TERMS "TAX TREATMENT" AND "TAX STRUCTURE" HAVE THE MEANING GIVEN TO SUCH
TERMS UNDER UNITED STATES TREASURY REGULATION SECTION 1.6011-4(C) AND
APPLICABLE STATE AND LOCAL LAW.
NOTICE TO RESIDENTS OF THE UNITED STATES
THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER APPLICABLE UNITED
STATES FEDERAL AND STATE SECURITIES LAWS.
NOTICE TO FLORIDA RESIDENTS
THE SECURITIES OFFERED HEREBY WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A
TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES ACT ("FSSA").
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SAID ACT IN THE STATE OF
FLORIDA. IN ADDITION, IF SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA, ALL
FLORIDA PURCHASERS OTHER THAN EXEMPT INSTITUTIONS SPECIFIED IN SECTION
517.061(7) OF THE FSSA SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN
THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH
PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT.
NOTICE TO GEORGIA RESIDENTS
THE NOTES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973 AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
NOTICE TO RESIDENTS OF GERMANY
THE INITIAL PURCHASER HAS AGREED TO COMPLY WITH THE FOLLOWING SELLING
RESTRICTIONS APPLICABLE TO THE FEDERAL REPUBLIC OF GERMANY.
PURSUANT TO THE SUBSCRIPTION AGREEMENT, THE INITIAL PURCHASER HAS AGREED
THAT IT SHALL NOT OFFER OR SELL THE NOTES IN THE FEDERAL REPUBLIC OF GERMANY
OTHER THAN IN COMPLIANCE WITH THE RESTRICTIONS CONTAINED IN THE GERMAN
SECURITIES PROSPECTUS ACT (WERTPAPIERPROSPEKTGESETZ) AND THE GERMAN
INVESTMENT ACT (INVESTMENTGESETZ), RESPECTIVELY, AND ANY OTHER LAWS AND
REGULATIONS APPLICABLE IN THE FEDERAL REPUBLIC OF GERMANY GOVERNING THE
ISSUE, THE OFFERING AND THE SALE OF SECURITIES.
THE NOTES MAY NEITHER BE, NOR BE INTENDED TO BE, DISTRIBUTED BY WAY OF PUBLIC
OFFERING, PUBLIC ADVERTISEMENT OR IN A SIMILAR MANNER WITHIN THE MEANING OF THE
10:21\10 July 2007\LONDON\CWM\4369396.02
vi

GERMAN SECURITIES PROSPECTUS ACT AND THE GERMAN INVESTMENT ACT NOR SHALL
THE DISTRIBUTION OF THIS PROSPECTUS OR ANY OTHER DOCUMENT RELATING TO THE
NOTES CONSTITUTE SUCH PUBLIC OFFER. IN ADDITION, THE INITIAL PURCHASER HAS
AGREED THAT IT HAS OFFERED, SOLD OR ADVERTISED AND THAT IT WILL OFFER, SELL OR
ADVERTISE THE NOTES ONLY TO PERMITTED INSTITUTIONAL INVESTORS ("INSTITUTIONAL
INVESTORS") WITHIN THE MEANING OF THE LEAFLET OF THE GERMAN FEDERAL FINANCIAL
SUPERVISORY AGENCY (BUNDESANSTALT FÜR FINANZDIENSTLEISTUNGSAUFSICHT – BAFIN)
DATED APRIL 2005 IN THE FEDERAL REPUBLIC OF GERMANY AND THIS PROSPECTUS MAY
NOT BE PASSED ON TO ANY OTHER PERSON OR ENTITY IN THE FEDERAL REPUBLIC OF
GERMANY. FURTHERMORE, EACH SUBSEQUENT TRANSFEREE/PURCHASER OF THE NOTES
WILL BE DEEMED TO REPRESENT THAT IF IT IS A PERSON OR ENTITY IN THE FEDERAL
REPUBLIC OF GERMANY IT IS AN INSTITUTIONAL INVESTOR AND TO AGREE NOT TO OFFER,
SELL OR ADVERTISE THE NOTES TO ANY PERSON OR ENTITY IN THE FEDERAL REPUBLIC OF
GERMANY WHO IS NOT AN INSTITUTIONAL INVESTOR.
THE DISTRIBUTION OF THE NOTES HAS NOT BEEN NOTIFIED AND THE NOTES ARE NOT
REGISTERED OR AUTHORISED FOR PUBLIC DISTRIBUTION IN THE FEDERAL REPUBLIC OF
GERMANY UNDER THE GERMAN INVESTMENT ACT. THIS PROSPECTUS HAS NOT BEEN FILED
OR DEPOSITED WITH THE GERMAN FEDERAL FINANCIAL SUPERVISORY AGENCY.
PROSPECTIVE GERMAN INVESTORS IN THE NOTES ARE URGED TO SEEK INDEPENDENT TAX
ADVICE AND TO CONSULT THEIR PROFESSIONAL ADVISORS AS TO THE LEGAL AND TAX
CONSEQUENCES THAT MAY ARISE FROM THE APPLICATION OF THE GERMAN INVESTMENT
TAX ACT TO THE NOTES AND NEITHER THE ISSUER NOR THE INITIAL PURCHASER ACCEPTS
ANY RESPONSIBILITY IN RESPECT OF THE GERMAN TAX POSITION OF THE NOTES.
ANMERKUNG FÜR EINWOHNER VON DEUTSCHLAND
DER ERSTKÄUFER HAT SICH GEMÄß ZEICHNUNGSVERTRAG DAMIT EINVERSTANDEN
ERKLÄRT, DASS ER DIE SCHULDVERSCHREIBUNGEN NUR UNTER BEACHTUNG DER
VORSCHRIFTEN DES WERTPAPIERPROSPEKTGESETZES, DES INVESTMENTGESETZES UND
ALLER ANDEREN, IN DER BUNDESREPUBLIK DEUTSCHLAND ANWENDBAREN GESETZE UND
VERORDNUNGEN ÜBER EMISSION, ANGEBOT UND VERKAUF VON WERTPAPIEREN ANBIETET
ODER VERKAUFT.
DIE SCHULDVERSCHREIBUNGEN DÜRFEN WEDER TATSÄCHLICH, NOCH DARF BEABSICHTIGT
WERDEN, DASS SIE IM WEGE DES ÖFFENTLICHEN ANBIETENS, DER ÖFFENTLICHEN
WERBUNG ODER IN ÄHNLICHER WEISE IM SINNE DES WERTPAPIERPROSPEKTGESETZES
UND DES INVESTMENTGESETZES VERTRIEBEN WERDEN, NOCH SOLL DIE AUSHÄNDIGUNG
DIESES VERKAUFSPROSPEKTES ODER EINES ANDEREN, MIT DEN
SCHULDVERSCHREIBUNGEN IN VERBINDUNG STEHENDEN DOKUMENTS EIN SOLCHES
ÖFFENTLICHES ANGEBOT BZW. ÖFFENTLICHEN VERTRIEB DARSTELLEN. DER ERSTKÄUFER
HAT SICH AUßERDEM DAMIT EINVERSTANDEN ERKLÄRT, DASS ER DIE
SCHULDVERSCHREIBUNGEN NUR INSTITUTIONELLEN INVESTOREN ("INSTITUTIONELLE
ANLEGER") IM SINNE DES MERKBLATTES DER BUNDESANSTALT FÜR
FINANZDIENSTLEISTUNGSAUFSICHT (BAFIN) VOM APRIL 2005 IN DER BUNDESREPUBLIK
DEUTSCHLAND ANGEBOTEN, AN DIESE VERKAUFT ODER BEI IHNEN UM DEN KAUF DER
SCHULDVERSCHREIBUNGEN GEWORBEN HAT, BZW. ANBIETEN, AN DIESE VERKAUFEN ODER
BEI IHNEN UM DEN KAUF DER SCHULDVERSCHREIBUNGEN WERBEN WIRD. DIESER
VERKAUFSPROSPEKT DARF NICHT AN ANDERE PERSONEN ODER RECHTSPERSONEN IN DER
BUNDESREPUBLIK DEUTSCHLAND AUSGEHÄNDIGT WERDEN. DES WEITEREN SICHERT
JEDER NACHFOLGENDE ERWERBER ODER KÄUFER DER SCHULDVERSCHREIBUNGEN, DER
EINE PERSON ODER RECHTSPERSON IN DER BUNDESREPUBLIK DEUTSCHLAND IST, ZU,
DASS ER EIN INSTITUTIONELLER INVESTOR IST UND ERKLÄRT SICH DAMIT EINVERSTANDEN,
DIE SCHULDVERSCHREIBUNGEN NUR PERSONEN ODER RECHTSPERSONEN IN DER
BUNDESREPUBLIK DEUTSCHLAND ANZUBIETEN, AN DIESE ZU VERKAUFEN ODER BEI IHNEN
UM DEN KAUF DER SCHULDVERSCHREIBUNGEN ZU WERBEN, DIE SOLCHE
INSTITUTIONELLEN INVESTOREN SIND.
DER VERTRIEB DER SCHULDVERSCHREIBUNGEN WURDE NICHT ANGEZEIGT UND DIE
SCHULDVERSCHREIBUNGEN SIND AUCH NICHT REGISTRIERT ODER ZUM ÖFFENTLICHEN
VERTRIEB IN DER BUNDESREPUBLIK DEUTSCHLAND IM SINNE DES INVESTMENTGESETZES
ZUGELASSEN. DER VERKAUFSPROSPEKT IST NICHT BEI DER BUNDESANSTALT FÜR
FINANZDIENSTLEISTUNGSAUFSICHT EINGEREICHT ODER HINTERLEGT WORDEN.
POTENTIELLEN DEUTSCHEN INVESTOREN WIRD DRINGEND EMPFOHLEN, UNABHÄNGIGEN
STEUERRAT EINZUHOLEN UND IHRE BERATER ZU DEN RECHTLICHEN UND STEUERLICHEN
10:21\10 July 2007\LONDON\CWM\4369396.02
vii

FOLGEN ZU BEFRAGEN, DIE SICH AUS EINER ANWENDUNG DES DEUTSCHEN
INVESTMENTSTEUERGESETZES AUF DIE SCHULDVERSCHREIBUNGEN ERGEBEN KÖNNTEN.
WEDER DER EMITTENT (NOCH DER ERSTKÄUFER) ÜBERNIMMT IRGENDEINE HAFTUNG
HINSICHTLICH DER DEUTSCHEN STEUERLICHEN BEHANDLUNG DER
SCHULDVERSCHREIBUNGEN.
ANY FOREIGN LANGUAGE TEXT INCLUDED WITHIN THE DOCUMENT IS FOR CONVENIENCE
PURPOSES ONLY AND DOES NOT FORM PART OF THE PROSPECTUS.
UNITED KINGDOM
EACH PURCHASER OF THE NOTES (I) IS A PERSON WHOSE ORDINARY ACTIVITIES INVOLVE IT
IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR
AGENT) FOR THE PURPOSES OF ITS BUSINESS AND (II) HAS NOT OFFERED OR SOLD AND
WILL NOT OFFER OR SELL THE NOTES OTHER THAN TO PERSONS WHOSE ORDINARY
ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF
INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR
WHO IT IS REASONABLE TO EXPECT WILL ACQUIRE, HOLD, MANAGE OR DISPOSE OF
INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES
WHERE THE ISSUE OF THE NOTES WOULD OTHERWISE CONSTITUTE A CONTRAVENTION OF
SECTION 19 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (THE "FSMA") BY THE
ISSUER.
ANY INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE
MEANING OF SECTION 21 OF THE FSMA) IN CONNECTION WITH THE ISSUE OR SALE OF ANY
NOTES MAY ONLY BE COMMUNICATED OR CAUSED TO BE COMMUNICATED IN
CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUER.
EACH PURCHASER OF THE NOTES MUST COMPLY WITH ALL APPLICABLE PROVISIONS OF
THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE NOTES IN, FROM,
OR OTHERWISE INVOLVING THE UNITED KINGDOM.
NOTICE TO RESIDENTS OF IRELAND
THE INITIAL PURCHASER HAS CONFIRMED THAT:
(I)
(II)
(III)
IT WILL NOT UNDERWRITE THE ISSUE OF, OR PLACE, OR OFFER, OR SELL THE
NOTES OTHERWISE THAN IN CONFORMITY WITH THE PROVISIONS OF THE IRISH
INVESTMENT INTERMEDIARIES ACT 1995, AS AMENDED, INCLUDING WITHOUT
LIMITATION, SECTIONS 9 AND 23 THEREOF AND ANY CODES OF CONDUCT RULES
MADE UNDER SECTION 37 THEREOF AND THE PROVISIONS OF THE INVESTOR
COMPENSATION ACT 1998;
IT WILL NOT UNDERWRITE THE ISSUE OF, OR PLACE, OR OFFER, OR SELL THE
NOTES, EXCEPT IN CONFORMITY WITH EC DIRECTIVE 2003/71/EC, THE IRISH
PROSPECTUS (DIRECTIVE 2003/71/EC) REGULATIONS 2005 AND THE IRISH
COMPANIES ACTS 1963 TO 2005 (AS AMENDED); AND
IT HAS NOT AND WILL NOT UNDERWRITE THE ISSUE OF, OR PLACE, OR OFFER, OR
SELL THE NOTES OTHERWISE THAN IN CONFORMITY WITH THE IRISH MARKET
ABUSE (DIRECTIVE 2003/6/EC) REGULATIONS 2005.
THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN IS FOR THE USE SOLELY OF
THE PERSON TO WHOM IT IS ADDRESSED. ACCORDINGLY, IT MAY NOT BE REPRODUCED IN
WHOLE OR IN PART, NOR MAY ITS CONTENTS BE DISTRIBUTED IN WRITING OR ORALLY TO
ANY THIRD PARTY AND IT MAY BE READ SOLELY BY THE PERSON TO WHOM IT IS
ADDRESSED AND HIS/HER PROFESSIONAL ADVISERS.
NOTICE TO RESIDENTS OF JAPAN
THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES AND
EXCHANGE LAW OF JAPAN AND EACH OF THE INITIAL PURCHASER AND THE ISSUER HAS
REPRESENTED, WARRANTED AND AGREED THAT IT HAS NOT, DIRECTLY OR INDIRECTLY,
OFFERED OR SOLD AND WILL NOT, DIRECTLY OR INDIRECTLY, OFFER OR SELL ANY OF THE
NOTES, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN (WHICH TERM
AS USED HEREIN MEANS ANY PERSON RESIDENT IN JAPAN, INCLUDING ANY CORPORATION
OR OTHER ENTITY ORGANISED UNDER THE LAWS OF JAPAN) OR TO OTHERS FOR
10:21\10 July 2007\LONDON\CWM\4369396.02
viii

REOFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT
OF, A RESIDENT OF JAPAN, EXCEPT PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE
SECURITIES AND EXCHANGE LAW OF JAPAN AND ANY OTHER APPLICABLE LAWS,
REGULATIONS AND MINISTERIAL GUIDELINES OF JAPAN.
NOTICE TO RESIDENTS OF FRANCE
THIS PROSPECTUS HAS NOT BEEN PREPARED IN CONNECTION WITH A PUBLIC OFFERING OF
FINANCIAL INSTRUMENTS IN FRANCE AND IS NOT A PROSPECTUS SUBMITTED FOR
APPROVAL (VISA) TO THE AUTORITÉ DES MARCHÉS FINANCIERS. THIS PROSPECTUS
CONTAINS INFORMATION RELATING TO AN OFFERING OF THE NOTES FROM THE ISSUER.
THE OFFERING OF THE NOTES IN FRANCE HAS NOT BEEN AUTHORISED BY THE AUTORITÉ
DES MARCHÉS FINANCIERS. CONSEQUENTLY, THE NOTES ARE NOT BEING AND MAY NOT BE
OFFERED OR SOLD IN FRANCE AND THIS PROSPECTUS, OR ANY INFORMATION CONTAINED
IN THIS PROSPECTUS OR ANY OFFERING MATERIAL RELATING TO THE NOTES, MAY NOT BE
DISTRIBUTED IN FRANCE, UNLESS IN RESPONSE TO AN UNSOLICITED APPROACH FROM A
QUALIFIED INVESTOR, AS DEFINED BY ARTICLE D. 411-1 OF THE FRENCH MONETARY AND
FINANCIAL CODE AND APPLICABLE REGULATIONS THEREUNDER, ACTING FOR ITS OWN
ACCOUNT, ON THE CONDITION THAT THIS PROSPECTUS SHALL NOT BE PASSED ON TO ANY
PERSON NOR REPRODUCED (IN WHOLE OR IN PART) AND THAT THE QUALIFIED INVESTORS
UNDERTAKE NOT TO RESELL, DIRECTLY OR INDIRECTLY, THE NOTES TO THE PUBLIC IN
FRANCE, OTHER THAN IN COMPLIANCE WITH ARTICLES L. 411-1, L. 411-2, L. 412-1 AND L. 621-8
TO L. 621-8-3 OF THE FRENCH MONETARY AND FINANCIAL CODE AND, AS THE CASE MAY BE,
ARTICLES 411-57 TO 411-61 OF THE GENERAL REGULATION OF THE AUTORITÉ DES MARCHÉS
FINANCIERS. THIS PROSPECTUS HAS BEEN PROVIDED TO YOU SOLELY FOR INFORMATION
PURPOSES.
NOTICE TO RESIDENTS OF ITALY
THE NOTES SHALL NOT BE OFFERED OR SOLD IN ITALY.
NOTICE TO RESIDENTS OF LUXEMBOURG
THE NOTES SHALL NOT BE OFFERED OR SOLD TO THE PUBLIC IN OR FROM THE GRAND-
DUCHY OF LUXEMBOURG, DIRECTLY OR INDIRECTLY, AND NEITHER THIS PROSPECTUS NOR
ANY FORM OF APPLICATION, ADVERTISEMENT OR OTHER MATERIAL MAY BE DISTRIBUTED
OR PUBLISHED IN THE GRAND-DUCHY OF LUXEMBOURG, UNLESS THE REQUIREMENTS OF
LUXEMBOURG LAW CONCERNING PUBLIC OFFERING OF SECURITIES HAVE FIRST BEEN MET.
NOTICE TO RESIDENTS OF TAIWAN
THE NOTES MAY NOT BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN
TAIWAN OR TO ANY RESIDENT OF TAIWAN OR TO OTHERS FOR REOFFERING OR RESALE
DIRECTLY OR INDIRECTLY IN TAIWAN OR TO ANY RESIDENT OF TAIWAN, EXCEPT AS
OTHERWISE PERMITTED BY APPLICABLE LAWS AND REGULATIONS IN TAIWAN.
NOTICE TO RESIDENTS OF ISRAEL
THIS OFFER IS INTENDED SOLELY FOR INVESTORS LISTED IN THE FIRST SUPPLEMENT OF
THE ISRAELI SECURITIES LAW, 1968 AS AMENDED. A PROSPECTUS HAS NOT BEEN
PREPARED OR FILED, AND WILL NOT BE PREPARED OR FILED, IN ISRAEL RELATING TO THE
SECURITIES HEREUNDER. THE NOTES CANNOT BE RESOLD IN ISRAEL OTHER THAN TO
ENTITIES WHO QUALIFY FOR AN EXEMPTION UNDER SECTION 15A(b) OF THE ISRAELI
SECURITIES LAW, 1968.
NOTICE TO RESIDENTS OF DENMARK
THIS PROSPECTUS HAS NOT BEEN AND WILL NOT BE FILED WITH OR APPROVED BY THE
DANISH FINANCIAL SUPERVISORY AUTHORITY OR ANY OTHER REGULATORY AUTHORITY IN
THE KINGDOM OF DENMARK.
THE NOTES HAVE NOT BEEN OFFERED OR SOLD AND MAY NOT BE OFFERED, SOLD OR
DELIVERED DIRECTLY OR INDIRECTLY IN DENMARK, UNLESS IN COMPLIANCE WITH
CHAPTERS 6 OR 12 OF THE DANISH ACT ON TRADING IN SECURITIES AND EXECUTIVE
ORDERS ISSUED PURSUANT HERETO AS AMENDED FROM TIME TO TIME. ACCORDINGLY,
THIS PROSPECTUS MAY NOT BE MADE AVAILABLE NOR MAY NOTES OTHERWISE BE
10:21\10 July 2007\LONDON\CWM\4369396.02
ix

MARKETED AND OFFERED FOR SALE IN DENMARK OTHER THAN IN CIRCUMSTANCES WHICH
ARE DEEMED NOT TO BE A MARKETING OR AN OFFER TO THE PUBLIC IN DENMARK.
AVAILABLE INFORMATION
To permit compliance with Rule 144A under the Securities Act in connection with the sale of the Notes,
the Issuer will be required to furnish or cause to be furnished, upon request of a holder or beneficial
owner of a Note, to such holder who is a QIB or a prospective investor who is a QIB and is designated
by such holder or beneficial owner the information required to be delivered under Rule 144A(d)(4) under
the Securities Act if at the time of the request the Issuer is neither a reporting company under Section 13
or Section 15(d) of the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. All information
made available by the Issuer pursuant to the terms of this paragraph may also be obtained during usual
business hours free of charge at the office of the Irish Listing Agent or the Irish Transfer and Paying
Agent in Ireland.
CURRENCIES
In this document, unless otherwise specified or the context otherwise requires, all references to "Euro"
and "€" are to the single currency introduced in January 1999 pursuant to the Treaty Establishing the
European Community as amended and references to "Dollars" and "U.S.$" are to the lawful currency of
the United States.
STABILISATION
In connection with this issue, Deutsche Bank AG, London Branch (the "Stabilising Manager") (or
persons acting on behalf of the Stabilising Manager) may over-allot Notes (provided that the aggregate
principal amount of Notes allotted does not exceed 105 per cent. of the aggregate principal amount of
the Notes) or effect transactions with a view to supporting the market price of the Notes at a level higher
than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or
persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation
action may begin on or after the Issue Date and, if begun, may be ended at any time, but it must end no
later than the earlier of 30 days after the Issue Date and 60 days after the date of the allotment of the
Notes. Any stabilisation action or over-allotment shall be conducted in accordance with all applicable
laws and rules.
10:21\10 July 2007\LONDON\CWM\4369396.02
x

TABLE OF CONTENTS
Page
SUMMARY................................................................................................................................................. 1
RISK FACTORS ...................................................................................................................................... 18
1. General ...................................................................................................................................... 18
2. Relating to the Notes ................................................................................................................. 18
3. Relating to the Collateral............................................................................................................ 27
4. Investment Manager .................................................................................................................. 41
5. Certain Conflicts of Interest........................................................................................................ 42
6. Investment Company Act........................................................................................................... 44
7. ERISA Considerations ............................................................................................................... 44
8. Forced Transfer ......................................................................................................................... 45
9. German Banking Act and German Investment Act .................................................................... 45
10. Regulatory Risk.......................................................................................................................... 45
TERMS AND CONDITIONS OF THE NOTES......................................................................................... 46
1. Definitions .................................................................................................................................. 48
2. Form and Denomination, Title and Transfer .............................................................................. 93
3. Status......................................................................................................................................... 96
4. Security.................................................................................................................................... 118
5. Covenants of and Restrictions on the Issuer ........................................................................... 123
6. Interest..................................................................................................................................... 125
7. Redemption.............................................................................................................................. 133
8. Payments................................................................................................................................. 139
9. Taxation ................................................................................................................................... 140
10. Events of Default...................................................................................................................... 140
11. Enforcement............................................................................................................................. 143
12. Prescription.............................................................................................................................. 145
13. Replacement of Notes ............................................................................................................. 146
14. Meetings of Noteholders, Modification, Waiver and Substitution ............................................. 146
15. Indemnification of the Trustee.................................................................................................. 151
16. Notices..................................................................................................................................... 151
17. Combination Notes .................................................................................................................. 152
18. Third Party Rights .................................................................................................................... 152
19. Governing Law......................................................................................................................... 152
USE OF PROCEEDS ............................................................................................................................ 153
FORM OF THE NOTES......................................................................................................................... 154
BOOK-ENTRY CLEARANCE PROCEDURES ...................................................................................... 159
RATINGS OF THE NOTES.................................................................................................................... 163
THE ISSUER ......................................................................................................................................... 165
THE INVESTMENT MANAGER............................................................................................................. 167
THE PORTFOLIO .................................................................................................................................. 170
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENT .............................................. 208
DESCRIPTION OF THE COLLATERAL ADMINISTRATOR.................................................................. 213
DESCRIPTION OF THE CLASS A1 NOTE PURCHASE AGREEMENT............................................... 214
HEDGING ARRANGEMENTS............................................................................................................... 217
1. General .................................................................................................................................... 217
2. Currency Hedge Transactions ................................................................................................. 217
3. Asset Swap Transactions ........................................................................................................ 217
4. Interest Rate Hedge Transactions ........................................................................................... 218
5. Replacement Interest Rate Hedge Transactions, Asset Swap Transactions and Currency
Hedge Transactions................................................................................................................. 218
6. Standard Terms of Asset Swap Agreements, Interest Rate Hedge Agreements and
Currency Hedge Transactions ................................................................................................. 219
7. Transfer and Modification ........................................................................................................ 221
8. Governing Law......................................................................................................................... 221
9. Offsetting Credit Default Swaps............................................................................................... 221
DESCRIPTION OF THE REPORTS ...................................................................................................... 223
TAX CONSIDERATIONS....................................................................................................................... 228
1. General .................................................................................................................................... 228
2. Netherlands Taxation............................................................................................................... 228
3. Taxation in Germany................................................................................................................ 231
4. United States Federal Income Taxation................................................................................... 234
5. EU Directive on the Taxation of Savings Income..................................................................... 247
CERTAIN ERISA CONSIDERATIONS .................................................................................................. 248
PLAN OF DISTRIBUTION ..................................................................................................................... 252
10:21\10 July 2007\LONDON\CWM\4369396.02
xi

TRANSFER RESTRICTIONS................................................................................................................ 256
GENERAL INFORMATION.................................................................................................................... 270
1. Clearing Systems..................................................................................................................... 270
2. Listing ...................................................................................................................................... 270
3. Consents and Authorisations ................................................................................................... 270
4. No Significant or Material Change ........................................................................................... 271
5. No Litigation............................................................................................................................. 271
6. Accounts .................................................................................................................................. 271
7. Documents Available ............................................................................................................... 271
8. Enforceability of Judgments..................................................................................................... 272
9. Irish Transfer and Paying Agent............................................................................................... 272
10. Expenses ................................................................................................................................. 272
INDEX OF DEFINED TERMS................................................................................................................ 273
10:21\10 July 2007\LONDON\CWM\4369396.02
xii

SUMMARY
The following is a summary only. It is important that all investors and potential investors in the Notes
recognise and understand that the following information is not complete, cannot be read in isolation and
is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus and the
other documents referred to therein. Potential investors in the Notes should also ensure that they read
and consider the risk factors related to an investment in the Notes set out under "Risk Factors" in this
Prospectus before investing therein.
Capitalised terms not specifically defined in this Summary have the meanings set out in Condition 1
(Definitions) under "Terms and Conditions of the Notes" below or are defined elsewhere in this
Prospectus. An index of defined terms appears at the back of this Prospectus. References to a
"Condition" or "Conditions" are to the specified condition or conditions in the "Terms and Conditions of
the Notes" below.
Issuer:
Investment Manager:
OCI Euro Fund I B.V., a private company with limited liability
incorporated under the laws of The Netherlands.
Octagon Credit Investors (UK) Ltd.
Notes:
Class of
Notes
Principal
Amount
Stated
Interest
Rate
Class A1 €52,500,000 6 month
EURIBOR 4/5
+ 0.30%
Class A2 €145,000,000 6 month
EURIBOR
+0.21%
Class A3 €49,500,000 6 month
EURIBOR
+0.31%
Class B €21,000,000 6 month
EURIBOR
+0.45%
Class C €21,000,000 6 month
EURIBOR
+0.75%
Class D €19,000,000 6 month
EURIBOR
+1.75%
Class E €22,000,000 6 month
EURIBOR
+4.25%
S&P
Rating 2
Moody's
Rating 2
Stated
Maturity
"AAA" "Aaa" 15 August
2024
"AAA" "Aaa" 15 August
2024
"AAA" "Aaa" 15 August
2024
"AA" "Aa2" 15 August
2024
"A" "A2" 15 August
2024
"BBB" "Baa3" 15 August
2024
"BB" "Ba3" 15 August
2024
Class F €26,500,000 N/A N/A N/A 15 August
2024
Initial
Offer
Price 3
100%
100%
100%
100%
100%
100%
100%
100%
Class of
Combination
Notes
Principal
Amount
S&P
Rating 2
Moody's
Rating 2
Stated
Maturity
Initial Offer
Price 3
Class P €15,000,000 N/A "Aaa" 15 August
2024
100%
__________________________________
1 Subject to available Interest Proceeds. See Condition 6(a)(ii) (Class F Subordinated Notes).
10:21\10 July 2007\LONDON\CWM\4369396.02
1

2 The ratings assigned by S&P to the Class A Notes address the timely payment of interest and the ultimate
payment of principal. The ratings assigned by S&P to the Class B Notes, the Class C Notes, the Class D
Notes and the Class E Notes address the ultimate payment of principal and interest. The ratings assigned
by Moody's to the Class P Combination Notes address the ultimate repayment of the Rated Balance in
respect of such Notes where "Rated Balance" means, in relation to the Class P Combination Notes, the
greater of (i) zero and (ii) the notional balance representing the initial principal amount of such Class on the
Issue Date, less the aggregate of all payments (whether of interest or principal) made in respect of such
Class on each Payment Date. The rating assigned to the Combination Notes does not address any
residual interest. A security rating is not a recommendation to buy, sell or hold securities and may be
subject to revision, suspension or withdrawal at any time by the applicable Rating Agency.
3 The Initial Purchaser may offer the Notes at other prices as may be negotiated at the time of sale.
4 EURIBOR or GBP LIBOR or USD LIBOR depending on the currency of the Class A1 Drawn Amount.
5 The Class A1 Noteholders will also be entitled to the Class A1 Commitment Fee in respect of each Class
A1 Note Commitment Accrual Period equal to (i) 0.18 per cent. per annum on the daily weighted average of
the Class A1 Available Commitment and (ii) 0.30 per cent. per annum of an amount equal to the daily
weighted average of the Class A1 Allocated Amount with respect to unfunded liabilities of the Issuer under
Synthetic Securities, Revolving Securities and Delayed Drawdown Obligations. See Condition 6(q) (Class
A1 Commitment Fee).
Trustee:
Collateral Administrator:
Custodian:
Principal Paying Agent:
Account Bank:
Exchange Agent:
Registrar:
Transfer Agent:
Irish Transfer and Paying
Agent:
Initial Purchaser:
Combination Notes:
Class A1 Notes:
Deutsche Trustee Company Limited.
Deutsche Bank AG, London Branch.
Deutsche Bank AG, London Branch.
Deutsche Bank AG, London Branch.
Deutsche Bank AG, London Branch.
Deutsche Bank AG, London Branch.
Deutsche Bank Trust Company Americas.
Deutsche Bank Trust Company Americas.
Deutsche International Corporate Services (Ireland) Limited.
Deutsche Bank AG, London Branch.
Each Class P Combination Note consists of two Components, a
"Class F Subordinated Component" and a Component
representing an interest in the Class P OAT Strips (the "Class P
OAT Security Component") acquired by the Issuer and
deposited in the Class P OAT Custody Account (as defined in
the Conditions) for the benefit of the Class P Combination
Noteholders only. The principal amount of the Class F
Subordinated Component of the Class P Combination Notes as
at the Issue Date shall be €7,900,000. The principal amount of
the Class P OAT Security Component of the Class P
Combination Notes as at the Issue Date shall be €7,100,000.
See the initial paragraphs of "Terms and Conditions of the
Notes" for a more detailed explanation of the terms applicable to
the Combination Notes.
Pursuant to a note purchase agreement (the "Class A1 Note
Purchase Agreement") between the Issuer, the Trustee, the
Investment Manager, the Capital Commitment Registrar, the
Class A1 Note Agent and the initial holder of the Class A1 Notes
(the "Initial Class A1 Noteholder"), the Initial Class A1
Noteholder will agree, subject to the terms thereof, to purchase
the Class A1 Notes and on each Class A1 Drawing Date at the
request of the Investment Manager (acting on behalf of the
Issuer), to advance amounts in Euro or Dollars or Sterling (each
a "Euro Denominated Drawing", a "Dollar Denominated
Drawing" and a "Sterling Denominated Drawing") in exchange
for repayment by the Issuer of amounts in, respectively, Euro or
Dollars or Sterling. Each Class A1 Drawing received by the
Issuer will be used by the Investment Manager (acting on behalf
of the Issuer) to purchase the Collateral Debt Obligations
10:21\10 July 2007\LONDON\CWM\4369396.02
2

Class P OAT Strips:
denominated in the currency of such Class A1 Drawing. It is a
condition to the entitlement of each initial Class A1 Noteholder to
transfer any Class A1 Notes that the transferee assumes the
obligations of such Initial Class A1 Noteholder under the Class
A1 Note Purchase Agreement in respect of the Class A1 Notes
so transferred. The maximum aggregate principal amount of
advances under the Class A1 Note Purchase Agreement is
€52,500,000 or its Euro equivalent in Sterling or Dollars
converted at the Initial Rate of Exchange in the case of any
amounts drawn in Sterling or Dollars.
The Issuer will also pay a Class A1 Commitment Fee to the
holders of the Class A1 Notes which shall accrue during each
Class A1 Note Commitment Accrual Period and be payable on
each Payment Date during the Reinvestment Period.
The holders of the Class A1 Notes must satisfy certain rating
requirements. If a holder of a Class A1 Note fails to satisfy the
rating requirements set out in the Class A1 Note Purchase
Agreement or otherwise defaults on its obligation to provide
Class A1 Drawings from time to time under the Class A1 Note
Purchase Agreement, such holder of the Class A1 Note, shall be
required to take action as set out more specifically in the Class
A1 Note Purchase Agreement.
The Principal Amount Outstanding of the Class A1 Notes which
represents the Class A1 Drawn Amount may be repaid on any
Payment Date during the Reinvestment Period at the discretion
of the Investment Manager acting on behalf of the Issuer or on
any Class A1 Drawing Repayment Date pursuant to Condition
7(e) (Class A1 Repayments) from amounts standing to the credit
of the Principal Account or the Unused Proceeds Account. Any
such repayment will not result in a reduction in the Class A1
Commitment but will increase the Class A1 Available
Commitment during the Reinvestment Period.
If (i) a Class A1 Drawing is prepaid on a Business Day other than
the Business Day following the last day of the related Interest
Accrual Period or (ii) for any reason (other than a default by such
Class A1 Noteholder or the Class A1 Note Agent) a Class A1
Drawing does not occur; the Issuer shall pay the Break Costs
attributable thereto on the date of repayment of such Class A1
Drawing or on the date that the Class A1 Drawing did not occur,
as applicable.
See "Description of the Class A1 Note Purchase Agreement".
The Issuer will collateralise the Class P OAT Security
Component of the Class P Combination Notes by acquiring
Obligation Assimilable du Trésor securities issued by the French
treasury which have been stripped ("Class P OAT Strips") by
Spécialities en Valeurs du Trésor ("SVTs"). SVTs are French
government securities primary dealers who are responsible for
making markets in French treasury securities and are authorised
to strip and reconstitute, inter alia, Obligation Assimilable du
Trésor securities. Stripping consists of separating a bond's
interest and principal payments into several zero coupon bonds.
The Class P OAT Strips acquired by the Issuer will be held as
security solely for the benefit of the holders of the Class P
Combination Notes and proceeds received in respect of the
Class P OAT Strips, either before or after enforcement of such
security, will not be available to any other Class of Noteholders.
The Class P OAT Strips will not be included in any calculation of
the Coverage Tests or Collateral Quality Tests.
The holders of the Class P Combination Notes shall, in respect
of the Class P OAT Security Component thereof, have recourse
only to the Class P OAT Strips and proceeds received in respect
thereof as described above and shall not have any rights in or to
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3

Distributions on the Notes:
Payment Dates:
Interest Payments:
the other security granted under the Trust Deed for the benefit of
the Secured Parties generally.
On each Payment Date upon which a payment of interest on the
Class F Subordinated Notes is made in accordance with the
Priorities of Payment, the Custodian, acting on behalf of the
Issuer, shall sell a portion of the Class P OAT Strips representing
the Class P OAT Security Component of the Class P
Combination Notes. The portion of the Class P OAT Strips to be
sold shall be determined in accordance with the Class P OAT
Sale Formula or such lower amount as communicated in writing
by 100 per cent. of the Class P Combination Noteholders to the
Collateral Administrator not later than 10 Business Days before
the relevant Payment Date.
The Class P OAT Strips will be held for the Issuer in a
segregated Euroclear custody account subject to a Belgian law
pledge for the benefit of the Class P Combination Noteholders
only.
15 February and 15 August in each year, commencing on
15 February 2008 (subject to adjustment for non-Business
Days).
Interest in respect of each Class A1 Drawing will be payable on
the Business Day following the last day of the related Interest
Accrual Period, and interest in respect of the Class B Notes, the
Class C Notes, the Class D Notes, the Class E Notes and the
Class F Subordinated Notes will be payable semi-annually in
arrear on each Payment Date in accordance with the Interest
Proceeds Priority of Payments. Interest will accrue on each
Class A1 Drawing from, and including, the applicable Class A1
Drawing Date to but excluding the last day of the related Interest
Accrual Period.
Each Class A1 Noteholder will also be entitled to receive any
Break Costs in respect of (i) each Class A1 Drawing which has
been repaid on a date other than the Business Day following the
last day of the related Interest Accrual Period or (ii) if for any
reason (other than a default by such Class A1 Noteholder or the
Class A1 Note Agent) a Class A1 Drawing does not occur. The
Break Cost in respect of a Class A1 Noteholder will be calculated
by the Calculation Agent and is an amount by which:
(a)
exceeds:
(b)
the interest which such Class A1 Noteholder should
have received for the period from, but excluding the
date of repayment or date of the cancelled Class A1
Drawing (as applicable) to the last day of the current or
proposed (as applicable) Interest Accrual Period in
respect of the related Class A1 Drawing, had the
principal amount been paid on the Business Day
following the last day of that Interest Accrual Period,
the amount which that Class A1 Noteholder would be
able to obtain by placing an amount equal to the
principal amount received by it or not advanced by it (as
applicable) on deposit with a lending bank in the Euro
market for a period starting on the Business Day
following receipt or recovery or date of the cancelled
Class A1 Drawing (as applicable) and ending on the last
day of the then current or proposed (as applicable)
Interest Accrual Period in respect of the related Class
A1 Drawing.
The Break Cost attributable to each Class A1 Noteholder will be
payable on the date upon which the relevant Class A1 Drawing
is repaid or on the date that the Class A1 Drawing did not occur,
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4

Deferral of Interest:
Redemption of the Notes:
as applicable.
If interest payments on the Class B Notes and/or the Class C
Notes and/or the Class D Notes and/or the Class E Notes cannot
be made on any Payment Date as a result of there being
insufficient Interest Proceeds available for such purpose, then
such unpaid interest will be deferred and will itself accrue interest
at the rate of interest applicable to such Notes. See Condition
6(c) (Deferral of Interest).
Any non-payment of interest in the circumstances described
above will not constitute an Event of Default unless the Class of
Notes in respect of which such non-payment occurs is the most
senior Class of Notes outstanding and provided that any such
failure to pay such interest in such circumstances continues for a
period of at least five Business Days. See Condition 10(a)
(Events of Default).
Subject to Condition 7 (Redemption), principal payments on the
Notes will be made in accordance with the Priorities of Payment
in the following circumstances:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
on the Maturity Date;
on any Payment Date following a breach of any
Coverage Test;
immediately following the Effective Date if (1) the Initial
Ratings of the Notes are downgraded or withdrawn (or
either Rating Agency gives notice of its intention to
downgrade or withdraw such Initial Ratings) and (2)
either the Investment Manager on behalf of the Issuer
has failed to present a plan setting out the actions the
Investment Manager is proposing to take in order to
attempt to cause the Initial Ratings to be reinstated or
confirmed or Rating Agency Confirmation has not been
received in respect of such plan;
at the option of the Class F Subordinated Noteholders
on any Payment Date following: (1) the occurrence of a
Withholding Tax Event or (2) the end of the Non-Call
Period;
after the Reinvestment Period, on each Payment Date
out of Principal Proceeds;
any time following an Event of Default which occurs and
is continuing and has not been cured. See Condition 10
(Events of Default);
on any Payment Date during the Reinvestment Period
at the discretion of the Investment Manager if the
Investment Manager determines that it has been
unable, for a period of 20 consecutive Business Days,
to identify additional Collateral Debt Obligations or
Substitute Collateral Debt Obligations in which to invest
or reinvest Principal Proceeds;
(h) the Euro Denominated Drawings, the Sterling
Denominated Drawings and the Dollar Denominated
Drawings may be prepaid on any Business Day at the
Investment Manager's option, acting on behalf of the
Issuer in accordance with the provisions of Condition
7(e) (Class A1 Repayments);
(i) the Euro Denominated Drawings, the Sterling
Denominated Drawings and the Dollar Denominated
Drawings may be repaid on any Payment Date during
the Reinvestment Period at the Investment Manager's
discretion in accordance with the Priorities of Payment;
and
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5

(j)
in respect of the Class P Combination Notes, on any
Payment Date upon which a payment of principal or
interest is payable in respect of the Class F
Subordinated Notes corresponding to the Class F
Subordinated Component and on any Payment Date
upon which Class P OAT Strips are sold in accordance
with the Trust Deed and upon receipt by the Custodian
of the redemption proceeds at maturity of the Class P
OAT Strips.
Non-Call Period: The Issue Date, to but excluding 15 August 2010.
Optional Redemption After
Non-Call Period
Redemption Prices:
Priorities of Payment:
Subject as provided below in respect of the Class P Combination
Notes and subject to the provisions of Condition 7(b)
(Redemption at the Option of the Class F Subordinated
Noteholders), the Notes of each Class are redeemable by the
Issuer, in whole but not in part, at the applicable Redemption
Prices (see below), from the proceeds of liquidation or realisation
of the Collateral, on any Payment Date falling on or after expiry
of the Non-Call Period, at the direction of an Extraordinary
Resolution of the Class F Subordinated Noteholders. Upon an
early redemption of the Notes pursuant to Condition 7(b)
(Redemption at the Option of the Class F Subordinated
Noteholders) the amount received in respect of the Class F
Subordinated Component of the Class P Combination Notes and
the amount equal to the related Class P OAT Strips Sale
Proceeds of the Class P OAT Relevant Sale Portion shall be
applied in redemption of the Principal Amount Outstanding of the
Class P Combination Notes.
Upon redemption in full of the Class F Subordinated Component
any remaining Class P OAT Strips will be applied in accordance
with Condition 7(j) (Redemption of Combination Notes).
The Redemption Price of each Class A1 Note will be (a) 100 per
cent. of the Principal Amount Outstanding of the Class A1 Note
to be redeemed plus (b) accrued and unpaid interest thereon to
the day of redemption plus (c) accrued and unpaid Class A1
Commitment Fees applicable to such Class A1 Note and where
such Class A1 Note is redeemed on a Business Day other than
the Business Day following the last day of the related Interest
Accrual Period in respect of each related Class A1 Drawing, the
Break Cost attributable to each Class A1 Drawing shall also be
payable on the date upon which the Class A1 Drawing is repaid.
The Redemption Price of any Class A2 Notes, Class A3 Notes,
Class B Notes, Class C Notes, Class D Notes or Class E Notes
will be (a) 100 per cent. of the Principal Amount Outstanding of
the Notes to be redeemed plus (b) accrued and unpaid interest
thereon (including any accrued and unpaid Deferred Interest on
such Notes) to the day of redemption.
The Redemption Price for each Class F Subordinated Note will
be its Pro Rata share (calculated in accordance with paragraphs
(B) and (F) of the Principal Proceeds Priority of Payments (to the
extent that such paragraphs incorporate paragraphs (U) through
(CC) (inclusive) of the Interest Proceeds Priority of Payments) of
the aggregate proceeds of liquidation of the Collateral, or
realisation of the security thereover in such circumstances,
remaining following application thereof in accordance with the
Priorities of Payment.
Interest Proceeds and Principal Proceeds will be applied on each
Payment Date in accordance with (i) in the case of Interest
Proceeds, the Interest Proceeds Priority of Payment, (ii) in the
case of Principal Proceeds, the Principal Proceeds Priority of
Payment, and (iii) in the case of Collateral Enhancement
Obligation Proceeds, the Collateral Enhancement Obligation
Proceeds Priority of Payment (together, the "Pre-Enforcement
10:21\10 July 2007\LONDON\CWM\4369396.02
6

Interest Proceeds Priority of
Payments:
Priority of Payments").
Upon enforcement the Interest Proceeds and Principal Proceeds
will be applied in accordance with the Post-Enforcement Priority
of Payments specified in Condition 11 (c) (Post-Enforcement
Priority of Payments).
The Interest Proceeds Priority of Payments are represented in
diagrammatic form for the purposes of this Summary and any
terms used herein are abbreviated for the purposes of this
diagram. Please see Condition 3(c)(i) (Application of Interest
Proceeds) for a full description.
Interest Proceeds shall be applied in the following order of
priority:
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7

Interest Proceeds
Issuer Taxes
Unpaid Financed Amount up to the Financed Amount Threshold, plus any Financed Amount Interest
Trustee Fees & Expenses and fees payable to the Trustee up to Senior Expenses Cap
Administrative Expenses up to Senior Expenses Cap
Senior Investment Management Fee add VAT
Scheduled Periodic Asset Swap, Interest Rate Hedge, Credit Short Obligation, Offsetting Credit Default Swap Payments and Currency Swap Payments
Derivative Issuer Termination Payments save for any Defaulted Derivative Issuer Termination Payments
Class A Notes Interest and Class A1 Commitment Fees, proportionate share of any Break Costs 1
Derivative Issuer Replacement Payments to the extent they exceed amounts received by Issuer upon termination of Derivative Agreement
Class B Interest and Deferred Interest
Pass
Class A Coverage
Tests
Fail
Redemption of Class A Notes 2
Class C Interest and Deferred Interest
Pass
Class B Coverage
Tests
Fail
Sequential Note Redemption to Class B
Class D Interest and Deferred Interest
Pass
Class C Coverage
Tests
Fail
Sequential Note Redemption to Class C
Class E Interest and Deferred Interest
Pass
Class D Coverage
Tests
Fail
Sequential Note Redemption to Class D
Pass
Class E Coverage
Tests
Fail
Redemption of Class E
Effective Date
Rating Event
Fail
Sequential Note Redemption to Class E
During Reinvestment Period, Reinvestment Diversion Test
Defaulted Derivative Issuer Termination payments due to defaulting
Hedge Counterparties
unpaid Trustee Fees & Expenses and fees payable to the Trustee
Unpaid Administrative Expenses
Fail
50% 50%
Purchase Additional
Collateral
Unpaid Senior Investment Management fee add VAT
Subordinated Investment Management Fee add VAT
Discretionary Payment into Collateral Enhancement Account
Repayment of Investment Manager Advances
Currency Funding Mismatches
100% to Class F Subordinated Note Interest until Incentive
Investment Fee IRR Threshold of 12.00% is met (less any
discretionary manager diversion to buy additional collateral)
After satisfaction of 12.00% Incentive Investment Management Fee
IRR Threshold
80.00%
Class F
Subordinated Notes
20.00%
Incentive Investment Management
Fee add VAT
1 Please refer to Condition 3(c)(i)(H) and 3(c)(i)(I) for more detail on the payment of interest on the Class A Notes.
2 Please refer to the definition of Note Payment Sequence for more detail on the redemption of the Class A Notes.
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8

Principal Proceeds Priority
of Payments:
The Principal Proceeds Priority of Payments are represented in
diagrammatic form for the purposes of this Summary and any
terms used herein are abbreviated for the purposes of this
diagram. Please see Condition 3(c)(ii) (Application of Principal
Proceeds) for a full description.
Principal Proceeds shall be applied in the following order of
priority:
Principal Proceeds
Payments due under Interest Proceeds down to Class A Notes interest
Class A Coverage Test
Fail
Redemption of Class A Notes 1
Class B Coverage Test
Fail
Sequential Note Redemption to Class B
Class C Coverage Test
Fail
Sequential Note Redemption to Class C
Effective Date Rating Event
Fail
Sequential Note Redemption to Class E
Special Redemption at
option of Investment
Manager on failure to
identify Collateral Debt
Obligations for acquisitions /
optional redemption by
Class F Subordinated
Noteholders
Post-Reinvestment Period
Reinvestment Period
Optional reinvestment of Unscheduled Principal Proceeds and
Sale Proceeds of Credit Improved & Credit Impaired Obligations
Reinvestment
The redemption of
Sequential redemption of Class A, B, C, D & E Notes (including
Class A1 Notes 2
interest and Deferred Interest)
Derivative Replacement Payments due to any Swap Counterparty
Termination payments due to defaulting Swap Counterparty
Unpaid Trustee Fees & Expenses and fees payable to the Trustee
Unpaid Administrative Expenses
Unpaid Senior Investment Management Fee + VAT
Unpaid Subordinated Investment Management Fee + VAT
Repayment of Investment Manager Advances
100% to Class F Subordinated Note interest until Incentive
Investment Management Fee IRR Threshold of 12.00% is met.
After satisfaction of 12.00% Incentive Investment Management
Fee IRR Threshold
80.00%
20.00%
Class F Subordinated
Note
Investment
Management Fee
1 Please refer to the definition of Note Payment Sequence for more detail on the redemption of the Class A Notes.
2 In accordance with Condition 7(e) (Class A1 Repayments) and subject to satisfaction of the Class E Coverage Tests.
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9

Investment Management
Fees
Senior Investment
Management Fee:
Subordinated Investment
Management Fee:
Incentive Investment
Management Fee:
Security for the Notes
General:
Non-Euro Obligation and
Asset Swap Transactions:
Currency Hedge
Transactions:
0.15 per cent. per annum of the Aggregate Collateral Balance as
at the beginning of the Due Period immediately preceding each
Payment Date. See the definition of Senior Investment
Management Fee in Condition 1 (Definitions) and "Description of
the Investment Management Agreement — Fees".
0.50 per cent. per annum of the Aggregate Collateral Balance as
at the beginning of the Due Period immediately preceding each
Payment Date. See the definition of Subordinated Investment
Management Fee in Condition 1 (Definitions) and "Description of
the Investment Management Agreement — Fees".
20 per cent. of all amounts payable in respect of the Class F
Subordinated Notes once a 12 per cent. Incentive Investment
Management Fee IRR Threshold has been reached. See the
definition of Incentive Investment Management Fee IRR
Threshold in Condition 1 (Definitions) and "Description of the
Investment Management Agreement — Fees".
The Notes will be secured by security over a portfolio of
Collateral Debt Obligations predominantly consisting of Euro and
non-Euro denominated Senior Loans, High Yield Bonds,
Structured Finance Obligations and Mezzanine Obligations of
various borrowers in Qualifying Countries. The Notes will also
be secured by various of the Issuer’s other rights, including its
rights under certain of the agreements described herein.
The Class P Combination Notes will also be secured in favour of
the Trustee for the benefit of the holders of the Class P
Combination Notes by security over the Class P OAT Strips.
The Issuer expects to have the Class P OAT Strips held in the
Class P OAT Custody Account and to pledge its interest in the
securities held in such account to the Custodian under a Belgian
law pledge ("Class P OAT Strips Pledge Agreement"). The
Custodian will in turn hold the benefit of the pledged assets for
the Trustee who, in accordance with the security constituted
under the Trust Deed, will hold the benefit of such security for
the holders of the Class P Combination Notes.
Other than in circumstances where the Issuer uses Dollar
Denominated Drawings or Sterling Denominated Drawings to
purchase Collateral Debt Obligations denominated in Dollar or
Sterling, respectively, the Issuer may purchase Collateral Debt
Obligations not denominated in Euro which are denominated in
the currency of a Qualifying Country (each, a "Non-Euro
Obligation") provided that an Asset Swap Transaction is
entered into in respect of each Non-Euro Obligation with one or
more Asset Swap Counterparties satisfying the applicable Rating
Requirement under which the currency risk arising from the
receipt of cash flows from the relevant Non-Euro Obligation,
including interest and principal payments (but excluding deferred
interest on Purposely Deferring Obligations) is hedged. See
"The Portfolio — Non-Euro Obligations".
After the Issue Date, the Issuer may from time to time enter any
cross currency and interest rate transaction, currency option,
spot foreign exchange contract, forward foreign exchange
contract and currency swaption (including any option with
respect to any of these transactions and any combination of
these transactions) which is either (i) entered into in accordance
with certain hedging procedures or (ii) to which the Rating
Agencies confirm that the entry into will not adversely affect the
then ratings of the Rated Notes. Each Currency Hedge
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10

Purchase of Collateral Debt
Obligations
As at the Issue Date:
Initial Investment Period:
Effective Date:
Effective Date
Requirements:
Reinvestment in Collateral
Debt Obligations:
Reinvestment Period:
Eligibility Criteria:
Transaction shall be entered into under a 1992 ISDA Master
Agreement (Multicurrency Cross Border Currency) or 2002 ISDA
Master Agreement (or such other ISDA pro forma Master
Agreement as may be published by ISDA from time to time)
(together with the Schedule and confirmation thereto, including
any guarantee thereof and any credit support annex entered into
pursuant to the terms thereof, including any guarantee thereof
and any credit support annex entered into pursuant to the terms
thereof, and each as amended or supplemented from time to
time, a "Currency Hedge Agreement") (except, in the case of a
spot foreign exchange contract which may be entered into on
standard market terms with any entity whose short term senior
unsecured debt securities are rated no lower than "A1+" by
Standard & Poor's or "P-1" by Moody's).
The Issuer expects to have purchased (or entered into
agreements to purchase) a Portfolio of Collateral Debt
Obligations with an Aggregate Principal Balance of
approximately €245,000,000 by the Issue Date, which represents
approximately 70 per cent. of the sum of the Principal Balances
of Collateral Debt Obligations anticipated to be purchased (or
committed to be purchased) by the Effective Date, being
€350,000,000 (the "Target Par Amount"). See "The Portfolio —
Acquisition of Collateral Debt Obligations".
The Investment Manager, on behalf of the Issuer, shall use all
commercially reasonable endeavours to purchase Collateral
Debt Obligations which in aggregate satisfy the Effective Date
Requirements during the Initial Investment Period from the Issue
Date to the Effective Date.
For the purpose of determining compliance with the Effective
Date Requirements, repayments or prepayments of any
Collateral Debt Obligations subsequent to the date of acquisition
shall be disregarded and the Principal Balance of a Collateral
Debt Obligation which is a Defaulted Obligation will be the lower
of its S&P Collateral Value and its Moody’s Collateral Value.
365 days following the Issue Date (subject to adjustment as
provided pursuant to the definition thereof set out in Condition 1
(Definitions)).
Satisfaction by the Portfolio of the Target Par Amount, the
Collateral Quality Tests, the Portfolio Profile Tests and the
Coverage Tests. See the definition of Effective Date
Requirements in Condition 1 (Definitions).
Subject to the limits described in the Priorities of Payment,
Principal Proceeds, Class A1 Drawings under the Class A1
Notes and the amount credited to the Euro Unused Proceeds
Principal Account and the Euro Unused Proceeds Interest
Account may be used during the Reinvestment Period to
purchase Collateral Debt Obligations meeting the Eligibility
Criteria and the Reinvestment Criteria during the Reinvestment
Period.
Following expiry of the Reinvestment Period, only Sale Proceeds
from the sale of Credit Improved Obligations, Credit Impaired
Obligations and Unscheduled Principal Proceeds may be
reinvested by the Issuer in Substitute Collateral Debt Obligations
meeting the Eligibility Criteria and Reinvestment Criteria on the
date of purchase or commitment to purchase. See "The Portfolio
— Management of the Portfolio" and "Reinvestment Criteria".
Issue Date to 15 August 2014, (or such earlier date as is
provided in the definition thereof in Condition 1 (Definitions)).
To qualify as a Collateral Debt Obligation, an obligation must
10:21\10 July 2007\LONDON\CWM\4369396.02
11

Offsetting Credit Default
Swap:
Credit Short Obligations:
Collateral Quality Tests,
Portfolio Profile Tests and
Coverage Tests:
Collateral Quality Tests:
Portfolio Profile Tests
satisfy certain specified Eligibility Criteria. See "The Portfolio —
Eligibility Criteria".
The Issuer (as protection buyer) may from time to time, subject
to compliance with the provisions of the Investment Management
Agreement, enter into credit default swap transactions with one
or more financial institutions (as protection seller), the Reference
Obligation of which is a Collateral Debt Obligation owned by the
Issuer. See "The Portfolio Offsetting Credit Default Swaps".
The Issuer (as protection buyer) may from time to time, subject
to compliance with the provisions of the Investment Management
Agreement, enter into credit default swap transactions with one
or more financial institutions (as protection seller), the Reference
Obligation of which is not a Collateral Debt Obligation which is
owned by the Issuer and entry into which shall be subject to
payment of the periodic premium thereunder to the applicable
Credit Short Obligation Counterparty. See "The Portfolio —
Credit Short Obligations".
The Collateral Quality Tests, Portfolio Profile Tests and
Coverage Tests must be satisfied as of the Effective Date. In
addition, the Collateral Quality Tests, Portfolio Profile Tests and
Coverage Tests must be satisfied after giving effect to the
purchase or commitment to purchase of any Substitute Collateral
Debt Obligation after the Effective Date or, (subject to certain
specified exceptions) if not satisfied prior to such purchase or
commitment to purchase, the relevant thresholds and amounts
calculated pursuant thereto must be maintained or improved
after giving effect to such purchase or commitment to purchase.
See "The Portfolio — Portfolio Profile Tests and Collateral
Quality Tests".
The following table sets out the Collateral Quality Tests and, with
respect to each test, where applicable, the value at which such
test is satisfied. See "The Portfolio — Collateral Quality Tests"
for a description of such test.
Test
CDO Monitor Test (until the
end of the Reinvestment
Period)
S&P Minimum Weighted
Average Recovery Rate Test
Moody's Minimum Diversity
Test
Moody's Maximum Weighted
Average Rating Factor Test
Moody's Minimum Weighted
Average Recovery Rate
Minimum Weighted Average
Spread Test
Maximum Weighted Average
Maturity Test
Value at which Test is
Satisfied
See "The Portfolio — Collateral
Quality Tests — CDO Monitor
Test"
See "S&P Test Matrices"
35 to 56
2000 to 3200
See "Moody's Test Matrices"
2.00% to 3.00%
See "The Portfolio — Collateral
Quality Tests — The Weighted
Average Maturity Test"
The Portfolio Profile Test will consist of each of the following:
(a)
not less than 75 per cent. of the Aggregate Principal
Balance shall consist of Senior Loans (provided that, for
the purposes of this paragraph, references to Senior
Loans shall comprise the aggregate of the Aggregate
Principal Balance of the Senior Loans and the Balances
standing to the credit of the Principal Account and the
Unused Proceeds Account, in each case as at the
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12

(b)
(c)
(d)
(e)
relevant Measurement Date);
not more than 2.50 per cent. of the Aggregate Principal
Balance shall consist of Senior Loans which are
obligations of any single Obligor, save that not more
than 3 per cent. of the Aggregate Principal Balance
shall consist of Senior Loans of up to five single
Obligors and not more than 2 per cent. of the Aggregate
Principal Balance shall consist of Mezzanine
Obligations which are obligations of any single Obligor;
the Aggregate Principal Balance of Senior Loans which
are senior unsecured loan obligations may not exceed
€17,500,000;
not more than 1.5 per cent. of the Aggregate Principal
Balance shall consist of High Yield Bonds which are
obligations of any single Obligor;
not more than 5 per cent. of the Aggregate Principal
Balance shall consist of Collateral Debt Obligations that
pay or are scheduled to pay interest less frequently than
semi-annually;
(f) the Aggregate Principal Balance of Non-Euro
Obligations may not exceed €87,500,000;
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
not more than 5 per cent. of the Aggregate Principal
Balance shall consist of Deferrable Obligations other
than Purposely Deferring Obligations;
not more than 10 per cent. of the Aggregate Principal
Balance shall consist of Collateral Debt Obligations with
a Stated Maturity that is later than the Maturity Date;
the Aggregate Principal Balance of Discount Obligations
may not be more than €35,000,000;
the limits specified in the Bivariate Risk Table
determined by reference to the Moody’s Ratings and
S&P Ratings of Selling Institutions, Synthetic
Counterparties, Offsetting Credit Default Swap
Counterparties and Put Option Counterparties are
satisfied;
the Aggregate Principal Balance of Synthetic Securities
may not exceed €52,500,000;
the aggregate notional amount under all Credit Short
Obligations and Offsetting Credit Default Swaps shall
not exceed 5 per cent. of the Aggregate Collateral
Balance;
the Aggregate Principal Balance of High Yield Bonds
may not be more than €26,250,000;
not more than 5 per cent. of the Aggregate Principal
Balance may consist of Structured Finance Obligations;
the aggregate of the Aggregate Principal Balance of
Unfunded Amounts and Funded Amounts under
Revolving Securities and the Aggregate Principal
Balance of Unfunded Amounts under Delayed
Drawdown Obligations may not be more than
€17,500,000;
not less than 95 per cent. of the Aggregate Collateral
Balance will be Floating Rate Collateral Debt
Obligations;
not more than 5 per cent. of the Aggregate Collateral
Balance may consist of Collateral Debt Obligations with
an S&P Rating of "CCC+" or lower or a Moody's Rating
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13

Coverage Tests
Reinvestment Diversion
Test:
(r)
(s)
of "Caa1" or lower, excluding Defaulted Obligations;
not more than 5 per cent. of the Aggregate Collateral
Balance may consist of DIP Loans; and
not more than 1.5 per cent. of the Aggregate Principal
Balance shall consist of Structured Finance Obligations
which are obligations of any single Obligor.
See "The Portfolio — Portfolio Profile Tests".
The Coverage Tests comprise Interest Coverage and Par Value
Tests applicable to each Class of Senior Notes. The following
table summarises the Coverage Test ratios expected to be
achieved by the Portfolio as at the Effective Date and the level of
each ratio required to satisfy such test. No assurance can be
given that the Portfolio as at the Effective Date will satisfy the
expected ratios set out below. See "The Portfolio — The
Coverage Tests" for a fuller description of the calculation of such
tests.
Class
Par Value Ratio Expected
on the Effective Date
Required Par
Value Ratio
A 141.7% 128.7%
B 130.6% 119.6%
C 121.1% 112.1%
D 113.6% 106.6%
E 106.1% 101.1%
Class
Required Interest Coverage Ratio
A 130.0%
B 120.0%
C 110.0%
D 105.0%
E 100.0%
During the Reinvestment Period, up to 50 per cent. of the
Interest Proceeds that would otherwise have been applied
towards payment of certain Issuer expenses and interest on the
Class F Subordinated Notes will instead be paid into the
Principal Account if the Reinvestment Diversion Test is not
satisfied for application at the discretion of the Investment
Manager (acting on behalf of the Issuer) either in redemption of
the Senior Notes in accordance with the Note Payment
Sequence or in the acquisition of additional Collateral Debt
Obligations.
Reinvestment Diversion
Ratio Expected on the
Effective Date
Required Reinvestment
Diversion Ratio
Interest Rate Hedging:
106.1% 102.1%
The Issuer may enter into one or more Interest Rate Hedge
Transactions (which may be interest rate cap and/or swap
transactions) with an Interest Rate Hedge Counterparty, subject
to receipt of Rating Agency Confirmation. It is not anticipated
that any Interest Rate Hedge Transactions will be entered into by
the Issuer on or prior to the Issue Date. Any payments, other
than Defaulted Interest Rate Hedge Issuer Termination
Payments, required to be made by the Issuer under any Interest
Rate Hedge Transactions will rank senior in priority to interest
payments on each Class of Notes.
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14

Authorised Denominations:
Regulation S Notes: Minimum Denominations of €100,000 and
integral multiples of €1,000 in excess thereof.
Rule 144A Notes: Minimum Denominations of €250,000 and
integral multiples of €1,000 in excess thereof.
The AI Notes: Minimum Denomination of €250,000 and integral
multiples of €1,000 in excess thereof.
The Class A1 Regulation S Definitive Certificate: Minimum
Denominations of €100,000 and integral multiples of €1,000 in
excess thereof.
The Class A1 Rule 144A Definitive Certificate: Minimum
Denominations of €250,000 and integral multiples of €1,000 in
excess thereof.
Eligible Purchasers:
The Notes of each Class will be offered:
(a)
(b)
(c)
outside of the United States to non-U.S. Persons (as
defined in Regulation S under the Securities Act) in
reliance on Regulation S under the Securities Act;
within the United States to persons who are both
"qualified institutional buyers" (as defined in Rule 144A
under the Securities Act ("Rule 144A"), ("QIBs") in
reliance on Rule 144A under the Securities Act and
Qualified Purchasers ("QPs") for purposes of Section
3(c)(7) of the Investment Company Act; and
Solely, in the case of the AI Notes to a QIB or an
institutional "accredited investor" within the meaning of
Sections 5.01(a) 1, 2, 3, 7 and 8 of Regulation D under
the Securities Act, which, in either case, is also a QP or
a company owned exclusively by QPs and/or
"knowledgeable employees" with respect to the Issuer
as defined in Rule 3c-5 of the Investment Company Act
("Knowledgeable Employees"), purchasing for its own
account or for the account of a QIB or an institutional
"accredited investor" which, in either case, is also a QP
or a company owned exclusively by QPs and/or
"knowledgeable employees" with respect to the Issuer
as defined in Rule 3c-5 of the Investment Company Act,
in a transaction exempt from registration under the
Securities Act.
The Class A1 Notes are only being offered for sale to holders
who satisfy certain rating criteria set out in the Class A1 Note
Purchase Agreement and subject to the terms and conditions of
the Class A1 Notes set out in the Trust Deed and the Class A1
Note Purchase Agreement.
The Offering:
The Regulation S Notes of each Class and the Class A1
Regulation S Definitive Certificate will be offered outside the
United States to non-U.S. Persons in "offshore transactions" in
reliance on Regulation S.
The Rule 144A Notes of each Class and the Class A1 Rule 144A
Definitive Certificate will be offered within the United States to
persons and outside the United States to U.S. Persons, in each
case, who are QIB/QPs.
Solely in the case of the AI Notes, to a QIB or an institutional
"accredited investor" within the meaning of Sections 5.01(a) 1, 2,
3, 7 and 8 of Regulation D under the Securities Act, which, in
either case, is also a QP or a company owned exclusively by
QPs and/or "knowledgeable employees" with respect to the
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15

Issuer as defined in Rule 3c-5 of the Investment Company Act
("Knowledgeable Employees"), purchasing for its own account
or for the account of a QIB or an institutional "accredited
investor" which is also a QP or a company owned exclusively by
QPs and/or "knowledgeable employees" with respect to the
Issuer as defined in Rule 3c-5 of the Investment Company Act, in
a transaction exempt from registration under the Securities Act..
Form, Registration and
Transfer of the Notes:
The Regulation S Notes of each Class (other than the Class A1
Notes and the AI Notes) sold outside the United States to non
U.S. Persons in reliance on Regulation S under the Securities
Act (which will be deposited on the Issue Date with Euroclear
and Clearstream, Luxembourg) will each be represented on
issue by beneficial interests in one or more permanent global
certificates of such Class in fully registered form, without interest
coupons or principal receipts (each, a "Regulation S Global
Certificate" and together, the "Regulation S Global
Certificates"). U.S. Persons may not hold an interest in a
Regulation S Global Certificate at any time. See "Form of the
Notes" and "Book-Entry Clearance Procedures" and "Transfer
Restrictions" below.
The Rule 144A Notes of each Class (other than the Class A1
Notes and the AI Notes) sold in reliance on Rule 144A to U.S.
Persons who are QIBs for the purposes of Rule 144A of the
Securities Act and QPs for the purposes of the Investment
Company Act will each be represented on issue by beneficial
interests in one or more permanent global certificates of such
class (each, a "Rule 144A Global Certificate" and together, the
"Rule 144A Global Certificates"), in fully registered form,
without interest coupons or principal receipts, which will be
deposited on or about the Issue Date with DTC. Ownership
interests in the Rule 144A Global Certificates will be shown on,
and transfers thereof will only be effected through records
maintained by DTC and its participants. Purchasers and
transferees of Notes will be deemed to have made certain
representations and agreements.
The AI Notes sold to an institutional "accredited investor" which
is also a QP ("AI Definitive Certificates") will be represented
on issue by definitive note certificates in fully registered form,
without interest coupons or principal receipts, and registered in
the name of the owner thereof or its nominee.
See "Form of the Notes", "Book-Entry Clearance Procedures"
and "Transfer Restrictions" below.
The Global Certificates will bear a legend, and such Global
Certificates or any interest therein, may not be transferred except
in compliance with the transfer restrictions set out in such
legend. See "Transfer Restrictions" below.
No beneficial interest in a Rule 144A Global Certificate may be
transferred to a person who takes delivery thereof through an
interest in a Regulation S Global Certificate unless the transferor
provides to a Transfer Agent with a written certification
substantially in the form set out in the Trust Deed regarding
compliance with certain of such transfer restrictions. Any
transfer of a beneficial interest in a Regulation S Global
Certificate to a person who takes delivery through an interest in a
Rule 144A Global Certificate is also subject to certification
requirements by the transferor substantially in the form set out in
the Trust Deed and each purchaser thereof shall be deemed to
represent that such purchaser is a QIB for purposes of Rule
144A of the Securities Act and a QP for the purposes of Section
3(c)(7) of the Investment Company Act. In addition, interests in
any of the Regulation S Notes may not at any time be held by or
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16

on behalf of any U.S. Person (as defined in Regulation S) or any
U.S. resident (as determined for the purposes of the Investment
Company Act).
The Trust Deed provides that the Issuer may require the sale of
any Note that has been transferred in breach of certain of such
transfer restrictions. See "Risk Factors — Investment Company
Act" and "Transfer Restrictions".
The Class A1 Definitive Certificates will be exchangeable for
Class A1 Notes in global form in the circumstances specified in
Condition 2(j) (Exchange of Class A1 Notes).
Certain ERISA
Considerations:
Governing Law:
Listing:
Tax Status:
Withholding Tax:
Ratings of Combination
Notes:
See "Certain ERISA Considerations" below.
The Notes, the Trust Deed, the Investment Management
Agreement, the Agency Agreement, the Class A1 Note Purchase
Agreement and all other Transaction Documents will be
governed by English law, except for the Management
Agreement, which will be governed by Dutch law, the Derivative
Transactions which may be governed by either English law or
New York law, any Collateral Acquisition Agreements which may
be governed by other governing laws, the Euroclear Pledge
Agreement and the Class P OAT Strips Pledge Agreement which
will be governed by Belgian law.
Application has been made to the Irish Financial Services
Regulatory Authority, as competent authority under Directive
2003/71/EC, for the Prospectus to be approved. Application has
been made to the Irish Stock Exchange for the Notes to be
admitted to the Official List and trading on its regulated market.
Such approval relates only to Notes which are to be admitted to
trading on the regulated market of the Irish Stock Exchange or
other regulated markets for the purposes of Directive 93/22/EEC
or which are to be offered to the public in any Member State of
the European Economic Area. See "General Information".
See "Tax Considerations".
Payments of interest and principal on the Notes may be subject
to income taxes, including applicable withholding taxes (if any),
and other taxes (if any) and the Issuer will not be obliged to pay
any additional amounts in relation thereto. See Condition 9
(Taxation).
The Class P Combination notes will be rated "Aaa" by Moody's.
See "Ratings of the Notes".
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17

RISK FACTORS
An investment in the Notes of any Class involves certain risks, including risks relating to the Collateral
securing such Notes and risks relating to the structure and rights of such Notes and the related
arrangements. Prospective investors should carefully consider the following factors ("Risk Factors", in
addition to the matters set forth elsewhere in this Prospectus, prior to investing in any Notes. Terms not
defined in this section and not otherwise defined above have the meanings set out in Condition 1
(Definitions) of the "Terms and Conditions of the Notes".
1. General
1.1 General
It is intended that the Issuer will invest in Collateral Debt Obligations with certain risk characteristics as
described below and subject to the investment policies, restrictions and guidelines described in "The
Portfolio" below. There can be no assurance that the Issuer’s investments will be successful, that its
investment objectives will be achieved, that the Noteholders will receive the full amounts payable by the
Issuer under the Notes or that they will receive any return on their investment in the Notes. Prospective
investors are therefore advised to review this entire Prospectus carefully and should consider, among
other things, the risk factors set out in this section before deciding whether to invest in the Notes.
Except as is otherwise stated below, such risk factors are generally applicable to all Classes of Notes,
although the degree of risk associated with each Class of Notes will vary according to its position in
terms of priority in the Priorities of Payment. See Condition 3(c) (Pre-Enforcement Priority of
Payments). In particular, payments in respect of the Class A Notes are generally higher in the Priorities
of Payment than those in respect of the Class B Notes, the Class C Notes, the Class D Notes, the Class
E Notes and the Class F Subordinated Notes. Neither the Initial Purchaser nor the Collateral
Administrator nor the Trustee nor the Investment Manager undertakes to review the financial condition
or affairs of the Issuer during the life of the arrangements and transactions contemplated by this
Prospectus nor to advise any investor or potential investor in the Notes of any information coming to the
attention of the aforementioned parties which is not included in this Prospectus.
1.2 Suitability
Prospective purchasers of the Notes of any Class should ensure that they understand the nature of such
Notes and the extent of their exposure to risk, that they have sufficient knowledge, experience and
access to professional advisers to make their own legal, tax, accounting and financial evaluation of the
merits and risks of investment in such Notes and that they consider the suitability of such Notes as an
investment in the light of their own circumstances and financial condition.
1.3 Combination Notes
Each of the Risk Factors herein applies to the Combination Notes to the extent that the Components of
any Combination Note correspond to any Classes of Notes to which these Risk Factors apply. The
Class P Combination Notes while having the economic substance of Combination Notes are technically
principal and 9 per cent. fixed rate coupon notes.
2. Relating to the Notes
2.1 Limited Liquidity and Restrictions on Transfer
Although there is currently a market for notes representing collateralised debt obligations similar to the
Notes, there is currently no market for the Notes themselves. Although the Initial Purchaser has advised
the Issuer that it intends to make a market for the Notes, the Initial Purchaser is not obliged to do so,
and any such market-making may be discontinued at any time without notice. There can be no
assurance that any secondary market for any of the Notes will develop or, if a secondary market does
develop, that it will provide the Noteholders with liquidity of investment or that it will continue for the life
of such Notes. Consequently, a purchaser must be prepared to hold such Notes for an indefinite period
of time or until the Maturity Date. In addition, no sale, assignment, participation, pledge or transfer of
the Notes may be effected if, among other things, it would require any of the Issuer or any of their
officers or directors to register under, or otherwise be subject to the provisions of, the Investment
Company Act or any other similar legislation or regulatory action. Furthermore, the Notes will not be
registered under the Securities Act or any U.S. state securities laws, and the Issuer has no plans, and is
under no obligation, to register the Notes under the Securities Act. The Notes are subject to certain
transfer restrictions and can be transferred only to certain transferees. See "Plan of Distribution" and
"Transfer Restrictions". Such restrictions on the transfer of the Notes may further limit their liquidity.
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18

2.2 Limited Recourse Obligations
The Notes are limited recourse obligations of the Issuer and are payable solely from amounts received
in respect of the Collateral securing the Notes. Payments on the Notes both prior to and following
enforcement of the security over the Collateral or the aggregate proceeds of liquidation of the Collateral
are subordinated to the prior payment of certain fees and expenses of, or payable by, the Issuer and to
payment of principal and interest on prior ranking Classes of Notes. See Condition 4(c) (Limited
Recourse).
None of the Investment Manager, the Noteholders of any Class, the Initial Purchaser, the Trustee, the
Collateral Administrator, any Derivative Counterparty, the Custodian, any Agent, any Class A1 Note
Agent or any Affiliates of any of the foregoing, or any other person or entity (other than the Issuer) will
be obliged to make payments on the Notes of any Class. Consequently, Noteholders must rely solely
on distributions on the Collateral Debt Obligations and amounts received under any Asset Swap
Transactions, any Currency Hedge Transactions and other Collateral securing the Notes for the
payment of principal and interest thereon. There can be no assurance that the distributions on the
Collateral Debt Obligations and amounts received under any Asset Swap Transactions, any Currency
Hedge Transactions and other Collateral securing the Notes will be sufficient to make payments on any
Class of Notes after making payments on more senior Classes of Notes and certain other required
amounts payable to other creditors ranking senior to or pari passu with such Class pursuant to the
Priorities of Payment. If distributions on the Collateral Debt Obligations and the other Collateral are
insufficient to make payments on the Notes, no other assets (and, in particular, no assets of the
Investment Manager, the Noteholders, the Initial Purchaser, the Trustee, any Derivative Counterparty,
the Collateral Administrator, the Custodian, any Agent or any Affiliates of any of the foregoing) will be
available for payment of the shortfall and following realisation of the Collateral and the application of the
proceeds thereof in accordance with the Priorities of Payment, the obligations of the Issuer to pay such
shortfall shall be extinguished. Any such shortfall will be borne first by (a) the Class F Subordinated
Noteholders, (b) thereafter, the Class E Noteholders, (c) thereafter, the Class D Noteholders, (d)
thereafter, the Class C Noteholders, (e) thereafter, the Class B Noteholders and finally (f) the Class A
Noteholders, in accordance with the Priorities of Payment. Any shortfall on the Components of any
Class of Combination Notes will affect such Class of Combination Notes to the corresponding extent.
In addition after all the related obligations of the Issuer have been paid in full, none of the Noteholders,
the Trustee nor any other Secured Party (nor any other person acting on behalf of any of them) shall be
entitled at any time to institute against the Issuer, or join in any institution against the Issuer of, any
bankruptcy, reorganisation, arrangement, insolvency, winding-up, examinership or liquidation
proceedings or any proceedings for the appointment of a liquidator, an examiner or administrator or a
similar official, or other proceedings under any applicable bankruptcy or similar law in connection with
any obligations of the Issuer relating to the Notes, the Trust Deed or otherwise owed to the Noteholders,
save for lodging a claim in the liquidation of the Issuer which is initiated by another party or taking
proceedings to obtain a declaration or judgment as to the obligations of the Issuer nor shall any of them
have a claim arising in respect of the share capital of the Issuer.
2.3 Subordination
The Class A1 Notes will rank pari passu and rateably with the Class A2 Notes (except where specified
as being subject to the Pari Passu Provisions or the Class A1/A2 Note Redemption Method), the Class
A3 Notes are fully subordinated to the Class A1 Notes and A2 Notes and except as described below,
the Class B Notes are fully subordinated to the Class A Notes, the Class C Notes are fully subordinated
to the Class A Notes and the Class B Notes, the Class D Notes are fully subordinated to the Class A
Notes, the Class B Notes and the Class C Notes, the Class E Notes are fully subordinated to the Class
A Notes, the Class B Notes, the Class C Notes and the Class D Notes and the Class F Subordinated
Notes are fully subordinated to the Senior Notes.
The payment of principal and interest on any Class of Notes may not be made until all payments of
principal and interest due and payable on any Classes of Notes ranking in priority thereto pursuant to
the Priorities of Payment have been made in full except in the event that the Class E Par Value Test has
not been satisfied, the Class E Notes will be redeemed to the extent necessary to cause the Class E Par
Value Test to be met if recalculated following such redemption. Payments of principal and interest on
the Notes are also subordinated to the payment of certain expenses of the Issuer and amounts payable
to other Secured Parties as specified in the Priorities of Payment. The risk of delays in payments or
ultimate non-payment of principal and/or interest will be borne disproportionately by the holders of the
Class F Subordinated Notes as compared to the Notes of each other Class, and among the holders of
the other Classes of Notes will be borne disproportionately by the holders of more junior Classes of
Notes as compared to the more senior Classes of Notes. In addition, to the extent described herein,
payments of interest on the Class B Notes, Class C Notes, Class D Notes and the Class E Notes may
be deferred to the extent there are not sufficient Interest Proceeds and/or Principal Proceeds available
10:21\10 July 2007\LONDON\CWM\4369396.02
19

to pay such interest in accordance with the Priorities of Payment and such deferral of interest will not
constitute an Event of Default under the Notes at any time whilst any more senior Classes of Notes
remain Outstanding. Any such deferral of interest will increase the effect of the subordination of the
Class F Subordinated Notes and of the Classes of Notes in respect of which payment was deferred.
Non-payment of interest on any of the Combination Notes will only affect such Combination Notes to the
extent that the corresponding Components of such Combination Notes are affected as described above.
For the purposes of subordination, the Combination Notes shall not be treated as a separate Class but
the Components of each Class of Combination Notes will be treated as Notes of the Classes to which
such Components relate. For the avoidance of doubt, only the Class P Combination Noteholders shall
have access to the proceeds of the Class P OAT Strips constituting the Class P OAT Security
Component represented by such Class P Combination Notes,
2.4 Subordination of the Class F Subordinated Notes
Payments on the Class F Subordinated Notes both prior to and following enforcement of the security
over the Collateral are subordinated to payments in respect of the Senior Notes and payment of certain
fees and other amounts payable by the Issuer in accordance with the Priorities of Payment. Interest on
the Class F Subordinated Notes will be paid on an available funds basis only, to the extent that there are
Interest Proceeds available, on each Payment Date following payment of interest on the Senior Notes
whilst any such Notes remain Outstanding and the fees, expenses and other amounts set out in the
Priorities of Payment and, subject always to the right of the Investment Manager to transfer amounts
which would have been payable on the Class F Subordinated Notes to the Collateral Enhancement
Account to be applied towards the acquisition or exercise of rights under Collateral Enhancement
Obligations and to the requirement in the event that the Reinvestment Diversion Test is not satisfied
during the Reinvestment Period to apply certain Interest Proceeds either in reinvestment in additional
Collateral Debt Obligations or in redemption of the Senior Notes in accordance with the Note Payment
Sequence.
Notwithstanding the above, Collateral Enhancement Obligation Proceeds may be distributed to the
Class F Subordinated Noteholders pursuant to the Collateral Enhancement Obligation Proceeds Priority
of Payments on a Payment Date on which scheduled interest on the Senior Notes is not paid in full
and/or the Senior Notes have not been redeemed in full. Unless designated as Interest Proceeds or
Principal Proceeds at the discretion of the Investment Manager, the other Secured Creditors will not be
entitled to receive any such Collateral Enhancement Obligations Proceeds.
In the event of any redemption in full pursuant to Condition 7(b) (Redemption at the Option of the Class
F Subordinated Noteholders) or acceleration of the Class A Notes, then the Class B Notes, the Class C
Notes, the Class D Notes, the Class E Notes and the Class F Subordinated Notes will also be subject to
automatic redemption/acceleration and the Collateral will, in either case, be liquidated. Liquidation of
the Collateral at such time or remedies pursued by the Trustee upon enforcement of the security over
the Collateral in such circumstances could be adverse to the interests of the Class B Noteholders, the
Class C Noteholders, the Class D Noteholders, the Class E Noteholders or the holders of Class F
Subordinated Notes, as the case may be. To the extent that any losses are incurred by the Issuer in
respect of any Collateral, such losses will be borne first by holders of the Class F Subordinated Notes,
then by the Class E Noteholders, then by the Class D Noteholders, then by the Class C Noteholders,
then by the Class B Noteholders and, finally, by the Class A Noteholders. Remedies pursued by the
Trustee at the direction of the holders of the Controlling Class at any time could be adverse to the
interests of the other Classes of Notes. The Class F Subordinated Noteholders will not be able to
exercise any remedies following an Event of Default unless the Class A Notes, the Class B Notes, the
Class C Notes, the Class D Notes and the Class E Notes have been redeemed and paid in full, nor will
they receive any distribution until the Rated Notes and certain other amounts have been paid. For the
purposes of subordination, the Combination Notes shall not be treated as a separate Class but the
Components of each Class of Combination Notes will be treated as Notes of the Classes to which such
Components relate.
The Issuer’s ability to make payments of interest and principal in respect of the Class F Subordinated
Notes will be constrained by the terms of the Senior Notes, by the level of distributions received in
respect of the Portfolio and other Collateral securing the Notes (see paragraph 3.3 "Nature of the
Collateral" below) and, in certain circumstances, by the interest rate mismatch described under "Interest
Rate Risk". If distributions on the Portfolio and the other Collateral are insufficient to make payment on
the Class F Subordinated Notes, no other assets will be available for payment of such deficiency. See
"Limited Recourse Obligations" above. No interest may therefore be payable on the Class F
Subordinated Notes for an indefinite period of time to maturity.
As referred to under paragraph 2.3 "Subordination" above, the risk of delays in the payment or ultimate
non-payment of principal and/or interest will be borne disproportionately by the holders of the Class F
Subordinated Notes as compared to the Notes of each other Class. In addition, any deferral of interest
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20

payable on the Class B Notes, Class C Notes, Class D Notes or Class E Notes, as described in
paragraph 2.3 "Subordination" above, will increase the effect of the subordination of the Class F
Subordinated Notes.
2.5 Subordination through Conflicts between Classes
Following the occurrence of an Event of Default, the Notes may be accelerated in accordance with
Condition 10(b) (Acceleration) by the Trustee at the request of the Controlling Class acting by Ordinary
Resolution. Liquidation of the Collateral at such time and/or the remedies pursued by the Trustee upon
enforcement of the security of the Collateral in such circumstances could be adverse to the interest of
holders of the Classes of Notes which rank junior in terms of priority to the Controlling Class directing
such enforcement.
In addition the Trust Deed provides that in the event of any conflict of interest between the various
Classes of Noteholders, the interests of the holders of the Controlling Class will prevail. If the holders of
the Controlling Class do not have an interest in the outcome of the conflict, the Trustee shall give priority
to the interests of (a) the Class A Noteholders over each of the other Classes of Noteholders, (b) the
Class B Noteholders over the Class C Noteholders, Class D Noteholders, Class E Noteholders and the
Class F Subordinated Noteholders, (c) the Class C Noteholders over the Class D Noteholders, Class E
Noteholders and the Class F Subordinated Noteholders, (d) the Class D Noteholders over the Class E
Noteholders and the Class F Subordinated Noteholders and (e) the Class E Noteholders over the Class
F Subordinated Noteholders. In the event that the Trustee receives conflicting or inconsistent requests
from two or more groups of Noteholders (or the holders of another Class of Notes given priority as
described in this paragraph), each representing less than the majority by principal amount of the
Controlling Class (or other Class of Notes given priority as described in this paragraph), the Trustee
shall give priority to the group which holds the greater amount of principal amount of the Notes of such
Class. The Trust Deed provides further that the Trustee will act upon the directions of the holders of the
Controlling Class (or other Class of Noteholders given priority as described in this paragraph) in such
circumstances, and shall not be obliged to consider the interests of the holders of any other Class of
Noteholders.
2.6 Average Life and Prepayment Considerations
The Maturity Date of the Notes is 15 August 2024 (subject to adjustment for Business Days); however,
the principal of the Notes of each Class (including the Components of each Class of Combination Notes)
is expected to be paid in full prior to the Maturity Date. Average life refers to the average amount of time
that will elapse from the date of issuance of a Note until each Euro of the principal of such Note will be
paid to the investor. The average lives of the Notes will be determined by the amount and frequency of
principal payments thereon, which are dependent upon, among other things, the amount of payments
received at or in advance of the scheduled maturity of the Collateral Debt Obligations (whether through
sale, maturity, redemption, default or other liquidation or disposition). The actual average lives and
actual maturities of the Notes will be affected by the financial condition of the Obligors under the
underlying Collateral Debt Obligations and the characteristics of such loans, including the existence and
frequency of exercise of any optional or mandatory redemption features, the prevailing level of interest
rates, the redemption price, the actual default rate, the actual level of recoveries on any Defaulted
Obligations, the timing of defaults and recoveries, and the frequency of tender or exchange offers for
such Collateral Debt Obligations. In particular, loans are generally repayable at par and a high
proportion of loans could be repaid. Substantially all of the Collateral Debt Obligations are expected to
be subject to optional redemption or prepayment by the relevant Obligor. Any disposition of a Collateral
Debt Obligation may change the composition and characteristics of the Collateral Debt Obligations
included in the Collateral and the rate of payments thereon and, accordingly, may affect the actual
average lives of the Notes. The ability of the Investment Manager, acting on behalf of the Issuer, to
reinvest any Principal Proceeds in the manner described under "The Portfolio — Management of the
Portfolio" and the decisions made regarding whether or not to reinvest such proceeds will also affect the
average lives of the Notes. The average lives of the Notes may also be affected by any of the provisions
of the Terms and Conditions relating to the optional or mandatory redemption of the Notes in whole or in
part (as applicable) prior to the Maturity Date.
2.7 Mandatory Redemption
The Notes may be subject to mandatory redemption in certain circumstances, including upon breach of
any Coverage Test or following the occurrence of an Effective Date Rating Event, in each case, to the
extent required, respectively, to procure that such Coverage Test would be satisfied if recalculated
following such redemption or that the Initial Ratings of the Notes would be reinstated or confirmed. In
such circumstances, the Classes of Notes will be redeemed in accordance with the Priorities of
Payment, starting with the Controlling Class of Notes and ending with the Class E Notes (subject, in
each case, to payment of all prior ranking amounts due and payable by the Issuer pursuant to the
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Priorities of Payment except in the event that the Class E Par Value Test has not been satisfied, the
Class E Notes will be redeemed to the extent necessary to cause the Class E Par Value Test to be met
if recalculated following such redemption). In addition, the Notes may be redeemed at the discretion of
the Investment Manager if at any time during the Reinvestment Period, the Investment Manager has
been unable for a period of 20 consecutive days, to identify additional Collateral Debt Obligations that
are deemed appropriate by the Investment Manager in sufficient amounts to permit the investment or
reinvestment of any Principal Proceeds received.
Any such mandatory or optional redemption of the Notes may result in a reduction in the amount of
Interest Proceeds available to pay Noteholders including a reduction in the level of returns payable to
the Class F Subordinated Noteholders.
2.8 Optional Redemption and Volatility of Portfolio Market Value
A form of liquidity for the Class F Subordinated Notes is the optional redemption provision set out in
Condition 7(b)(i) (Redemption at the Option of the Class F Subordinated Noteholders) which allows for
such redemption after the Non-Call Period. There can be no assurance however that such optional
redemption provision will be capable of exercise in accordance with the conditions set out in Condition
7(b)(ii) (Terms and Conditions of Redemption at the Option of the Class F Subordinated Noteholders).
An optional redemption of the Notes could require the Investment Manager to liquidate the Collateral
Debt Obligations more rapidly than would otherwise be desirable, which could adversely affect the
realised value of such Collateral Debt Obligations. The market value of the Collateral Debt Obligations
may fluctuate, with, among other things, changes in prevailing interest rates, foreign exchange rates,
general economic conditions, the conditions of financial markets (particularly the markets for senior and
mezzanine loans), European and international political events, events in the home countries of the
Obligors under the Collateral Debt Obligations or the countries in which their assets and operations are
based, developments or trends in any particular industry and the financial condition of such Obligors.
The secondary market for senior and mezzanine loans is still limited. A decrease in the market value of
the Portfolio would adversely affect the amount of proceeds which could be realised upon liquidation of
the Portfolio and ultimately the ability of the Issuer to redeem the Class F Subordinated Notes pursuant
to the right of optional redemption set out in Condition 7(b)(i) (Redemption at the Option of the Class F
Subordinated Noteholders) due to the threshold requirements set out therein. There can be no
assurance that, upon any such redemption, the proceeds realised would permit any payment on the
Class F Subordinated Notes after required payments are made in respect of the Senior Notes and to the
other creditors of the Issuer which rank in priority to the holders of the Class F Subordinated Notes
pursuant to the Priorities of Payment.
2.9 Amount and Timing of Payments
Investment in the Notes of any Class involves a degree of risk arising from fluctuations in the amount
and timing of receipt of principal and interest on the Collateral Debt Obligations by or on behalf of the
Issuer and the amounts of the claims of creditors of the Issuer ranking in priority to the holders of each
Class of the Notes. In particular, prospective purchasers of such Notes should be aware that the
amount and timing of payment of principal and interest on the Collateral Debt Obligations will depend
upon the detailed terms of the documentation relating to each of the Collateral Debt Obligations and on
whether or not any Obligor thereunder defaults in its obligations.
2.10 Net Proceeds Less Than Aggregate Amount of the Notes
It is anticipated that the proceeds received by the Issuer on the Issue Date from the issuance of the
Notes, net of certain fees and expenses, will be less than the aggregate principal amount of the Notes.
Consequently, it is anticipated that on the Issue Date the proceeds of the Collateral will be insufficient to
fully redeem the aggregate principal amount of the Notes upon the occurrence of an Event of Default on
or about that date.
2.11 Volatility of the Class F Subordinated Notes
The Class F Subordinated Notes represent a leveraged investment in the underlying Collateral Debt
Obligations. Accordingly, it is expected that changes in the market value of the Class F Subordinated
Notes will be greater than changes in the market value of the underlying Collateral Debt Obligations,
which themselves are subject to credit, liquidity, interest rate and other risks. Utilisation of leverage is a
speculative investment technique and involves certain risks to investors and will generally magnify the
Class F Subordinated Noteholders’ opportunities for gain and risk of loss.
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2.12 Future Ratings of the Rated Notes and the Combination Notes Not Assured and Limited
in Scope
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision,
suspension or withdrawal by any Rating Agency at any time. Credit ratings represent a rating agency’s
opinion regarding the credit quality of an asset but are not a guarantee of such quality. There is no
assurance that a rating accorded to any of the Notes will remain for any given period of time or that a
rating will not be lowered or withdrawn entirely by a Rating Agency if, in its judgement, circumstances in
the future so warrant. In the event that a rating initially assigned to any of the Notes is subsequently
lowered for any reason, no person or entity is required to provide any additional support or credit
enhancement with respect to any such Notes and the market value of such Notes is likely to be
adversely affected.
Although the Class P Combination Notes have the economic substance of combination notes, they are,
technically, principal and 9 per cent. fixed rate coupon notes. The Moody's rating will address the "Rated
Balance" of such Notes and does not address the likelihood of any payments of interest being made on
the Class P Combination Notes.
2.13 Resolutions, Amendments and Waivers
Decisions may be taken by Noteholders by way of Ordinary Resolution or Extraordinary Resolution, in
each case, either acting together or, to the extent specified in any applicable Transaction Document, as
a Class of Noteholders acting independently. Such Resolutions can be effected either at a duly
convened meeting of the applicable Noteholders or by the applicable Noteholders resolving in writing.
Meetings of the Noteholders may be convened by the Issuer, the Trustee or by one or more Noteholders
holding not less than 10 per cent. in principal amount of the Notes Outstanding of a particular Class,
subject to certain conditions including minimum notice periods.
The Trustee may, in its discretion, determine that any proposed Ordinary Resolution or Extraordinary
Resolution affects only the holders of one or more Classes of Notes, in which event the required quorum
and minimum percentage voting requirements of such Ordinary Resolution or Extraordinary Resolution
may be determined by reference only to the holders of that Class or Classes of Notes.
In the event that a meeting of Noteholders is called to consider a Resolution, a determination as to
whether the requisite number of Notes have been voted in favour of such Resolution will be determined
by reference to the percentage which the Notes voted in favour represent of the total amount of Notes
held or represented by any person or persons entitled to vote which are present at such meeting and not
by the Principal Amount Outstanding or the original principal amount of all such Notes which are entitled
to be voted in respect of such Resolution. This means that a lower percentage of Noteholders may pass
a Resolution which is put to a meeting of Noteholders than would be required for a Written Resolution in
respect of the same matter. There are however quorum provisions which provide that a minimum
number of Noteholders representing a minimum amount of the original principal amount of the
applicable Class or Classes of Notes be present at any meeting to consider an Extraordinary Resolution
or Ordinary Resolution. In the case of an Extraordinary Resolution, this is two or more persons holding
or representing not less than 50 per cent. of the aggregate original principal amount of each Class of
Notes (or the relevant Class or Classes only, if applicable) and in the case of an Ordinary Resolution
this is two or more persons holding or representing not less than 10 per cent. of the aggregate original
principal amount of each Class of Notes (or the relevant Class or Classes only, if applicable). Such
quorum provisions still, however, require considerably lower thresholds than would be required for a
Written Resolution. In addition, in the event that a quorum requirement is not satisfied at any meeting,
lower quorum thresholds will apply at any meeting previously adjourned for want of quorum as set out in
Condition 14(b) (Decisions and Meetings of Noteholders) and in the Trust Deed.
The minimum percentage required for Noteholders to pass an Extraordinary Resolution is 66 per cent.
of the aggregate original principal amount of the Notes of each Class.
Certain entrenched rights relating to the Terms and Conditions of the Notes including the currency
thereof, Payment Dates applicable thereto, the Priorities of Payment, the provisions relating to quorums
and the percentages of votes required for the passing of an Extraordinary Resolution, cannot be
amended or waived by Ordinary Resolution but require an Extraordinary Resolution. It should however
be noted that amendments may still be effected and waivers may still be granted in respect of such
provisions in circumstances where not all Noteholders agree with the terms thereof and any
amendments or waivers once passed in accordance with the provisions of the Terms and Conditions of
the Notes and the provisions of the Trust Deed will be binding on all such dissenting Noteholders. In
addition to the Trustee’s right to agree to changes to the Transaction Documents to correct a manifest
error, or to changes which, in its opinion, are not materially prejudicial to the interests of the Noteholders
of any Class without the consent of the Noteholders, modifications may also be made and waivers
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granted in respect of certain other matters, subject to the prior consent of the Trustee but without the
consent of the Noteholders as set out in Condition 14(c) (Modification and Waiver).
2.14 Voting Rights of the Class A1 Noteholders
For the purposes of voting on resolutions and issuing directions to the Trustee and any other decisions
required to be made by the Class A1 Noteholders, votes and the applicable quorum shall be determined
by reference to (i) in the event of a meeting of Class A1 Noteholders, the percentage which the Class A1
Notes voted in favour represent of the total amount of Class A1 Notes held or represented by any
person or persons entitled to vote which are present at such meeting and (ii) in the event of a Written
Resolution, the aggregate of the Principal Amount Outstanding of the Class A1 Notes and the Class A1
Available Commitment.
2.15 Enforcement Rights Following an Event of Default
Following the occurrence of an Event of Default the Trustee may, at its discretion, and shall, at the
request of the Controlling Class acting independently by Extraordinary Resolution subject in both cases
to it being indemnified and/or secured to its satisfaction, give notice to the Issuer that the Notes are to
be immediately due and payable following which the security over the Collateral shall become
enforceable and may be enforced either by the Trustee, at its discretion, or if so directed by the
Controlling Class acting independently by Extraordinary Resolution; provided, however, that the Notes
shall not become so due and payable and the security over the Collateral may not be so accelerated
and enforced unless:
(a)
(b)
the Trustee determines that the anticipated proceeds realised from such enforcement (after
deducting any reasonable expenses incurred in connection therewith) would be sufficient to
discharge in full all amounts due and payable in respect of all Classes of Notes other than the
Class F Subordinated Notes (including, without limitation, Deferred Interest on the Class B
Notes, the Class C Notes, the Class D Notes and the Class E Notes) and all amounts payable
in priority thereto pursuant to the Priorities of Payment (such determination being an
"Enforcement Threshold Determination") and the senior Class Outstanding, acting by
Extraordinary Resolution, and the Investment Manager consents to such determination; or
consent to such enforcement is received by the Trustee from (i) the Controlling Class and (ii)
each other Class of Notes where the Par Value Coverage Ratio, applicable to the Class of
Notes ranking immediately senior to such Class of Notes, is greater than 100 per cent., in each
case acting independently by an Extraordinary Resolution of such Class.
The requirements described above could result in the Controlling Class being unable to procure
enforcement of the security over the Collateral in circumstances in which they desire such enforcement
and may also result in enforcement of such security in circumstances where the proceeds of liquidation
thereof would be insufficient to ensure payment in full of all amounts due and payable in respect of the
Senior Notes in accordance with the Priorities of Payment and/or at a time when enforcement thereof
may be adverse to the interests to certain Classes of Notes and, in particular, the Class F Subordinated
Notes.
2.16 German Investment Tax Act
The German Investment Tax Act (Investmentsteuergesetz) (the "Investment Tax Act") applies only (i)
to "units" (Investmentanteile) in investment funds held by investors who are resident in Germany for
German tax purposes, (ii) to an investor holding units through a permanent establishment (or a
permanent representative) in Germany or (iii) to an investor (other than a foreign credit institution or a
foreign financial services institution) physically presenting units at the office of a German Disbursing
Agent (as defined below) (an "over-the-counter transaction" – Tafelgeschäft). A "German Disbursing
Agent" means a German credit institution or a German financial services institution each as defined in
the German Banking Act (Kreditwesengesetz), including a German branch of a non-German credit
institution or a non-German financial services institution, but excluding a non-German branch of a
German credit institution or a German financial services institution.
The Issuer has been advised that the Notes should not qualify as "units" in a foreign investment fund for
the following reason:
Based on a circular of the German Federal Ministry of Finance (Bundesministerium der Finanzen) dated
2 June 2005 (BStBl. I 2005 page 728 (732), sec. 6), the Notes will not be classified as "units in a foreign
investment fund" if "according to the contractual conditions (Vertragsbedingungen), in addition to the
substitution of debt securities for the purpose of ensuring size, maturity profile and risk structure only up
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to 20 per cent. per annum of the assets (Vermögen) of the Issuer may, be traded on a discretionary
basis by the Issuer".
As set out in "The Portfolio", subsection "Management of the Portfolio", sub-paragraph "Discretionary
Reinvestment during the Reinvestment Period", paragraph (c), the following rule is provided for:
"During the Reinvestment Period only, the Investment Manager acting on behalf of the Issuer may
dispose of any Collateral Debt Obligation (other than a Credit Improved Obligation, a Credit Impaired
Obligation, a Defaulted Obligation or an Exchanged Equity Security which may only be sold in the
circumstances provided below) and reinvest the Sale Proceeds (other than Collateral Enhancement
Obligation Proceeds and accrued interest on such Collateral Debt Obligations included in Interest
Proceeds by the Investment Manager) thereof in Substitute Collateral Debt Obligations, such sale and
reinvestment being subject to: (…)
(…) the Collateral Administrator confirming that the Aggregate Principal Balance of Collateral Debt
Obligations sold in any year (with each year commencing on the Issue Date or, as the case may be, an
anniversary thereof, and ending in the next succeeding anniversary thereof) when aggregated with the
Aggregate Principal Balance of any Collateral Debt Obligations to be sold (in each case excluding any
Credit Improved Obligations, Credit Impaired Obligations or Defaulted Obligations sold) does not exceed
20 per cent. of the Aggregate Collateral Balance, measured as at the beginning of each such year."
There is no guidance as to how the tax authorities would apply the 20 per cent. threshold in detail and in
particular whether they would include the dispositions of Credit Improved Obligations within the 20 per
cent. threshold. Accordingly, the Issuer believes that good arguments exist that the rules taken from the
Prospectus should comply with the rules established by the tax authorities in the above circular;
however, no assurance can be given that the Investment Tax Act will not be applicable to the Class E
Notes, the Class F Subordinated Notes and to the Class P Combination Notes.
The Issuer has been advised that the tax authorities would be expected to follow the above
interpretation issued by the German Federal Ministry of Finance. The tax authorities may, however,
change their position with effect for the future or, although this is considered unlikely, with retroactive
effect. Furthermore, there is no case law on this issue and the German courts may or may not share the
view expressed by the German Federal Ministry of Finance, if the issue were ever brought to court.
The Issuer will use its reasonable efforts to comply with the minimum statutory reporting and publication
requirements of the Investment Tax Act (if applicable) for "semi-transparent" funds (the "Minimum
Reporting Requirements") provided always that (i) compliance with such Minimum Reporting
Requirements is not, in the opinion and at the entire discretion of the Issuer or Investment Manager in
consultation with the Collateral Administrator, unduly onerous, (ii) the Issuer may satisfy such Minimum
Reporting Requirements by providing the requisite financial information (upon such information being
made available to it) to a professional German tax adviser with instructions to such adviser to re-format
the relevant information as required as well as to certify the re-formatted information and to publish such
information in the Electronic Federal Gazette in accordance with Section 5 of the Investment Tax Act on
behalf of the Issuer and (iii) neither the Issuer, the Trustee, the Collateral Administrator, the Investment
Manager nor any Agent shall have any liability whatsoever for any such information prepared and/or
published under the Minimum Reporting Requirements or for any tax consequences to any Noteholder
or other party. It is believed that, in consequence of compliance with such Minimum Reporting
Requirements, investors holding Notes which are subject to the Investment Tax Act will not be subject to
the lump-sum taxation provisions of section 6 of the Investment Tax Act, but that in principle the rules for
semi-transparent funds will apply. Under the rules of the Investment Tax Act for semi-transparent funds,
the Issuer's taxable earnings (e.g. payments of interest received) are in principle taxed in the hands of
investors. Certain earnings retained by the Issuer (e.g. retained interest income) (if any) would be
deemed to be distributed to investors holding Notes which are subject to the Investment Tax Act at the
end of the Issuer's financial year in which the income was earned by the Issuer. Therefore, a tax liability
for investors could arise before payments have actually been received.
However, if the Issuer does not comply with the Minimum Reporting Requirements, or if the German tax
authorities do not accept the validity of such reporting, the investors holding Notes which are subject to
the Investment Tax Act will be subject to the adverse lump-sum taxation provisions of section 6 of the
Investment Tax Act pursuant to which the higher of (i) distributions on such Notes, the interim profit
(Zwischengewinn) and 70 per cent. of the annual increase in the market price of such Notes and (ii) 6
per cent. of the market price of such Notes at the end of every calendar year, (the "Assumed Profits")
would be taxed. The interim profit represents mainly interest accrued or received by an investment fund
(within the meaning of the Investment Tax Act) but not yet distributed or attributed to the investors in the
fund.
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Where units to which the Investment Tax Act applies are kept in a custodial account maintained with a
German Disbursing Agent, such German Disbursing Agent would be required to withhold tax at a rate of
30 per cent. (plus solidarity surcharge thereon at a rate of 5.5 per cent.) not only of the gross amount of
interest paid, but in addition at the point of time the units are sold or redeemed by the Issuer also of the
aggregate amount of income deemed to have accrued to investors holding units which are subject to the
Investment Tax Act and not yet otherwise subject to taxation. In the case of an over-the-counter
transaction, such withholding tax is levied at the rate of 35 per cent. (plus solidarity surcharge thereon at
a rate of 5.5 per cent.).
Moreover, there is a risk that investments made by or on behalf of the Issuer qualify as units in foreign
investment funds (within the meaning of the Investment Tax Act) which do not satisfy the Minimum
Reporting Requirements and therefore qualify as "non-transparent" sub-funds. In this case the Issuer
may be deemed to have earned Assumed Profits from these investments according to the lump-sum
taxation provisions of section 6 of the Investment Tax Act and such Assumed Profits may accordingly be
attributed to investors holding Notes which are subject to the Investment Tax Act, resulting in adverse
tax and liquidity consequences for such investors.
Investors should be aware that there are a number of uncertainties regarding the interpretation of the tax
provisions contained in the Investment Tax Act (including those relating to the Minimum Reporting
Requirements). Prospective German investors in the Notes are urged to seek independent tax advice
and to consult their professional advisers as to the legal and tax consequences that may arise from the
application of the Investment Tax Act to the Notes and neither the Issuer nor any other party accepts
any responsibility in respect of the German tax position of the Notes or the holders of the Notes.
This section should be read in conjunction with the section entitled "Taxation in Germany — Investors
subject to the German Investment Tax Act".
2.17 Currency of Payments in respect of the Rule 144A Notes
Noteholders should be aware that interests in the Rule 144A Notes are held by a nominee for DTC and
all payments in respect of such Rule 144A Notes will be made in Dollars. A holder of an interest through
DTC in a Rule 144A Note may make an application to DTC to have payment or payments under such
Rule 144A Notes made in Euro.
2.18 Tax Treatment of Notes
Since the Issuer will be a passive foreign investment company, a U.S. person holding Class F
Subordinated Notes may be subject to additional taxes unless it elects to treat the Issuer as a qualified
electing fund and to recognise currently its proportionate share of the Issuer's income. In order to
comply with such election such U.S. Holder must receive certain information from the Issuer ("QEF
Information"). The Investment Manager (on behalf of the Issuer) will use reasonable endeavours to
provide the QEF Information if requested by a U.S. Holder. The Issuer shall take reasonable efforts to
procure the Collateral Administrator to produce (on behalf of the Issuer) any supplemental report
required in respect of the Collateral pursuant to the requirements of the German tax authorities to the
extent that such requirements apply to a German investor in the Notes. All reasonable expenses
incurred by the Investment Manager or the Collateral Administrator in supplying "tax information" for
Noteholders will be paid by the Issuer up to an amount of €17,500 per annum (such amount to include
all amounts in respect of fees and expenses incurred by the Investment Manager or the Issuer in the
same year in the preparation, provision or validation of data for purposes of all Noteholder tax
jurisdictions) as set out in the definition "Administration Expenses" (or such other higher amount as
reasonably determined by the Investment Manager). If such expenses exceed this limit, the Investment
Manager or as the case may be the Collateral Administrator will not be obliged to provide such
information unless and until it has been reimbursed upfront and in full by the relevant Noteholder for any
such excess. The Issuer is under no obligation to supply U.S. Holders with the QEF Information or
supplemental reports in respect of German tax requirements or incur costs above the limit permitted
above and as a result, the Issuer cannot ensure that such information will be made available (see "Tax
Considerations").
The Issuer also may be a controlled foreign corporation, in which case U.S. Persons holding Class F
Subordinated Notes could be subjected to different tax treatments. See "Income Tax Considerations"
below.
The Issuer intends to treat the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes,
and the Class E Notes, and the Trust Deed requires that holders agree to treat the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes, and the Class E Notes, as debt of the Issuer for
U.S. Federal, state and local income and franchise tax purposes except (x) as otherwise required by
applicable law, (y) to the extent a holder makes a protective QEF election or (z) to the extent that a
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holder files certain United States tax information returns required only of certain equity owners with
respect to various reporting requirements under the Code (as defined herein). It is possible that the
treatment of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, and the Class
E Notes as debt of the Issuer could be challenged by the U.S. Internal Revenue Service. If such a
challenge were successful, the Class A Notes, the Class B Notes, the Class C Notes, the Class D
Notes, and the Class E Notes would be treated as equity interests in the Issuer, and the U.S. Federal
income tax consequences of investing in the Class A Notes, the Class B Notes, the Class C Notes, the
Class D Notes, and the Class E Notes would be the same as those of having invested in the Class F
Subordinated Notes without electing to treat the Issuer as a qualified electing fund. See "Income Tax
Considerations" below.
2.19 Tax Treatment of Combination Notes
The Issuer intends to treat holders of the Combination Notes as direct ownership of the underlying
Class F Subordinated Notes and Class P OAT Strips for U.S. federal, state and local income tax
purposes. The Trust Deed will provide that each Holder, by accepting a Combination Note, agrees to
such treatment and agrees to report all income (or loss) in accordance with such characterisation,
unless otherwise required by the decision of applicable tax authority and it chooses not to contest.
2.20 United States Taxation of the Issuer
The Issuer does not expect that its activities will cause it to be treated as engaged in the conduct of a
trade or business within the United States for U.S. federal income tax purposes (a "U.S. Trade or
Business"); however, there can be no assurance that the U.S. Internal Revenue Service (the "IRS") will
agree. If the IRS were to successfully assert that the Issuer is engaged in the conduct of a U.S. Trade
or Business, there could be material adverse financial consequences to the Issuer and to persons who
hold the Notes. In such a case, part or all of the income and gains of the Issuer could be subject to
United States income tax and additional branch profits tax which would reduce or even eliminate cash
available for distribution to the holders of the Notes. In addition, if the Issuer is treated as engaged in a
U.S. Trade or Business, in some circumstances payments by the Issuer under the Notes could be
subject to U.S. withholding tax.
3. Relating to the Collateral
3.1 The Portfolio
The decision by any prospective holder of Notes to invest in such Notes should be based, among other
things (including, without limitation, the identity of the Investment Manager), on the Eligibility Criteria
which each Collateral Debt Obligation is required to satisfy as at the date of purchase or commitment to
purchase, as disclosed in this Prospectus and on the Portfolio Profile Tests, Collateral Quality Tests
(including the Ramp-Up Interim Targets), Coverage Tests and Target Par Amount that the Portfolio is
required to satisfy as at the Effective Date and thereafter on each Measurement Date (and, as described
herein, prior to the Effective Date, in the case of the Ramp-Up Interim Targets). This Prospectus does
not contain any information regarding the individual Collateral Debt Obligations on which the Notes will
be secured from time to time. Purchasers of any of the Notes will not necessarily have an opportunity to
evaluate for themselves all relevant economic, financial and other information regarding the investments
to be made by the Issuer and, accordingly, will be in part dependent upon the judgment and ability of the
Investment Manager in selecting investments for purchase on behalf of the Issuer over time. No
assurance can be given that the Issuer and the Investment Manager on its behalf will be successful in
obtaining suitable investments or that, if such investments are made, the objectives of the Issuer will be
achieved.
Neither the Issuer nor the Initial Purchaser has made any investigation into the Obligors of the Collateral
Debt Obligations. The value of the Portfolio may fluctuate from time to time (as a result of substitution or
otherwise) and none of the Issuer, the Trustee, the Initial Purchaser, the Custodian, the Investment
Manager, the Collateral Administrator, any Derivative Counterparty, any Class A1 Note Agent or any of
their Affiliates is under any obligation to maintain the value of the Collateral Debt Obligations at any
particular level. None of the Issuer, the Trustee, the Custodian, the Investment Manager, the Collateral
Administrator, any Derivative Counterparty, the Initial Purchaser or any of their Affiliates has any liability
to the Noteholders as to the amount or value of, or any decrease in the value of, the Collateral Debt
Obligations nor any decrease in the level of distributions realisable therefrom from time to time.
3.2 Consideration Relating to the Availability of Financing
The Issuer's ability to draw down Class A1 Drawings from the Class A1 Available Commitment under
the Class A1 Notes will be dependent upon its ability to satisfy the conditions precedent to draw down
as set out in the Class A1 Note Purchase Agreement. No new drawdowns of Class A1 Drawings by the
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Issuer will be permitted under the Class A1 Notes after the Class A1 Available Commitment Termination
Date. The fact that the Initial Investment Period may be up to one year long magnifies the risks
discussed above. No assurance can be given that the conditions to draw down Class A1 Drawings from
the Class A1 Available Commitment under the Class A1 Notes will be capable of being satisfied at any
time after the Issue Date. Any inability by the Issuer to draw down Class A1 Drawings from the Class
A1 Available Commitment under the Class A1 Notes will affect its ability to acquire additional Collateral
Debt Obligations during the Initial Investment Period.
3.3 Nature of the Collateral
The Collateral on which the Notes and the claims of the other Secured Parties are secured will be
subject to credit, liquidity, interest rate and exchange rate risks, general economic conditions,
operational risks, structural risks, the condition of financial markets, political events, developments or
trends in any particular industry, changes in prevailing interest rates and periods of adverse
performance. All of the Collateral Debt Obligations pledged to secure the Notes will be senior leveraged
loans, Structured Finance Obligations, high yield bonds and mezzanine loans (or synthetic securities
linked thereto) of various Obligors, with a principal place of business or significant operations in a
Qualifying Country substantially all of which will be rated or assigned an implied rating below investment
grade.
Credit Risk Investment in the Notes of any Class involves a degree of risk arising from fluctuations in
the amount and timing of receipt of the principal and interest on the Collateral Debt Obligations by or on
behalf of the Issuer and the amounts of the claims of creditors of the Issuer ranking in priority to the
holders of each Class of the Notes. In particular, prospective purchasers of such Notes should be
aware that the amount and timing of payment of the principal and interest on the Collateral Debt
Obligations will depend upon the detailed terms of the documentation relating to each of the Collateral
Debt Obligations and on whether or not any obligor thereunder defaults in its obligations.
Default and Concentration Risk The subordination levels of each of the Classes of Notes will be
established to withstand certain assumed deficiencies in payment caused by defaults on the related
Collateral Debt Obligations. See "Ratings of the Notes". There is no assurance that actual losses will
not exceed such assumed losses. If actual payment deficiencies exceed such assumed levels,
however, payments on the Notes could be adversely affected. The amount which defaults on the
Collateral Debt Obligations adversely affecting each Class of Notes will be directly related to the level of
subordination thereof pursuant to the Priorities of Payment. The risk that payments on the Notes could
be adversely affected by defaults on the related Collateral Debt Obligations is likely to be increased to
the extent that the Portfolio of Collateral Debt Obligations is concentrated in any one Obligor, industry,
region or country as a result of the increased potential for correlated defaults in respect of a single
issuer or within a single industry, region or country as a result of downturns relating generally to such
industry, region or country.
To the extent that a default occurs with respect to any Collateral Debt Obligation and the Issuer or the
Trustee sells or otherwise disposes of such Collateral Debt Obligation, the proceeds of such sale or
disposition are likely to be less than the unpaid principal and interest thereon. In addition, the Issuer
may incur additional expenses to the extent it seeks recoveries upon the default of a Collateral Debt
Obligation or participates in the restructuring of a Collateral Debt Obligation. Even in the absence of a
default with respect to any of the Collateral Debt Obligations, the potential volatility and illiquidity of the
European leverage loan market means that the market value of such Collateral Debt Obligations may be
less than the market value thereof when initially purchased and from the principal amount of such
Collateral Debt Obligations. Accordingly, no assurance can be given as to the amount of proceeds of
any sale or disposition of such Collateral Debt Obligations at any time, or that the proceeds of any such
sale or disposition would be sufficient to repay a corresponding par amount of principal of and interest
on the Notes after, in each case, paying all amounts payable prior thereto pursuant to the Priorities of
Payment. Moreover, there can be no assurance as to the timing of any recovery.
Acquisition and Disposal Risk The financial markets may experience substantial fluctuations in prices
for Senior Loans, Structured and Finance Obligations and Mezzanine Obligations and limited liquidity for
such obligations. No assurance can be given that the conditions giving rise to such price fluctuations
and limited liquidity will not occur, subsist or become more acute following the Issue Date. During
periods of limited liquidity and higher price volatility, the Issuer’s ability to acquire or dispose of Collateral
Debt Obligations at a price and time that the Issuer deems advantageous may be impaired. As a result,
in periods of rising market prices, the Issuer may be unable to participate in price increases fully in the
event that it is either unable to dispose of Collateral Debt Obligations whose prices have risen or to
acquire Collateral Debt Obligations whose prices are on the increase; the Issuer’s inability to dispose
fully and promptly of Collateral Debt Obligations in declining markets will conversely cause the net asset
value of the Portfolio to decline. A decrease in the market value of the Collateral Debt Obligations would
also adversely affect the proceeds of sale that could be obtained upon the sale of the Collateral Debt
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Obligations and could ultimately affect the ability of the Issuer to pay in full or redeem the Notes.
Accordingly, no assurance can be given as to the amount of proceeds of any sale or disposition of such
Collateral Debt Obligations at any time, or that the proceeds of any such sale or disposition would be
sufficient to repay a corresponding par amount of principal of and interest on the Notes after, in each
case, paying all amounts payable prior thereto pursuant to the Priorities of Payment.
3.4 The Target Par Amount
The Issuer has entered into certain agreements to purchase a substantial portion of the Portfolio on or
prior to the Issue Date and will use the proceeds of the issuance of the Notes to settle such trades on or
about the Issue Date and/or to repay loans used to finance the purchase of such Collateral Debt
Obligations prior to the Issue Date. The prices paid for such Collateral Debt Obligations on settlement
will reflect the market value of such Collateral Debt Obligations on the date the Issuer purchased or
committed to purchase such obligations, which may be greater or less than their market value on the
Issue Date or the date of settlement of the applicable trade, if later. In addition, although such
obligations are required to satisfy the Eligibility Criteria at the time of entering into a binding commitment
to purchase them, it is possible that the obligations may no longer satisfy such Eligibility Criteria on the
Issue Date or later settlement of the acquisition thereof due to intervening events. The requirement that
the Eligibility Criteria be satisfied applies only at the time that any commitment to purchase a Collateral
Debt Obligation is entered into and any failure by such obligation to satisfy the Eligibility Criteria at a
later stage will not result in any requirement to sell it or take any other action.
3.5 Collateral Reinvestment Provisions; Restrictions on Acquisition and Disposition
During the Reinvestment Period and, to the limited extent described more fully herein, after the
Reinvestment Period, the Investment Manager, acting on behalf of the Issuer, may dispose of certain
Collateral Debt Obligations and reinvest the Sales Proceeds thereof, together with any Scheduled
Principal Proceeds and Unscheduled Principal Proceeds received in Substitute Collateral Debt
Obligations subject to compliance with the Reinvestment Criteria and certain other conditions. The
exercise by the Investment Manager of its discretion in disposing of such Collateral Debt Obligations
and purchasing Substitute Collateral Debt Obligations in compliance with the Reinvestment Criteria and
such other requirements will expose the Issuer to the market conditions prevailing at the time of such
sale and reinvestment. Such actions during periods of adverse market conditions may result in
unfavourable changes in the characteristics and quality of the Portfolio and may result in a decrease in
the overall yield on the Portfolio, adversely affecting the Issuer’s ability to make payments on the Notes.
The income generated by any Substitute Collateral Debt Obligations will depend, among other factors,
on the price paid therefor and the availability of investments satisfying the Reinvestment Criteria which
are acceptable to the Issuer or the Investment Manager, acting on behalf of the Issuer. The need to
satisfy such Reinvestment Criteria and the other trading criteria specified in the Investment Management
Agreement and to identify acceptable investments may require the purchase of Substitute Collateral
Debt Obligations with lower yields than those initially acquired or require that any Principal Proceeds
received be maintained temporarily in cash or Eligible Investments, which may reduce the yield on the
Collateral. Additionally, due to the significant restrictions imposed by the Investment Management
Agreement on the Investment Manager's ability to buy and sell Collateral Debt Obligations on behalf of
the Issuer, during certain periods or in certain circumstances, the Investment Manager may be unable
as a result of such restrictions to buy or sell securities or to take other actions on behalf of the Issuer
which they might consider to be in the best interests of the Issuer and the Noteholders. Further,
Obligors of Collateral Debt Obligations may be more likely to exercise any rights they may have to
redeem such obligations when interest rates or spreads are declining. The impact, including any
adverse impact, of such disposal or potential reinvestment on the holders of the Class F Subordinated
Notes will be magnified by the leveraged nature of the Class F Subordinated Notes. See "The Portfolio"
below.
3.6 Considerations Relating to the Initial Investment Period
During the Initial Investment Period, the Investment Manager, acting on behalf of the Issuer, will use all
commercially reasonable efforts to purchase additional Collateral Debt Obligations in order to satisfy the
Ramp-Up Interim Targets at the dates applicable thereto and, to satisfy as at the Effective Date, the
Target Par Amount and each of the Coverage Tests, Collateral Quality Tests and Portfolio Profile Tests.
See "The Portfolio" below. The ability to satisfy such targets and tests will depend on a number of
factors beyond the control of the Issuer and the Investment Manager, including the availability of
obligations that satisfy the Eligibility Criteria and other Portfolio-related requirements in the primary and
secondary loan markets, the condition of the financial markets, general economic conditions and
international political events. Therefore, there can be no assurance that such targets and tests will be
met. In addition, (save for circumstances where Sterling Collateral Debt Obligations are purchased with
Sterling Denominated Drawings, Euro Collateral Debt Obligations are purchased with Euro
Denominated Drawings and Dollar Collateral Debt Obligations are purchased with Dollar Denominated
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Drawings) the ability of the Issuer to enter into Asset Swap Transactions upon the acquisition of other
Non-Euro Obligations will also depend upon a number of factors outside the control of the Issuer and
the Investment Manager, including its ability to identify a suitable Asset Swap Counterparty with whom
the Issuer may enter into Asset Swap Transactions. To the extent it is not possible to purchase such
additional Collateral Debt Obligations during the Initial Investment Period, the level of income receivable
by the Issuer on the Collateral and therefore its ability to meet its interest payment obligations under the
Notes may be adversely affected. Such failure to acquire additional Collateral Debt Obligations may
also result in the non-confirmation or downgrade or withdrawal by any Rating Agency of its Initial
Ratings of any Class or Classes of Notes. Such downgrade or withdrawal may result in the redemption
of the Notes, shortening the weighted average lives of the Notes and therefore reducing the leverage
ratio of the Class F Subordinated Notes to the other Classes of Notes which could adversely affect the
level of returns to the holders of the Class F Subordinated Notes. Any such redemption of the Notes
may also adversely affect the amount of excess spread capable of being generated because the most
senior ranking Classes of Notes bear interest at a lower rate of interest than the remaining Classes of
Senior Notes.
3.7 Characteristics of Senior Loans, High Yield Bonds and Mezzanine Obligations
The Portfolio Profile Tests provide that, as at the Effective Date (and thereafter, to the extent required by
the Reinvestment Criteria), not less than 75 per cent. of the Aggregate Principal Balance shall consist of
Senior Loans or cash in the Principal Account and Unused Proceeds Account. Senior Loans and
Mezzanine Obligations are of a type generally incurred by the Obligors thereunder in connection with
highly leveraged transactions, often (although not exclusively) to finance internal growth, acquisitions,
mergers and/or stock purchases. As a result of, among other things, the additional debt incurred by the
Obligor in the course of such a transaction, the Obligor’s creditworthiness is typically judged by the
rating agencies to be below investment grade. Senior Loans are typically at the most senior level of the
capital structure with Mezzanine Obligations being subordinated thereto or to any other senior debt of
the Obligor. Senior Loans are often secured by specific collateral, including but not limited to,
trademarks, patents, accounts receivable, inventory, equipment, buildings, real estate, franchises and
common and preferred stock of the Obligor and its subsidiaries, although the security granted in respect
of some Senior Loans may be limited to share security over the Obligor group and some Senior Loans
may also be unsecured. The Portfolio Profile Tests provide that the Aggregate Principal Balance of
Senior Loans which are senior unsecured loan obligations may not be more than €17,500,000.
Mezzanine Obligations are subordinate to Secured Senior Loans, Unsecured Senior Loans and often
have the benefit of a second charge over such assets. Secured Senior Loans and Unsecured Senior
Loans usually have shorter terms than more junior obligations and often require mandatory
prepayments from excess cash flow, asset dispositions and offerings of debt and/or equity securities.
Mezzanine Obligations generally take the form of medium term loans repayable shortly (perhaps six
months or one year) after the senior debt of the Obligor thereunder. Because Mezzanine Obligations
are only repayable after the senior debt of an Obligor (and interest payments may be blocked to protect
the position of senior debt interest in certain circumstances), they will carry a higher rate of interest to
reflect the greater risk of their not being repaid. Due to the greater risk associated with Mezzanine
Obligations as a result of their subordination below senior debt of the Obligor, mezzanine lenders may
be granted share options or warrants in the Obligor which can be exercised in certain circumstances,
principally being immediately prior to the Obligor's shares being sold or floated in an initial public offering
or higher cash paying instruments or on a payment in kind basis, which are payable according to their
contractual terms. These are referred to herein as Collateral Enhancement Obligations.
The majority of Senior Loans and Mezzanine Obligations bear interest based on a floating rate index, for
example EURIBOR, the certificate of deposit rate, a prime or base rate (each as defined in the
applicable loan agreement) or other index, which may reset daily (as most prime or base rate indices
do) or offer the borrower a choice of one, two, three, six, nine or twelve month interest and rate reset
periods. The purchaser of an interest in a Senior Loan or Mezzanine Obligation may receive certain
syndication or participation fees in connection with its purchase. Other fees which may be payable in
respect of Senior Loan or Mezzanine Obligations, which are separate from interest payments on such
loans, may include facility, commitment, amendment and prepayment fees.
Risks Associated with Senior Leveraged Loans and Mezzanine Obligations The Obligor under a
leveraged loan often provides the lenders thereunder with extensive information about its business,
which is not generally available to the public. Because of the provision of such confidential information,
the unique and customised nature of a loan agreement, and the private syndication of the loan,
leveraged loans are generally not easily purchased or sold as publicly traded securities, and historically
the trading volume in the loan market has been small relative to, for example, the high yield bond
market.
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Senior Loans and Mezzanine Obligations also generally provide for restrictive covenants designed to
limit the activities of the Obligors thereunder in an effort to protect the rights of lenders to receive timely
payments of interest on, and repayment of principal of, the loans. Such covenants may include
restrictions on dividend payments, specific mandatory minimum financial ratios, limits on total debt and
other financial tests. A breach of covenant (after giving effect to any cure period) under a Senior Loan or
Mezzanine Obligation which is not waived by the lending syndicate is normally an event of default which
allows the syndicate to demand immediate repayment in full of the outstanding loan.
Although any particular Senior Loan, Second Lien Loan, Mezzanine Obligation or High Yield Obligation
often will share many similar features with other loans and obligations of its type, the actual terms of any
particular Senior Loan, Second Lien Loan, Mezzanine Obligation or High Yield Obligation will have been
a matter of negotiation and will thus be unique. Any particular loan or obligation may contain terms that
are not standard and that provide less protection to creditors than might be expected, including in
respect of covenants, events of default, security or guarantees. The leveraged credit markets are
constantly evolving. Recently, there has been an increasing trend of less protection for creditors in
terms of covenants and other terms than has historically been the case. The Investment Manager may
select Collateral Debt Obligations that provide less protection for creditors in the event of a default than
is customary.
In order to induce banks and institutional investors to invest in a Senior Loan or Mezzanine Obligation,
and to obtain a favourable rate of interest, an Obligor under such an obligation often provides the
investors therein with extensive information about its business, which is not generally available to the
public. Due to the provision of confidential information, the unique and customised nature of the loan
agreement including such Secured Senior Loan, Unsecured Senior Loan or Mezzanine Obligation, and
the private syndication of the loan, Senior Loans, Unsecured Senior Loans and Mezzanine Obligations
are generally not as easily purchased or sold as a publicly traded security, and historically the trading
volume in the loan market has been small relative to, for example, the high yield bond market.
Historically, investors in or lenders under European Senior Loans and Mezzanine Obligations have been
predominantly commercial banks and investment banks. The range of investors for such loans has
broadened to include money managers, insurance companies, hedge funds, arbitrageurs, bankruptcy
investors and mutual funds seeking increased potential total returns and portfolio managers of trusts or
special purchase companies issuing collateralised bond and loan obligations. As secondary market
trading volumes increase, new loans are frequently adopting more standardised documentation to
facilitate loan trading which may improve market liquidity. There can be no assurance, however, that
future levels of supply and demand in loan trading will provide the degree of liquidity which currently
exists in the market. This means that such assets may be subject to greater disposal risk in the event
that such assets are sold following enforcement of the security over the Collateral or otherwise.
Increased Risks for Mezzanine Obligations The European market for Mezzanine Obligations is
generally less liquid than that for Senior Loans, resulting in increased disposal risk for such obligations.
The fact that Mezzanine Obligations are generally subordinated to any Senior Loan and potentially other
indebtedness of the relevant Obligor thereunder, may have a longer maturity than such other
indebtedness and will generally only have a second ranking security interest over any security granted
in respect thereof, increases the risk of non-payment of Mezzanine Obligations in an enforcement
situation.
Mezzanine Obligations also generally involve greater credit and liquidity risks than those associated with
investment grade corporate obligations and Senior Loans. They are often entered into in connection
with leveraged acquisitions or recapitalisations in which the Obligors thereunder incur a substantially
higher amount of indebtedness than the level at which they previously operated and, as referred to
above, sit at a subordinated level in the capital structure of such companies. Mezzanine Obligations
may provide that all or part of the interest accruing thereon will not be paid on a current basis but will be
deferred.
Risks Associated with High Yield Bonds The Portfolio Profile Tests provide that the Aggregate
Principal Balance of High Yield Bonds may not be more than €26,250,000. Therefore the Collateral
Debt Obligations securing the Notes will be high yield debt securities issued by various obligors which
are rated below investment grade and will have greater credit and liquidity risk than investment grade
corporate bonds.
High yield debt securities are generally unsecured, may be subordinated to other obligations of the
applicable obligor and generally involve greater credit and liquidity risks than those associated with
investment grade corporate obligations. They are often issued in connection with leveraged acquisitions
or recapitalisations in which the obligors thereunder incur a substantially higher amount of indebtedness
than the level at which they previously operated.
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High yield debt securities have historically experienced greater default rates than investment grade
securities. Although several studies have been made of historical default rates in the U.S. high yield
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 in
either the European or the U.S. high yield markets which may exceed the hypothetical default rates
assumed by investors in determining whether to purchase the Notes or by the Rating Agencies in rating
the Notes.
The lower rating of securities in the high yield sector reflects a greater possibility that adverse changes
in the financial condition of an issuer thereof, or in general economic conditions (including a sustained
period of rising interest rates or an economic downturn), or both, may affect the ability of such issuer to
make payments of principal and interest on its debt. Many issuers of high yield debt securities are
highly leveraged, and specific developments affecting such issuers, including reduced cash flow from
operations or inability to refinance debt at maturity, may also adversely affect such issuers'ability to
meet their debt service obligations. There can be no assurance as to the levels of defaults and/or
recoveries that may be experienced on the High Yield Bonds in the Portfolio.
European high yield debt securities are generally subordinated structurally, as opposed to contractually,
to senior secured debtholders. Structural subordination is when a high yield security investor lends to a
holding company whose primary asset is ownership of a cash generating operating company or
companies. The debt investment of the high yield investor is serviced by passing the revenues and
tangible assets from the operating companies upstream through the holding company (which typically
has no revenue generating capacity of its own) to the security holders. In the absence of upstream
guarantees from operating or asset owning companies in the group, such a process leaves the security
yield bond investors deeply subordinated to secured and unsecured creditors of the operating
companies and means that investors therein will not necessarily have access to the same security
package as the senior lenders (even on a second priority charge basis) or be able to participate directly
in insolvency proceedings or pre-insolvency discussions relating to the operating companies within the
group. This facet of the European high yield market differs from the U.S. high yield market, where
structural subordination is markedly less prevalent.
In the case of high yield debt securities issued by issuers with their principal place of business in
Europe, structural subordination of high yield debt securities, coupled with the relatively shallow depth of
the European high yield market, leads European high yield defaults to realise lower average recoveries
than their U.S. counterparts. Another factor affecting recovery rates for European high yield bonds is
the bankruptcy regimes applicable in different European jurisdictions and the enforceability of claims
against the high yield bond issuer. See paragraph 3.16 "Insolvency considerations relating to Collateral
Debt Obligations" below. It must be noted, however, that the overall probability of default (based on
credit rating) remains similar for both U.S. and European credits; it is the severity of the effect of any
default that differs between the two markets as a result of the aforementioned factors.
In addition to the characteristics described above, high yield securities frequently have call or
redemption features that permit the issuer to redeem such obligations prior to their final maturity date. If
such a call or redemption were exercised by an issuer during a period of declining interest rates, the
Investment Manager, acting on behalf of the Issuer, may only be able to replace such called obligation
with a lower yielding obligation, thus decreasing the net investment income from the Portfolio.
Defaults and Recoveries There is limited historical data available as to the levels of defaults and/or
recoveries that may be experienced on Senior Loans and Mezzanine Obligations and no assurance can
be given as to the levels of default and/or recoveries that may apply to any Senior Loans and Mezzanine
Obligations purchased by the Issuer. Recoveries on both Senior Loans and Mezzanine Obligations may
also be affected by the different bankruptcy regimes applicable in different jurisdictions and the
enforceability of claims against the Obligors thereunder. See paragraph 3.16 "Insolvency
Considerations relating to Collateral Debt Obligations" below.
A non-investment grade loan or debt obligation or an interest in a non-investment grade loan is
generally considered speculative in nature and may become a Defaulted Obligation for a variety of
reasons. Upon any Collateral Debt Obligation becoming a Defaulted Obligation, such Defaulted
Obligation may become subject to either substantial workout negotiations or restructuring, which may
entail, among other things, a substantial reduction in the interest rate, a substantial write-down of
principal and a substantial change in the terms, conditions and covenants with respect to such Defaulted
Obligation. In addition, such negotiations or restructuring may be quite extensive and protracted, and
therefore may result in uncertainty with respect to ultimate recovery on such Defaulted Obligation. The
liquidity for Defaulted Obligations may be limited, and to the extent that Defaulted Obligations are sold, it
is highly unlikely that the proceeds from such sale will be equal to the amount of unpaid principal and
interest thereon. Furthermore, there can be no assurance that the ultimate recovery on any Defaulted
Obligation will be at least equal either to the minimum recovery rate assumed by the Rating Agencies in
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ating the Notes or any recovery rate used in the analysis of the Notes by investors in determining
whether to purchase the Notes.
Prepayment Risk Loans are generally prepayable in whole or in part at any time at the option of the
Obligor thereof at par plus accrued and unpaid interest thereon. Prepayments on loans may be caused
by a variety of factors, which are difficult to predict. Accordingly, there exists a risk that loans purchased
at a price greater than par may experience a capital loss as a result of such a prepayment. In addition,
Principal Proceeds received upon such a prepayment are subject to reinvestment risk. Any inability of
the Issuer to reinvest such Principal Proceeds in Collateral Debt Obligations with comparable interest
rates that satisfy the Reinvestment Criteria may adversely affect the timing and amount of payments and
distributions received by the Noteholders and the yield to maturity of the Notes. There can be no
assurance that the Issuer will be able to reinvest Principal Proceeds in Collateral Debt Obligations with
comparable interest rates that satisfy the Reinvestment Criteria or (if it is able to make such
reinvestments) as to the length of any delays before such investments are made.
Credit Risk Risks applicable to Senior Loans and Mezzanine Obligations also include the possibility
that earnings of the Obligor may be insufficient to meet its debt service obligations thereunder and the
declining creditworthiness and potential for insolvency of the Obligor of such loans during periods of
rising interest rates and economic downturn. An economic downturn could severely disrupt the market
for leveraged loans and adversely affect the value thereof and the ability of the Obligor thereunder to
repay principal and interest.
3.8 Participations and Assignments
The Issuer may acquire interests in Collateral Debt Obligations which are loans either directly (by way of
novation or assignment) or indirectly (by way of sub-participation). Each institution from which such an
interest is acquired is referred to herein as a "Selling Institution". Interests in loans acquired directly
by way of novation or assignment are referred to herein as "Assignments". Interests in loans acquired
indirectly by way of sub-participation are referred to herein as "Participations". As described in more
detail below, holders of Participations are subject to additional risks not applicable to a holder of a direct
interest in a loan.
The purchaser of an Assignment typically succeeds to all the rights of the assigning Selling Institution
and becomes entitled to the benefit of the loans and the other rights of the lender under the loan
agreement. The Issuer, as an assignee, will generally have the right to receive directly from the
borrower all payments of principal and interest to which it is entitled, provided that notice of such
Assignment has been given to the borrower. As a purchaser of an Assignment, the Issuer typically will
have the same voting rights as other lenders under the applicable loan agreement and will have the right
to vote to waive enforcement of breaches of covenants. The Issuer will generally also have the same
rights as other lenders to enforce compliance by the borrower with the terms of the loan agreement, to
set off claims against the borrower and to have recourse to collateral supporting the loan. As a result,
the Issuer will generally not bear the credit risk of the Selling Institution and the insolvency of the Selling
Institution should have little effect on the ability of the Issuer to continue to receive payment of principal
or interest from the borrower. The Issuer will, however, assume the credit risk of the borrower.
Participations by the Issuer in a Selling Institution’s portion of the loan typically results in a contractual
relationship only with such Selling Institution and not with the borrower under such loan. The 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 rights of set-off against the borrower and no right to
enforce compliance by the borrower with the terms of the applicable loan agreement 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 experience delays in receiving payments made to the Selling Institution by
the borrower or 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 sets-off claims against the Selling Institution. If the Issuer is treated as a
general creditor of the Selling Institution, it may not have any exclusive or senior claim with respect to
the Selling Institution’s interest in, or the collateral with respect to, the loan. The Investment Manager
has not and will not perform independent credit analyses of the Selling Institution. Each Selling
Institution (or an entity guaranteeing such institution) is required to satisfy the applicable Rating
Requirement. The Issuer may purchase a Participation from a Selling Institution that does not itself
retain any economic interest 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 participate directly in any vote to waive
enforcement of any covenants breached by a borrower. However, most participation agreements
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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 pre-payment) or interest or release 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 from those of the Issuer and such Selling
Institutions may not be required to consider the interests of the Issuer in connection with the exercise of
its votes.
Additional risks are therefore associated with the purchase of Participations by the Issuer as opposed to
Assignments. The Portfolio Profile Tests specify certain individual and aggregate third party credit
exposure limits for Selling Institutions determined by reference to their Moody’s and/or S&P Ratings.
Assignments and Participations are sold strictly without recourse to the Selling Institutions and the
Selling Institution will generally make no representations or warranties about the underlying loan, the
borrowers, the documentation of the loans or any collateral securing the loans. In addition, the Issuer
will be bound by provisions of the underlying loan agreements, if any, that require the preservation of the
confidentiality of information provided by the borrower.
3.9 Synthetic Securities
In the event that Collateral Debt Obligations acquired by or on behalf of the Issuer from time to time are
Synthetic Securities, in addition to the credit risks associated with loans and/or securities which are
Reference Obligations under Synthetic Securities, the Issuer will also be subject to the credit risk of the
applicable Synthetic Counterparty. The Issuer will have a contractual relationship with the relevant
Synthetic Counterparty only and not with the Reference Entity of the Reference Obligation (in each case
as defined in the relevant Synthetic Security). The Issuer generally will have no right directly to enforce
compliance by the Reference Entity with the terms of the Reference Obligation nor any rights of set-off
against the Reference Entity, nor have any voting rights with respect to the Reference Obligation. The
Issuer will not directly benefit from any collateral supporting the Reference Obligation and will not have
the benefit of the remedies that would normally be available to a holder of such Reference Obligation.
In addition to the risks described above, in the event of the insolvency of the Synthetic Counterparty, the
Issuer will be treated as a general unsecured creditor of such Synthetic Counterparty, and will not have
any claim with respect to the Reference Obligation. Consequently, the Issuer will be subject to the
credit risk of the Synthetic Counterparty as well as that of the Reference Entity. As a result,
concentrations of Synthetic Securities in any one Synthetic Counterparty subject the Notes to an
additional degree of risk with respect to defaults by such Synthetic Counterparty as well as by the
Reference Entity. Although the Investment Manager will not perform independent credit analyses of the
Synthetic Counterparties on behalf of the Issuer, any such Synthetic Counterparty, or an entity
guaranteeing such Synthetic Counterparty, individually and in the aggregate will be required to satisfy
the applicable Rating Requirement thereto.
The Portfolio Profile Tests provide that the Aggregate Principal Balance of Collateral Debt Obligation
that are Synthetic Securities may not exceed €52,500,000 and also specify certain individual and
aggregate third party credit exposure limits for Synthetic Counterparties determined by reference to their
Moody’s and/or S&P Ratings.
Whilst the returns on a Synthetic Security will generally reflect those of the related Reference Obligation
or the unlevered exposure to a portfolio of Reference Obligations, as a result of the terms of the
Synthetic Security and the assumption of the credit risk of the applicable Synthetic Counterparty, a
Synthetic Security may have a different expected return, a different (and potentially greater) probability
of default, a different (and potentially greater) expected loss characteristic following a default and a
different (and potentially lower) expected recovery following default. Additionally, the terms of a
Synthetic Security may provide for different maturities, payment dates, interest rates, interest rate
references and credit exposures and non-credit related exposures to obligations of the Issuer other than
the Reference Obligation relating thereto.
Generally, upon the occurrence of certain specified credit events under a Synthetic Security relating
generally to the credit of the applicable Reference Entity, the relevant Synthetic Security will become
repayable and its terms will permit or require the Synthetic Counterparty to satisfy its repayment
obligations under the Synthetic Security in such circumstances by delivering to the Issuer a principal
amount of Reference Obligations or other Deliverable Obligations of the applicable Reference Entity or
cash in an amount equal to the current market value of a principal amount of the Reference Obligations
or such Deliverable Obligations of the Reference Entity equal to the original principal amount of the
applicable Synthetic Security. Such amounts may be significantly less than the original principal amount
of such Synthetic Security or, in certain circumstances, zero.
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Prospective investors in the Notes should also note that a Reference Obligation does not need to satisfy
the Eligibility Criteria relating to currency of denomination. As referred to above, a Synthetic Security
which is a Defaulted Obligation will generally be settled either by a cash settlement or a physical
settlement. The Issuer may be required upon a credit event to take delivery of a non-euro denominated
obligation or of a currency other than euros, exposing the Issuer to exchange rate risk.
3.10 Collateral Enhancement Obligations
All funds required in respect of the purchase price of any Collateral Enhancement Obligations and all
funds required in respect of the exercise price of any rights or options thereunder, may only be paid out
of the Balance standing to the credit of the Collateral Enhancement Account at the relevant time
(including, as described below, Interest Proceeds transferred thereto). Such Balance shall be
comprised of all Distributions and Sale Proceeds received in respect of Collateral Enhancement
Obligations from time to time (referred to herein as "Collateral Enhancement Obligation Proceeds")
together with all other sums deposited therein from time to time which the Investment Manager
determines shall be paid into the Collateral Enhancement Account pursuant to the Priorities of Payment
rather than being paid to the Class F Subordinated Noteholders. In addition, if the Balance standing to
the credit of the Collateral Enhancement Account at the relevant time is not sufficient to fund a purchase
or exercise (as applicable) of one or more Collateral Enhancement Obligations, the Investment Manager
may, at its discretion, arrange for the payment of any such shortfall by any of (i) making an Investment
Manager Advance, and/or (ii) requesting that funds be paid out of the Interest Account to the Collateral
Enhancement Account for this purpose on the terms and subject to the limits set forth in Condition 3(j)
(Payments to and from the Accounts). The amount of funds that may be withdrawn from the Interest
Account pursuant to paragraph 2 of Condition 3(j)(ii) (Interest Accounts) for such purpose are subject to
a cap in aggregate in any particular Due Period of €200,000 or its Euro equivalent converted at the Spot
Rate.
The Investment Manager has the discretion to either (i) credit or (ii) transfer (pursuant to Condition
3(j)(x)(4) (Collateral Enhancement Account)) amounts representing Sale Proceeds in excess of the
purchase price of any Collateral Enhancement Obligation that is sold, to the Principal Account to be
applied as Principal Proceeds pursuant to the Principal Proceeds Priority of Payments.
The Investment Manager is under no obligation whatsoever to exercise its discretion to take any of the
actions described above and there can be no assurance that the Balance standing to the credit of the
Collateral Enhancement Account will be sufficient to fund the exercise of any right or option under any
Collateral Enhancement Obligation at any time. The ability of the Investment Manager to exercise any
rights or options under any Collateral Enhancement Obligation, on behalf of the Issuer, will be
dependent upon there being sufficient amounts standing to the credit of the Collateral Enhancement
Account, to pay the costs of any such exercise (including, as described above, Interest Proceeds
available for this purpose). Failure to exercise any such right or option may result in a reduction of the
returns to the Class F Subordinated Noteholders (and, potentially, Noteholders of other Classes).
All Collateral Enhancement Obligation Proceeds in respect of any Collateral Enhancement Obligation
will be deposited into the Collateral Enhancement Obligation Account and applied, on each Payment
Date, in accordance with the Collateral Enhancement Obligation Proceeds Priority of Payments, first,
towards repayment of any Investment Manager Advance and thereafter, at the discretion of the
Investment Manager, in payment to the Class F Subordinated Noteholders. The other Secured Parties
will not be entitled to receive such distributions and sale proceeds.
Collateral Enhancement Obligations and any income or return generated thereby are not taken into
account for the purposes of determining satisfaction of, nor are they required to satisfy, any of the
Coverage Tests, Portfolio Profile Tests or Collateral Quality Tests.
3.11 Structured Finance Obligations
It is expected that a proportion of the Collateral pledged to secure the Notes will be Structured Finance
Obligations which may include collateral loan obligations and Whole Business Securitisations.
Structured Finance Obligations are typically securities that entitle the holders thereof to receive
payments that depend primarily on the cash flow from a specified pool of financial assets, either fixed or
revolving, that by their terms convert into cash within a finite time period, together with rights or other
assets designated to assure the servicing or timely distribution of proceeds to holders of the Structured
Finance Obligations.
Structured Finance Obligations are often subject to extension and prepayment risks which may have a
substantial impact on the timing of their cashflows. The average life of each individual security may be
affected by a large number of factors such as structural features (including the existence and frequency
of exercise of any optional redemption, mandatory redemption or prepayment or sinking fund features),
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the payment or the prepayment rate of the underlying assets, the prevailing level of interest rates, the
actual default rate of the underlying assets, the timing of recoveries and the level of rotation in the
underlying assets. As a result, no assurance can be made as to the exact timing of cashflows from the
Portfolio or on the Notes. This uncertainty may substantially affect the returns of each Class of Notes.
It is expected that some of the Collateral will consist of Structured Finance Obligations that are
subordinated in right of payment and rank junior to other securities that are secured by or represent an
ownership interest in the same pool of assets. In addition, the underlying documentation for certain of
such Structured Finance Obligations provide for the diversion of payments of interest and/or principal to
more senior classes when the delinquency or loss experience of the pool of assets underlying such
Structured Finance Obligations exceeds certain levels or applicable over-collateralisation or interest
coverage tests are not satisfied. In certain circumstances, payments of interest on certain Structured
Finance Obligations in the Portfolio may be reduced, deferred or eliminated for one or more payment
dates, which may adversely affect the ability of the Issuer to pay principal and interest in respect of the
Notes. As a result of the foregoing, such subordinated Structured Finance Obligations have a higher
risk of loss and a lower degree of control and/or decision making rights compared to more senior
classes of such securities. Additionally, as a result of the diversion of cash flow to more senior classes,
the average life of such subordinated Structured Finance Obligations may lengthen. Subordinated
Structured Finance Obligations generally do not have the right to trigger an event of default or vote on or
direct remedies following a default until the more senior securities are paid in full. As a result, a shortfall
in payments to holders of subordinated Structured Finance Obligations will generally not result in a
default being declared on the transaction and the restructuring of the same. Finally, because
subordinated Structured Finance Obligations may represent a relatively small percentage of the size of
the asset pool being securitised, the impact of a relatively small loss on the overall pool may be
substantial on the individual subordinated Structured Finance Obligation.
The offering materials in respect of the issue of Structured Finance Obligations may contain extensive
risk factors and other considerations associated with an investment in such Structured Finance
Obligations, which may include both generic risks and risks specific to the particular structure or asset
class of a Structured Finance Obligation. Potential investors in the Notes should conduct their own due
diligence as to the nature of, and risks associated with, Structured Finance Obligations.
3.12 Sterling and Dollar Collateral Debt Obligations
The Investment Manager, acting on behalf of the Issuer, may from time to time acquire Collateral Debt
Obligations which are denominated in Sterling or Dollars (each a "Sterling Collateral Debt Obligation"
or a "Dollar Collateral Debt Obligation").
In determining the Coverage Tests and the Reinvestment Diversion Test, the outstanding Sterling or
Dollar principal or interest amount in respect of a Sterling Collateral Debt Obligation or Dollar Collateral
Debt Obligation will be converted into Euro at the Spot Rate. In determining the Collateral Quality Tests
and Portfolio Profile Tests, the outstanding Sterling or Dollar principal or interest amount in respect of a
Sterling Collateral Debt Obligation or Dollar Collateral Debt Obligation will be converted into Euro at the
Initial Exchange Rate.
3.13 Counterparty Risk
Synthetic Securities, Credit Short Obligations, Offsetting Credit Default Swaps, Participations, Asset
Swap Transactions, Currency Hedge Transactions, Put Options and any Interest Rate Hedge
Transactions involve the Issuer entering into contracts with counterparties. Pursuant to such contracts,
the counterparties agree to make payments to the Issuer under certain circumstances as described
therein. The Issuer will be exposed to the credit risk of the counterparty in respect of any such
payments. Each such counterparty is required to have a rating of at least the applicable Rating
Requirement.
3.14 Interest Rate Risk
Certain of the Notes bear interest at floating rates based on EURIBOR (the "Floating Rate Notes").
There may be a timing mismatch between payments of interest on the Notes and payments of interest
on the Collateral Debt Obligations and, in the case of Floating Rate Collateral Debt Obligations, the
rates at which they bear interest may adjust more or less frequently, and on different dates and based
on different indices than the interest rate of the Notes. Such mismatches could adversely impact the
ability of the Issuer to make payments on the Floating Rate Notes. In addition, any payments of
principal or interest received in respect of Collateral Debt Obligations and not otherwise reinvested
during any Reinvestment Period in Substitute Collateral Debt Obligations will generally be reinvested in
Eligible Investments until shortly before the next due date. There is no requirement that such Eligible
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Investments bear interest on a particular basis, and the interest rates available for such Eligible
Investments are inherently uncertain.
The Issuer may enter into one or more Interest Rate Hedge Transactions on the Issue Date to reduce
the impact of any interest rate and basis mismatches which might otherwise arise. The Issuer may also
enter into one or more Interest Rate Hedge Transactions following the Issue Date subject to receipt of
Rating Agency Confirmation. Whether the Issuer enters into any such transaction or not and
notwithstanding the fact that payment of interest on the Class F Subordinated Notes is subordinated to
the payment of interest on the Senior Notes, there can be no assurance that the Collateral Debt
Obligations and the Eligible Investments will in all circumstances generate sufficient Interest Proceeds to
make timely payments of interest on the Senior Notes or ensure any particular return on the Class F
Subordinated Notes and there can be no assurance that any interest rate hedging entered into by the
Issuer will achieve the intended result.
In addition, the Initial Purchaser and/or one or more of its Affiliates, with acceptable credit support
arrangements, if necessary, may act as counterparty with respect to all or some of the Interest Rate
Hedge Transactions, which may create certain conflicts of interest. In the event of the insolvency of an
Interest Rate Hedge Counterparty the Issuer will be treated as a general creditor of the Interest Rate
Hedge Counterparty. Consequently, the Issuer will be subject to the credit risk of any Interest Rate
Hedge Counterparty, as well as that of the Collateral Debt Obligations.
3.15 Currency Risk
It is anticipated that on the Effective Date a portion of the Aggregate Principal Balance of the Collateral
Debt Obligations will be comprised of Non-Euro Obligations. The percentage of the Portfolio that is
comprised of these types of securities may increase or decrease over the life of the Notes.
Notwithstanding that (i) Non-Euro Obligations that have an associated Asset Swap Transaction which
will include currency protection provisions and (ii) the currency risk between the payments from Euro
Collateral Debt Obligations, Sterling Collateral Debt Obligations and Dollar Collateral Debt Obligations
that are not the subject of an Asset Swap Transaction will be naturally hedged by the interest and
principal payments under the Class A1 Drawings, losses may be incurred due to fluctuations in the Euro
exchange rates in the event of a default under any such Asset Swap Transaction.
In addition, fluctuations in Euro exchange rates may result in a decrease in value of the Portfolio for the
purposes of sale thereof upon enforcement of the security over it, notwithstanding that any sale
proceeds received will be converted at the Asset Swap Transaction Exchange Rate or Currency Hedge
Transaction Exchange Rate, such amounts may be reduced by any termination payments payable by
the Issuer in such circumstances. The Investment Manager may also be limited at the time of
reinvestment in its choice of Collateral Debt Obligations because of the cost of entry into such Asset
Swap Transactions or Currency Hedge Transactions and due to restrictions in the Investment
Management Agreement with respect thereto.
The Issuer’s ongoing payment obligations under such Asset Swap Transactions and Currency Hedge
Transactions (including termination payments) may be significant. The payments associated with such
hedging arrangements generally rank senior to payments on the Notes.
In addition, there may be exchange rate risk associated with the Exchange Agent converting Euro
payments into Dollars for payments made by DTC on the Rule 144A Notes.
3.16 Insolvency Considerations relating to Collateral Debt Obligations
Collateral Debt Obligations may be subject to various laws enacted for the protection of creditors in the
countries of the jurisdictions of incorporation of Obligors and, if different, in which the Obligors conduct
business and in which they hold the assets, which may adversely affect such Obligors’ abilities to make
payment on a full or timely basis. These insolvency considerations will differ depending on the country
in which each Obligor is located or domiciled. In particular, it should be noted that a number of
continental European jurisdictions operate "debtor-friendly" insolvency regimes which would result in
delays in payments under Collateral Debt Obligations where Obligors thereunder are subject to such
regimes, in the event of their insolvency.
The different insolvency regimes applicable in the different European jurisdictions result in a
corresponding variability of recovery rates for Senior Loans and Mezzanine Obligations entered into by
Obligors in such jurisdictions. No reliable historical data is available in respect of such recovery rates.
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3.17 Lender Liability Considerations; Equitable Subordination
In recent years, a number of judicial decisions in the United States and other jurisdictions have upheld
the right of borrowers to sue lenders or bondholders on the basis of various evolving legal theories
(collectively, termed "lender liability"). Generally, lender liability is founded upon the premise that an
institutional lender or bondholder has violated a duty (whether implied or contractual) of good faith and
fair dealing owed to the borrower or issuer or has assumed a degree of control over the borrower or
issuer resulting in the creation of a fiduciary duty owed to the borrower or issuer or its other creditors or
shareholders. Although it would be a novel application of the lender liability theories, the Issuer may be
subject to allegations of lender liability. However, the Issuer does not intend to engage in, and the
Investment Manager does not intend to act on behalf of the Issuer with respect to any, conduct that
would form the basis for a successful cause of action based upon lender liability.
In addition, under common law principles that in some cases form the basis for lender liability claims, if a
lender or bondholder (a) intentionally takes an action that results in the under-capitalisation of a
borrower to the detriment of other creditors of such borrower, (b) engages in other inequitable conduct
to the detriment of such other creditors, (c) engages in fraud with respect to, or makes
misrepresentations to, such other creditors or (d) uses its influence as a stockholder to dominate or
control a borrower to the detriment of other creditors of such borrower, a court may elect to subordinate
the claim of the offending lender or bondholder to the claims of the disadvantaged creditor or creditors, a
remedy called "equitable subordination". Because of the nature of the Collateral Debt Obligations, the
Issuer may be subject to claims from creditors of an Obligor that Collateral Debt Obligations issued by
such Obligor that are held by the Issuer should be equitably subordinated. However, the Issuer does
not intend to engage in, and the Investment Manager does not intend to act on behalf of the Issuer with
respect to, any conduct that would form the basis for a successful cause of action based upon the
equitable subordination doctrine described above.
The preceding discussion is based upon principles of United States federal and state laws. Insofar as
Collateral Debt Obligations that are obligations of non-United States Obligors are concerned, the laws of
certain foreign jurisdictions may impose liability upon lenders or bondholders under factual
circumstances similar to those described above, with consequences that may or may not be analogous
to those described above under United States federal and state laws.
3.18 Governing law of the Portfolio
The Trust Deed is governed by English law. Some of the Collateral Debt Obligations may be obligations
governed by laws of jurisdiction other than England and which may require different and/or additional
procedures and/or documentation to create or perfect any security interest.
3.19 Changes in Tax Law; No Gross-Up; General
The Issuer and the Investment Manager shall use all commercially reasonable endeavours to ascertain
the withholding tax position on payments of interest on Collateral Debt Obligations (including whether
interest payments will be paid gross or net and if net, whether there is an obligation to gross up) at the
time when they are acquired by the Issuer. If the Obligors of such Collateral Debt Obligations do not
make "gross-up" payments that cover the full amount of any such withholding taxes, the amounts
available to make payments on, or distributions to, the Noteholders would accordingly be reduced.
However, there can be no assurance that, as a result of any change in any applicable law, rule or
regulation or interpretation thereof, the payments on the Collateral Debt Obligations might not in the
future become subject to withholding tax or increased withholding rates in respect of which the relevant
Obligor will not be obliged to gross-up to the Issuer. In such circumstances, the Issuer may be able, but
will not be obliged, to take advantage of (i) a double taxation treaty between The Netherlands and the
jurisdiction from which the relevant payment is made, (ii) the current applicable law in the jurisdiction of
the borrower or (iii) the fact that the Issuer has taken a Participation in such Collateral Debt Obligations
from a Selling Institution which is able to pay interest payable under such Participation gross if paid in
the ordinary course of its business. In the event that the Issuer receives any interest payments on any
Collateral Debt Obligation net of any applicable withholding tax, the Coverage Tests and Collateral
Quality Tests will be determined by reference to such net receipts. Such tax would also reduce the
amounts available to make payments on the Notes. There can be no assurance that remaining
payments on the Collateral Debt Obligations would be sufficient to make timely payments of interest,
principal on the Maturity Date and other amounts payable in respect of the Notes of each Class.
In the event that the aggregate amount of any withholding tax on payments in respect of the Collateral
Debt Obligations during any Due Period is in excess of six per cent. of the aggregate interest payments
due on all Collateral Debt Obligations during such Due Period, a Collateral Tax Event shall be deemed
to have occurred following which the Notes may be redeemed (in whole but not in part) at the option of
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the holders of the Class F Subordinated Notes, acting by Extraordinary Resolution. See Condition
7(b)(i)(B) (Redemption at the Option of the Class F Subordinated Noteholders).
3.20 Offsetting Credit Default Swaps
In order to hedge the credit risks associated with holding Collateral Debt Obligations, the Issuer may
enter into one or more Offsetting Credit Default Swaps. However, in the event of the insolvency of the
Offsetting Credit Default Swap Counterparty, the Issuer will be treated as a general creditor of such
Offsetting Credit Default Swap Counterparty. Consequently, the Issuer will be subject to the credit risk
of the Offsetting Credit Default Swap Counterparty as well as that of the reference obligor. As a result,
concentrations of Offsetting Credit Default Swaps in any one Offsetting Credit Default Swap
Counterparty may subject the Notes to an additional degree of risk with respect to defaults by such
Offsetting Credit Default Swap Counterparty as well as by the reference obligor. Although the
Investment Manager will not perform independent credit analysis of the Offsetting Credit Default Swap
Counterparties on behalf of the Issuer, any such relevant Offsetting Credit Default Counterparty, or an
entity guaranteeing such Offsetting Credit Default Counterparty, individually and in the aggregate, will be
required to satisfy the required ratings set out under "The Portfolio — Management of the Portfolio —
Offsetting Credit Default Swaps". The Rating Agencies may downgrade any of the Notes (other than
the Class F Subordinated Notes (which are not rated)) if an Offsetting Credit Default Swap Counterparty
is not in compliance with the Offsetting Credit Default Swap Counterparty rating requirements set out
herein. No assurance can be given that the Offsetting Credit Default Swap Counterparty will be able to
maintain its ratings. It is expected that the Initial Purchaser and/or one or more of its Affiliates, with
acceptable credit support arrangements, if necessary, may act as Offsetting Credit Default Swap
Counterparties with respect to all or a portion of the Offsetting Credit Default Swaps, which may create
certain conflicts of interest.
3.21 Risk relating to Credit Short Obligations
The Issuer may, subject to certain limitations, create Credit Short Obligations through purchasing credit
protection in relation to reference obligations that it may or may not own. Investing in Credit Short
Obligations involves certain risks as described in the succeeding two paragraphs.
The Issuer may from time to time enter into a credit default swap transaction with a Credit Short
Obligation Counterparty having a stated notional amount under which the Issuer is the purchaser of
credit protection and with a term ending no later than the Stated Maturity; provided that (i) either the
terms thereof provide for the Issuer to be able to elect for either cash or physical settlement on or after
the occurrence of a credit event in relation to the relevant Reference Obligation or, if the Issuer elects for
physical settlement at the date it enters into the Credit Short Obligation, it credits an amount equal to the
notional amount of such Credit Short Obligation to the Collateral Enhancement Account to permit the
purchase of the Deliverable Obligations relating to such Credit Short Obligation if a credit event were to
occur in relation to the Reference Obligation, provided that (a) such amount credited to the Collateral
Enhancement Account shall not be used for any other purpose; (b) on the settlement date of the Credit
Short Obligation no more than such amount equal to the notional amount may be used to purchase the
Deliverable Obligations relating to such Credit Short Obligation; and (c) the Investment Manager (acting
on behalf of the Issuer) will be required under and in accordance with the Investment Management
Agreement to sell any Deliverable Obligations which are delivered in such circumstances if they do not
satisfy the Eligibility Criteria, (ii) the obligor of the Reference Obligation is organised in a Qualifying
Country and (iii) Rating Agency Confirmation has been obtained; provided that if the proposed Credit
Short Obligation is a Form-Approved Credit Short Obligation, Rating Agency Confirmation shall be
deemed to have been satisfied when the Issuer provides a copy of the documentation to the Rating
Agencies (a "Credit Short Obligation").
The Issuer shall not acquire any Credit Short Obligations unless (i) after giving effect to such acquisition,
the Coverage Tests are satisfied and (ii) the Minimum Weighted Average Spread Test, the CDO Monitor
Test and the Moody's Maximum Weighted Average Rating Factor Test are satisfied.
No assurance can be given that the acquisition of such Credit Short Obligations will result in any return
to the Issuer. The periodic premiums payable by the Issuer under Credit Short Obligations will reduce
the amount of proceeds that would otherwise be available to pay interest on the Notes or to invest in
other Collateral Debt Obligations.
The Issuer is required to terminate Credit Short Obligations if there would be insufficient Interest
Proceeds to pay interest on the Class A Notes on any Payment Date and the termination payment
received by the Issuer in connection with such a termination would be sufficient to pay such interest.
This requirement may require the Investment Manager to terminate Credit Short Obligations at a time
that it would not otherwise elect to do so. If (i) any Credit Short Obligation is terminated and the Issuer
is required to make a termination payment; or (ii) any Credit Short Obligation is sold or assigned and the
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Issuer is required to make a payment and the Interest Coverage Tests, Collateral Quality Tests or
Reinvestment Diversion Threshold are not satisfied at the time of such sale, assignment or termination,
Interest Amounts that would otherwise have been paid to the holders of the Class F Subordinated Notes
will be transferred to the Principal Account to be applied as Principal Proceeds.
3.22 Security
Clearing Systems: Collateral Debt Obligations or other assets forming part of the Collateral which are
in the form of securities (if any) will be held by the Custodian on behalf of the Issuer. The Custodian will
hold such assets which can be cleared through Euroclear in an account with Euroclear (the "Euroclear
Account") unless the Trustee otherwise consents and will hold the other securities comprising the
Portfolio which cannot be so cleared (i) through its accounts with Clearstream, Luxembourg and The
Depository Trust Company ("DTC"), as appropriate, and (ii) through its sub-custodians who will in turn
hold such assets which are securities both directly and through any appropriate clearing system. Those
assets held in clearing systems (and not held in the Euroclear Account) will not be held in special
purpose accounts and will be fungible with other securities from the same issue held in the same
accounts on behalf of the other customers of the Custodian or its subcustodian, as the case may be. A
first fixed charge over the Portfolio will be created under English law pursuant to the Trust Deed on the
Issue Date and will take effect as a security interest over the right of the Issuer to require delivery of
equivalent securities from the Custodian in accordance with the terms of the Agency Agreement (as
defined in the Conditions) which may expose the Secured Parties to the insolvency of the Custodian or
its sub-custodian.
The Class P OAT Strips will be held by the Custodian on behalf of the Issuer through the Class P OAT
Custody Account which will be the subject of commercial pledges under Belgian law created by the
Issuer pursuant to the Class P OAT Strips Pledge Agreement on the Issue Date. The effect of these
security interests will be to enable the Custodian, on enforcement, to sell (i) the Class P OAT Strips on
behalf of the Trustee for the benefit of the Class P Combination Noteholders according to their
respective interests (to the extent of the Class P OAT Security Component only).
On the Issue Date, there will be a pledge taken over the Euroclear Account, but the Trustee may (but
need not) at any time require from the Issuer that such security be taken, in which case a pledge will be
granted by the Issuer pursuant to Belgian law over the Euroclear Account (the "Euroclear Pledge
Agreement"). If so granted, the effect of this security interest would be to enable the Custodian, on
enforcement, to sell the securities in the Euroclear Account on behalf of the Trustee. The Euroclear
Pledge Agreement (if entered into) would not entitle the Trustee to require delivery of the relevant
securities from the depositary or depositaries that have physical custody of such securities or allow the
Trustee to dispose of such securities directly.
The Class P OAT Strips will be held by the Custodian through the Class P OAT Custody Account which
will be the subject of a commercial pledge under Belgian law created by the Issuer pursuant to the Class
P OAT Strips Pledge Agreement on the Issue Date. The effect of this security interest will be to enable
the Custodian, on enforcement, to sell the Class P OAT Strips on behalf of the Trustee for the benefit of
the Class P Combination Noteholders (to the extent of the Class P OAT Security Component only).
In any event, the charge created pursuant to the Trust Deed and the Euroclear Pledge Agreement (and,
in the case of the Class P Combination Noteholders, to the extent of the Class P OAT Security
Component, the Class P OAT Strips Pledge Agreement) may be insufficient or ineffective to secure the
Collateral Debt Obligations which are securities for the benefit of Noteholders, particularly in the event of
any insolvency or liquidation of the Custodian or any sub-custodian that has priority over the right of the
Issuer to require delivery of such assets from the Custodian in accordance with the terms of the Agency
Agreement. In addition, custody and clearance risks may be associated with Collateral Debt Obligations
or other assets comprising the Portfolio which are securities that do not clear through DTC, Euroclear or
Clearstream, Luxembourg. There is a risk, for example, that such securities could be counterfeit, or
subject to a defect in title or claims to ownership by other parties.
Any risk of loss arising from any insufficiency or ineffectiveness of the security for the Notes or the
custody and clearance risks which may be associated with assets comprising the Portfolio will be borne
by the Noteholders without recourse to the Issuer, the Trustee, the Investment Manager, the Collateral
Administrator, Managing Directors, the Custodian, the Hedge Counterparties, or any other party.
However, the charge created pursuant to the Trust Deed and the security created by the Euroclear
Pledge Agreement (and, in the case of the Class P Combination Noteholders, to the extent of the Class
P OAT Security Component, the Class P OAT Strips Pledge Agreement) may be insufficient or
ineffective to secure the Collateral Debt Obligations which are securities for the benefit of Noteholders,
particularly in the event of any insolvency or liquidation of the Custodian or any sub-custodian that has
priority over the right of the Issuer to require delivery of such assets from the Custodian in accordance
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with the terms of the Agency Agreement. Any risk of loss arising from any insufficiency or
ineffectiveness of the security for the Notes must be borne by the Noteholders without recourse to the
Issuer, the Trustee, the Initial Purchasers, the Investment Manager, the Collateral Administrator or any
other party.
In addition, custody and clearance risks may be associated with Collateral Debt Obligations or other
assets of the Issuer which are securities that do not clear through Euroclear or Clearstream,
Luxembourg. There is a risk, for example, that such securities could be counterfeit, or subject to a
defect in title or claims to ownership by other parties.
Although the security constituted by the Trust Deed over the Collateral Debt Obligations and Eligible
Investments held from time to time, including the security over the Accounts is expressed to take effect
as fixed security, under English law it is likely to (as a result of the substitutions of Collateral Debt
Obligations contemplated by the Investment Management Agreement and the payments to be made
from the Accounts in accordance with the Terms and Conditions and the Trust Deed) take effect as a
floating charge which, in particular, would rank after a subsequently created fixed security interest.
Although the Issuer has covenanted not to create any such subsequent security interests (other than
permitted under the Trust Deed) without the prior written consent of the Trustee, no assurances can be
made that such subsequent security interests will not arise, whether as a result of the actions of the
Issuer, by operation of law or otherwise.
Pursuant to the Trust Deed, the Issuer and the Investment Manager will covenant that they will notify the
Trustee and (to the extent applicable) each other if the Issuer holds any asset which is a security as
opposed to a loan.
Fixed Security: Although the security constituted by the Trust Deed over the Collateral held from time
to time, including the security over the Accounts, is expressed to take effect as a fixed charge, it may (as
a result of, among other things, the substitutions of Collateral Debt Obligations or Eligible Investments
contemplated by the Investment Management Agreement and the payments to be made from the
Accounts in accordance with the Conditions and the Trust Deed) take effect as a floating charge which,
in particular, would rank after a subsequently created fixed charge. However, the Issuer has covenanted
in the Trust Deed not to create any such subsequent security interests (other than those permitted under
the Trust Deed) without the prior written consent of the Trustee.
3.23 Class P Combination Notes
In the event that the Notes are redeemed pursuant to Condition 7(b) (Redemption at the Option of the
Class F Subordinated Noteholders) each Class P Combination Noteholder will, in respect of the Class P
OAT Security Component, receive either a pro rata distribution in kind of the Class P OAT Strips or a
Class P Combination Noteholder may elect to receive the proceeds of sale of the Class P OAT Strips
realised by the Custodian. Each Class P Combination Noteholder should ensure that it will have the
ability to take delivery of and to hold the Class P OAT Strips.
4. Investment Manager
The Investment Manager is given authority in the Investment Management Agreement to act as
investment manager to the Issuer in respect of the Portfolio pursuant to and in accordance with the
parameters and criteria set out in the Investment Management Agreement. See "The Portfolio" and
"Description of the Investment Management Agreement". The powers and duties of the Investment
Manager in relation to the Portfolio include (amongst other things) on behalf of the Issuer the selection
and purchase of Collateral Debt Obligations and the sale and reinvestment thereof to the extent
permitted in accordance with the provisions of the Investment Management Agreement. See "The
Portfolio" below.
The performance of any investment in the Notes will be dependent in part on the ability of the
Investment Manager to monitor the Portfolio and its selection of Collateral Debt Obligations for sale and
purchase by or on behalf of the Issuer and the performance of the Investment Manager of its obligations
under the Investment Management Agreement. The loss by the Investment Manager of a number of
key individuals could have a material adverse effect on the ability of the Investment Manager to perform
its obligations under the Investment Management Agreement. The Investment Manager may be
removed in certain circumstances as described herein under "Description of the Investment
Management Agreement" including, at the direction of the holders of the Controlling Class acting
independently by Extraordinary Resolution in the event that Patrick Steiner ceases to have primary
responsibility for providing investment management services to the Issuer in relation to the Portfolio, and
is not replaced by either J. Ferguson, A. Gordon or M. Nechamkin or no other replacement investment
manager for the Investment Manager of the skill and experience at least equivalent to that of Patrick
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Steiner, J. Ferguson, A. Gordon or M. Nechamkin in respect of management of the Portfolio has been
appointed.
The Investment Manager has the discretion to determine that amounts of interest payable in respect of
the Class F Subordinated Notes be applied in payment to the Principal Account. The Investment
Manager is under no obligation to exercise this discretion even if failure to do so would result in breach
of any of the Coverage Tests or is not in the interests of the Noteholders.
5. Certain Conflicts of Interest
Various potential and actual conflicts of interest may arise from the overall advisory, investment and
other activities of the Investment Manager, its Affiliates and their respective clients and from the conduct
by the Initial Purchaser and its Affiliates of other transactions with the Issuer, including, without
limitation, acting as counterparty with respect to Asset Swap Agreements or Currency Hedge
Agreements, any Interest Rate Hedge Agreements, Participations, Credit Short Obligations, Offsetting
Credit Default Swaps and Synthetic Securities or as party to or in connection with the investment of any
funds in Eligible Investments. The following briefly summarises some of these conflicts, but is not
intended to be an exhaustive list of all such conflicts.
The Investment Manager and/or its Affiliates and its clients may invest in securities that would be
appropriate as security for the Notes. Such investments may be different from those made on behalf of
the Issuer. The Investment Manager and its Affiliates may also have ongoing relationships with, render
services to or engage in transactions with, companies whose securities are pledged to secure the Notes
and may own equity or debt securities issued by issuers of and other obligors on Collateral Debt
Obligations. As a result, individuals or Affiliates of the Investment Manager may possess information
relating to Obligors under Collateral Debt Obligations which is not known to the individuals at the
Investment Manager responsible for monitoring the Collateral Debt Obligations and performing the other
obligations under the Investment Management Agreement. In addition, Affiliates and clients of the
Investment Manager may invest in loans and securities that are senior to, or have interests different
from or adverse to, the Collateral Debt Obligations that are pledged to secure the Notes. The
Investment Manager and/or its Affiliates may at certain times be simultaneously seeking to purchase or
dispose of investments for its or their own account, for the Issuer, for any similar entity for which it
serves as manager or adviser and for its clients or Affiliates. There is no limitation or restriction on the
Investment Manager or any of its Affiliates with regard to acting as investment manager to other parties
or persons. It is intended, however, that all Collateral Debt Obligations will be purchased and sold by
the Issuer on terms prevailing in the market. Neither the Investment Manager nor any of its Affiliates is
under any obligation to offer investment opportunities of which they have become aware to the Issuer or
to account to the Issuer (or share with the Issuer or inform the Issuer of) any such transaction or any
benefit received by them from any such transaction. Furthermore, the Investment Manager and/or its
Affiliates may make an investment on behalf of any account that they manage or advise without offering
the investment opportunity to or making any investment on behalf of the Issuer. The Investment
Manager and/or its Affiliates have no affirmative obligation to offer any investments to the Issuer or to
inform the Issuer of any investments before offering any investments to other funds or accounts that the
Investment Manager and/or its Affiliates manage or advise. Furthermore, Affiliates of the Investment
Manager may make an investment on their own behalf without offering the investment opportunity to, or
the Investment Manager making any investment on behalf of, the Issuer. Affirmative obligations may
exist or may arise in the future, whereby Affiliates of the Investment Manager are obliged to offer certain
investments to funds or accounts that such Affiliates manage or advise before or without the Investment
Manager offering those investments to the Issuer. Affiliates of the Investment Manager have no
affirmative obligation to offer any investments to the Issuer or to inform the Issuer of any investments
before engaging in any investments for themselves. The Investment Manager will endeavour to resolve
conflicts with respect to investment opportunities in a manner which it deems equitable to the extent
possible under the prevailing facts and circumstances. Although the professional staff of the Investment
Manager will devote as much time to the Issuer as the Investment Manager deems appropriate to
perform its duties in accordance with the Investment Management Agreement, those staff may have
conflicts in allocating their time and services among the Issuer and the Investment Manager’s other
accounts. To the extent the transactions on behalf of more than one client of the Investment Manager
or its affiliates during the same period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price. It is also possible that the
investments made by other funds or advisory clients for which the Investment Manager acts may be pari
passu, senior or junior in ranking to an investment in such issuer's securities by the Issuer. In such
instances, the Investment Manager may take positions, give advice and provide recommendations
contrary to those which may be taken by, given or provided to the Issuer.
The Investment Manager, on behalf of the Issuer, may conduct principal trades with itself and its
Affiliates, subject to applicable law. The Investment Manager may also effect cross client transactions
where the Investment Manager causes a transaction to be effected between the Issuer and another
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account advised and/or managed by any of its Affiliates. Client cross transactions enable the
Investment Manager to purchase or sell a block of securities for the Issuer at a set price and possibly
avoid an unfavourable price movement that may be created through entrance into the market with such
purchase or sell order. In addition, with the prior authorisation of the Issuer, which may be revoked at
any time, the Investment Manager may enter into agency cross transactions where any of its Affiliates
acts as broker with respect to any securities that form part of the Portfolio for the Issuer and for the other
party to the transaction, in which case any such Affiliate will receive commissions from, and have a
potentially conflicting division of loyalties and responsibilities regarding, both parties to the transaction.
In executing such cross transactions for the Issuer and selecting brokers or dealers, the Investment
Manager shall use commercially reasonable efforts to seek the best overall terms available and shall
execute or direct the execution of all such transactions in a manner permitted by law and in a manner
that it believes to be in the best interest of the Issuer. In assessing the best overall terms available for
any Issuer transaction, the Investment Manager will consider all factors it deems relevant including, but
not limited to, the timing for such purchase or sale, the breadth of the market in the Collateral Debt
Obligation, market conditions, the price of the Collateral Debt Obligation, the financial condition and
execution capability of the broker or dealer and the reasonableness of any basis. Pursuant to its
investment determinations for the Issuer, in placing orders with brokers and dealers, the Investment
Manager will use commercially reasonable efforts to obtain the best net price and the most favourable
execution of its orders. If the Investment Manager believes such prices and executions are obtainable
from more than one broker or dealer, it may give consideration to placing portfolio transactions with
those brokers and dealers who also furnish research and other services to the Issuer or the Investment
Manager.
The Investment Manager is wholly owned by Octagon, which is majority owned by its employees and
minority-owned by certain other investors, including affiliates of JPMorgan Partners LLC ("JPMorgan
Partners"), the global private equity investment affiliate and an indirect subsidiary of JPMorgan Chase &
Co. ("JPMorgan Chase"), which affiliates own approximately 18 per cent. of the Investment Manager's
equity. Notwithstanding that the activities of the Investment Manager on behalf of the Issuer are
managed by its two directors independently of and conducted separately from the commercial banking,
investment banking and other activities of JPMorgan Chase and its affiliates, certain conflicts of interest
with respect to the Issuer may arise due to the other activities in which JPMorgan Chase and its
affiliates engage. As part of their regular business, JPMorgan Chase and its affiliates hold, purchase,
sell and trade both for their respective accounts and for the accounts of their respective clients, on a
principal or agency basis, loans, securities and other investments and financial instruments of all types
and provide various financial, investment advisory and other services. A JPMorgan Chase affiliate may
own loans or securities of, act as an underwriter, agent, placement agent or dealer or for or provide
other commercial banking, investment banking, investment advisory or other services to, issuers of
Collateral Debt Obligations and may take positions, give advice and provide recommendations contrary
to those which may be taken by, given or provided to the Issuer and may hold interests potentially
adverse to those of the Issuer. In conducting their activities, JPMorgan Chase and its affiliates will be
acting for their own accounts or for the account of other clients and would be expected not to take into
account the interests of the Issuer and might take actions, including, but not limited to, restructuring an
item of Collateral Debt Obligations, foreclosing on an item of Collateral Debt Obligations, requiring
additional collateral from an Obligor, charging significant fees and interest to an Obligor, placing the
Obligor in bankruptcy, or demanding payment on an item of Collateral Debt Obligations guarantee, that
may be contrary to the interests of an Issuer and could adversely affect the prices of the Collateral Debt
Obligations or the ability of the Issuer to dispose of Collateral Debt Obligations, and otherwise create
conflicts of interest for the Issuer, each of which could have an adverse impact on the Issuer's
performance.
Upon any resignation or removal of the Investment Manager while any of the Notes are Outstanding, the
Issuer shall appoint an institution as replacement Investment Manager, subject to (among other things)
(i) (a) the holders of the Class F Subordinated Notes (including those Class F Subordinated Notes held
by the Investment Manager, one or more of its Affiliates and/or one or more directors thereof) and (b)
the holders of the Controlling Class, in each case, acting independently by Ordinary Resolution, not
disapproving of such institution within 30 days of notice of such appointment. Any Notes held by the
Investment Manager, one or more of its Affiliates and/or any one or more directors thereof will have no
voting rights with respect to any vote (or written direction or consent) in connection with the removal of
the Investment Manager and will be deemed not to be Outstanding in connection with any such vote;
provided, however, that any Notes held by the Investment Manager, one or more of its Affiliates and/or
one or more directors thereof will have voting rights (including in respect of written directions and
consents) with respect to all other matters as to which Noteholders are entitled to vote, including,
without limitation, any vote in connection with the appointment of a replacement Investment Manager
which is not Affiliated with the Investment Manager in accordance with the Investment Management
Agreement. See "Description of the Investment Management Agreement".
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It is expected that the Initial Purchaser or its Affiliates may have, respectively, underwritten, purchased,
syndicated or acted as agent under certain of the Collateral Debt Obligations at original drawdown, will
own equity or other debt of Obligors under Collateral Debt Obligations and will have provided investment
banking services, advisory, banking and other services to Obligors under Collateral Debt Obligations. In
addition, the Investment Manager and/or its Affiliates may have ongoing relationships (including, without
limitation, the provision of investment banking, commercial banking and advisory services or engaging in
securities derivatives transactions) with such Obligors and may own equity or other securities of
Obligors to issuers of Collateral Debt Obligations while also maintaining ongoing relationships
(including, without limitation, the provision of investment banking, commercial banking and advisory
services or engaging in securities derivatives transaction) with purchasers of the Notes. From time to
time, the Investment Manager may, on behalf of the Issuer, purchase or sell Collateral Debt Obligations
through the Initial Purchaser or its Affiliates. The Issuer may invest in the securities of companies
affiliated with the Initial Purchaser, the Investment Manager or their respective Affiliates or companies in
which the Initial Purchaser, the Investment Manager or their respective Affiliates have an equity or
participation interest. In addition, the Initial Purchaser and its Affiliates may invest in debt obligations
that have interests different from or adverse to the debt obligations that constitute Collateral Debt
Obligations. The purchase, holding and sale of such investments by the Issuer may enhance the
profitability of the Initial Purchaser, the Investment Manager’s or their Affiliates’ own investments in such
companies. The Initial Purchaser does not take any responsibility for and has no obligations in respect
of the Issuer. In addition, it is expected that the Initial Purchaser or one or more of its Affiliates thereof
may also act as counterparty with respect to one or more Synthetic Securities or Participations or act as
Derivative Counterparty with respect to one or more Derivative Transactions.
There is no limitation or restriction on the Investment Manager, the Initial Purchaser or any of their
respective Affiliates with regard to acting as Investment Manager (or in a similar role) to other parties or
persons. This and other future activities of the Investment Manager, the Initial Purchaser and/or their
Affiliates may give rise to additional conflicts of interest.
Amounts payable to the Investment Manager and/or any Derivative Counterparty may be payable in
whole or in part on a subordinated or contingent basis or solely or primarily from Interest Proceeds or
Principal Proceeds, in each case as specified in the Conditions of the Notes. In certain circumstances,
such payment arrangements could create a conflict of interest between the Investment Manager and the
holders of one or more Classes of Notes.
6. Investment Company Act
The Issuer has not registered with the United States Securities and Exchange Commission (the "SEC")
as an investment company pursuant to the Investment Company Act, in reliance on an exception under
Section 3(c)(7) of the Investment Company Act for investment companies (a) whose outstanding
securities are beneficially owned only by "qualified purchasers" and certain transferees thereof identified
in Rule 3c-6 under the Investment company Act and (b) which do not make a public offering of their
securities in the United States.
If the SEC or a court of competent jurisdiction were to find that the Issuer is required, but in violation of
the Investment Company Act, had failed, to register as an investment company, possible consequences
include, but are not limited to, the following: (i) the SEC could apply to a district court to enjoin the
violation; (ii) investors in the Issuer could sue the Issuer and recover any damages caused by the
violation; and (iii) any contract to which the Issuer is party that is made in, or whose performance
involves, a violation of the Investment Company Act would be unenforceable by any party to the contract
unless a court were to find that under the circumstances enforcement would produce a more equitable
result than non-enforcement and would not be inconsistent with the purposes of the Investment
Company Act. Should the Issuer be subjected to any or all of the foregoing, the Issuer would be
materially and adversely affected.
7. ERISA Considerations
Under a regulation of the United States Department of Labor, if certain employee benefit plans or other
retirement arrangements subject to the U.S. Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or section 4975 of the United States Internal Revenue Code of 1986, as amended,
(the "Code") or entities whose underlying assets are treated as assets of such plans or arrangements
(collectively, "Plans") invest in the Notes, certain transactions involving the assets of the Issuer could be
considered "prohibited transactions" under section 406 of ERISA or section 4975 of the Code. See
"Certain ERISA Considerations" below.
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8. Forced Transfer
Each initial purchaser of an interest in a Rule 144A Note and each transferee of an interest in a Rule
144A Note will be deemed to represent at the time of purchase that, amongst other things, the
purchaser is both a QIB and a Qualified Purchaser and each initial purchaser of an interest in a Class E
Note, Class F Subordinated Note and Class P Combination Note will be deemed to make
representations in respect of ERISA.
The Trust Deed provides that if, notwithstanding the restrictions on transfer contained therein, the Issuer
determines that (1) any holder of an interest in a Rule 144A Note is a U.S. person as defined under
Regulation S under the Securities Act (a "U.S. Person") and is not both a QIB and a Qualified
Purchaser at the time it acquires an interest in a Rule 144A Note; (2) any holder of a Class E Note,
Class F Subordinated Note or Class P Combination Note has made or is deemed to have made an
ERISA related representation that is false or misleading or if the beneficial ownership of such holder of a
Class E Note, Class F Subordinated Note or Class P Combination Note causes a violation of the 25 per
cent. limitation set forth in such representations or (3) any holder of an interest in an AI Note is not an
institutional "accredited investor" within the meaning of Section 5.01(a), 1, 2, 3, 7 or 8 of Regulation D
under the Securities Act and QPs, knowledgeable employees as defined in Rule 3c-5 of the Investment
Company Act ("Knowledgeable Employees") with respect to the Issuer or a company owned
exclusively by QPs and/or Knowledgeable Employees (any such person, a "Non-Permitted Holder"),
the Issuer shall, promptly after determination that such person is a Non-Permitted Holder by the Issuer
or the Trustee (and notice by the Trustee to the Issuer, if the Trustee makes the discovery), send notice
to such Non-Permitted Holder demanding that such Non-Permitted Holder transfer its interest to a
person that is not a Non-Permitted Holder within 30 days of the date of such notice. If such Non-
Permitted Holder fails to effect the transfer required within such 30-day period, (a) upon direction from
the Issuer or the Investment Manager on its behalf, the Trustee, on behalf of and at the expense of the
Issuer, shall procure that such beneficial interest be transferred in a commercially reasonable sale to a
person or entity that certifies to the Trustee and the Issuer, in connection with such transfer, that such
person or entity either is not a U.S. Person or is a QIB and a Qualified Purchaser or, in the case of a
transfer of the Class E Notes, the Class F Subordinated Notes and the Class P Combination Notes, to a
person with respect to whom the ERISA representation would not be false or misleading or, in the case
of a transfer of the AI Notes, to an institutional "accredited Investor" which is also a QP and (b) pending
such transfer, no further payments will be made in respect of such beneficial interest.
9. German Banking Act and German Investment Act
There is currently legal uncertainty in the Federal Republic of Germany as to whether collateralised debt
obligation ("Collateral Debt Obligation") transactions involve activities requiring a licence under the
German Banking Act (Kreditwesengesetz - KWG) on the basis that they constitute "banking business"
and also as to the treatment of Collateral Debt Obligation transactions under the regulatory regime of
the German Investment Act (Investmentgesetz - InvG). In particular, the German regulator recently
broadly interpreted the banking business of principal broking (Finanzkommissionsgeschäft) under the
German Banking Act as including cases where a German or foreign company invests in financial
instruments for the economic interest of German investors. Should it be determined that activities
involved in Collateral Debt Obligation transactions are subject to licence requirements under the
German Banking Act or that they should be regulated under the German Investment Act, the German
regulator could impose sanctions on certain of the parties involved, including the Issuer, including the
immediate cessation of the business operations and prompt liquidation of the transactions conducted.
10. Regulatory Risk
The Issuer is not conducting banking or financial services activity requiring licenses or consents from
regulators in its jurisdiction of incorporation and seeks to comply with all applicable laws and regulations
applicable to it of which it is aware in all jurisdictions with which the transaction is connected. The
possibility cannot be excluded, however, that either by reason of a change in law or regulation or their
interpretation in any applicable jurisdiction or by reason of law or regulation of which the Issuer is
unaware, certain of its activities or those of its agents in relation to the issue and offering of the Notes
and the acquisition, trading and management of the Portfolio may constitute the provision of cross
border banking or financial services which are regulated in other jurisdictions. Should it be determined
that the Issuer has failed to comply with any applicable licence or consent requirements under any
applicable banking or financial services law or regulation in any jurisdiction in relation to the issue and
offering of the Notes and the acquisition, trading and management of the Portfolio, the regulators in such
jurisdiction could, to the extent they have authority to do so, impose sanctions on certain of the parties
involved, including the Issuer, seeking the immediate cessation of such parties'activities in that
jurisdiction, liquidation of the transactions conducted by it in that jurisdiction or with investors in or from
that jurisdiction and even the imposition of criminal sanctions.
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TERMS AND CONDITIONS OF THE NOTES
The following are the conditions of each of the Class A Notes, the Class B Notes, the Class C Notes, the
Class D Notes, the Class E Notes, the Class F Subordinated Notes and the Class P Combination Notes,
substantially in the form in which they will be endorsed on such Notes if issued in definitive certificated
form, which will be incorporated by reference into the Global Certificates of each Class (other than the
AI Notes) representing the Notes, subject to the provisions of such Global Certificates, some of which
will modify the effect of these Conditions. See "Form of the Notes — Global Certificates —
Amendments to Terms and Conditions".
The issue of €52,500,000 Class A1 Senior Secured Floating Rate Variable Funding Notes due 2024 (the
"Class A1 Notes"), €145,000,000 Class A2 Senior Secured Floating Rate Notes due 2024 (the "Class
A2 Notes"), €49,500,000 Class A3 Senior Secured Floating Rate Notes due 2024 (the "Class A3
Notes" and, together with the Class A1 Notes and the Class A2 Notes, the "Class A Notes"),
€21,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2024 (the "Class B Notes"),
€21,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2024 (the "Class C Notes"),
€19,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2024 (the "Class D Notes"),
€22,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2024 (the "Class E Notes",
and, together with the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, the
"Senior Notes") and, €26,500,000 Class F Subordinated Notes due 2024 (the "Class F Subordinated
Notes"), €15,000,000 Class P Combination Notes due 2024 (the "Class P Combination Notes"),
(collectively, the Senior Notes, the Class F Subordinated Notes and the Combination Notes, together
the "Notes" and each class thereof a "Class") of OCI Euro Fund I B.V. (the "Issuer") were authorised
by resolution of the board of Directors of the Issuer dated 4 July 2007. The Notes are constituted by a
trust deed (together with all other documents or agreements entered into from time to time by the Issuer
in order to grant security over any of the Collateral to the Trustee, the "Trust Deed") comprising the
master trust terms dated 10 July 2007 (the "Master Trust Terms"), as incorporated into and amended
and/or supplemented by an issue deed dated 10 July 2007 in respect of the Notes between (amongst
others) the Issuer and Deutsche Trustee Company Limited, in its capacity as trustee (the "Trustee",
which expression shall include all persons from time to time being the trustee under the Trust Deed) for
the Noteholders (the "Issue Deed").
Each Class P Combination Note consists of two Components: a Component consisting of Class F
Subordinated Notes (the "Class F Subordinated Component" and a Component representing a
secured interest in Class P OAT Strips (the "Class P OAT Security Component"). The Class P OAT
Security Component will be collateralised by Class P OAT Strips acquired by the Issuer and shall
mature in April 2024. Repayment of the original Principal Amount Outstanding of the Class P
Combination Notes is expected to be made out of the payments of interest in respect of and proceeds of
redemption of the Class F Subordinated Notes together with the proceeds of sale or at maturity of Class
P OAT Strips in accordance with the Trust Deed. Save to the extent related to the issuance or transfer
thereof and save to the extent otherwise provided below in respect of the application of amounts
received in respect thereof, the terms and conditions applicable to each Class P Combination Note,
including the terms on which amounts are due and payable in respect thereof, are, in the case of the
Class F Subordinated Component, the terms and conditions of the Class F Subordinated Notes, and in
the case of the Class P OAT Security Component, the terms and conditions relating to the Class P OAT
Strips and described herein and in the Trust Deed. The €15,000,000 principal amount of the Class P
Combination Notes issued on the Issue Date will comprise €15,000,000 principal amount of the Class P
OAT Security Component (in respect of which the OAT Strips have a face amount of €15,000,000 but
with a purchase price of €7,100,000) and €7,900,000 principal amount of Class F Subordinated
Component. The initial principal amount of the Class F Subordinated Component in respect of the
Class P Combination Notes is included in (and is not additional to) the initial principal amount of the
Class F Subordinated Notes.
The principal amount of the Class P Combination Notes, reflects the aggregate of the purchase price of
the Class P OAT Security Component and the purchase price of the Class F Subordinated Component.
The principal amount of, in the case of the Class P Combination Notes, the Class F Subordinated
Component, shall at all times be determined on a pro rata basis by reference to the proportions which
each such Component represented of the relevant Class of Combination Notes.
Each Class of Combination Notes is a separate Class of Notes and the Components thereof are not
separately transferable. A holder may exchange all or a portion of its Combination Notes subject as
provided below for proportional interests in the Classes of Notes to which the Components thereof
correspond or, in the case of the Class P Combination Notes, for proportional interests in the Class F
Subordinated Notes to which the Class F Subordinated Component of the Class P Combination Notes
correspond and either the Class P OAT Strips or the proceeds of sale of the Class P OAT Strips, as
further described in Condition 2(i) (Exchange of Class P Combination Notes).
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46

For the purposes of these Conditions, the Trust Deed and all agreements entered into in connection
therewith, save to the extent such provisions relate to issuance or transfer of such Notes and subject as
provided below: (a) references to the Class F Subordinated Notes shall be deemed to include the
principal amount of the Class F Subordinated Component of which the relevant Class of Combination
Notes are comprised, (b) all references to payments (including redemptions) to be made with respect to,
or to votes or consents to be given by the holders of, the Class F Subordinated Notes shall be deemed
to include references to a proportional amount of such payments, distributions, amounts, votes or
consents, as applicable, which relate to the Class F Subordinated Component of the relevant Class of
Combination Notes, (whether or not explicitly mentioned), and (c) the Notes of each Class which
correspond to Components of which any Combination Notes are comprised shall be deemed to be
issued and Outstanding for the purposes of determining the rights attaching to the Components
corresponding thereto and the Trustee, the Collateral Administrator or the Calculation Agent, to the
extent applicable, shall determine what amounts are payable in respect of, and what rights attach to, the
Components of which each Combination Note is comprised by reference to the Notes corresponding
thereto treated as if (i) they were issued and Outstanding in a principal amount equal to the principal
amount of the Components corresponding thereto, and (ii) amounts had been paid in respect thereof in
accordance with these Conditions. Notwithstanding the above, a principal amount of each Class of
Notes which is equal to the principal amount of the Components of any Combination Notes
corresponding thereto shall not actually be issued and Outstanding to the extent of the principal amount
of each Component corresponding thereto. References herein to the "Notes" or the Notes of any Class
shall be to all Notes, or all Notes of that Class, as applicable, that are issued and Outstanding or
deemed to be issued and Outstanding from time to time.
The entitlement of any Combination Notes to amounts payable pursuant to the Priorities of Payment
shall be determined by reference to the entitlement of the Classes of Notes which correspond to the
Components of which such Combination Notes are comprised pursuant to the Priorities of Payment,
provided however that the terms and conditions of such Classes of Notes shall not apply to the Class P
Combination Notes, to the extent that they relate to the application of amounts payable in respect of
such Classes of Notes towards the payment of principal and interest on the Class P Combination Notes
and all amounts of principal and interest payable in respect of each Class of Combination Notes shall be
applied as provided in Condition 6(g) (Interest on the Combination Notes) and Condition 7(j)
(Redemption of Combination Notes).
These Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed
(which includes the forms of the certificates representing the Notes). The following agreements have
been entered into in relation to the Notes:
(a)
(b)
(c)
an Agency Agreement dated the Issue Date (the "Agency Agreement") between, amongst
others, the Issuer, Deutsche Bank Trust Company Americas, as registrar (the "Registrar",
which term shall include any successor or substitute registrar appointed pursuant to the terms
of the Agency Agreement) and transfer agent (the "Transfer Agent") and Deutsche
International Corporate Services (Ireland) Limited (the "Irish Transfer and Paying Agent"),
Deutsche Bank AG, London Branch, as principal paying agent, account bank, calculation
agent, exchange agent and custodian (respectively, the "Principal Paying Agent", the
"Account Bank", the "Calculation Agent", the "Exchange Agent" and the "Custodian" which
terms shall include any successor or substitute principal paying agent, account bank,
calculation agent, exchange agent or custodian, respectively, appointed pursuant to the terms
of the Agency Agreement) and the Trustee comprising the master agency terms dated 10 July
2007 (the "Master Agency Terms") as incorporated into, and amended and/or supplemented
by, the Issue Deed. References to "Paying Agents" and "Transfer Agent" shall include the
Principal Paying Agent and the Irish Transfer and Paying Agent;
an Investment Management Agreement dated the Issue Date (the "Investment Management
Agreement") between Octagon Credit Investors (UK) Ltd as Investment Manager in respect of
the Portfolio (the "Investment Manager", which term shall include any successor Investment
Manager appointed pursuant to the terms of the Investment Management Agreement), the
Issuer, Deutsche Bank AG, London Branch, as Collateral Administrator (the "Collateral
Administrator" which term shall include any successor Collateral Administrator appointed
pursuant to the terms of the Investment Management Agreement) and the Trustee comprising
the master investment management terms dated 10 July 2007 (the "Master Investment
Management Terms"), as incorporated into, and amended and/or supplemented by, the Issue
Deed and the management criteria annex contained therein (the "Management Criteria
Annex");
any Asset Swap Agreements between the Issuer and each Asset Swap Counterparty entered
into on or about the Issue Date;
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47

(d)
(e)
(f)
(g)
(h)
(i)
(j)
a management agreement between the Issuer and the Managing Directors entered into on or
about the Issue Date (the "Management Agreement");
a subscription agreement dated on or about 10 July 2007 (the "Subscription Agreement")
between Deutsche Bank AG, London (the "Initial Purchaser") and the Issuer under which the
Initial Purchaser agrees to subscribe for the Notes (other than the Class A1 Notes) in its
capacity as Initial Purchaser;
a Class A1 Note Purchase Agreement dated on or about the Issue Date (the "Class A1 Note
Purchase Agreement") between the Issuer, the Trustee, Deutsche Bank Trust Company
Americas (the "Capital Commitment Registrar"), which term shall include any successor
Capital Commitment Registrar appointed pursuant to the terms of the Class A1 Note Purchase
Agreement), Deutsche Bank AG, London Branch (the "Class A1 Note Agent") and Gresham
Receivables (No. 1) Limited (the "Class A1 Noteholder(s)", which term shall include any
person to whom some or all of the rights and obligations under the Class A1 Note Purchase
Agreement are transferred or novated), the Investment Manager and the Collateral
Administrator in relation to the Class A1 Notes;
any Interest Rate Hedge Agreements dated the Issue Date between the Issuer and the Interest
Rate Hedge Counterparty;
any Offsetting Credit Default Swaps between the Issuer and the relevant Offsetting Credit
Default Swap Counterparty entered into on or about the Issue Date;
any Credit Short Obligations between the Issuer and the relevant Credit Short Obligation
Counterparty entered into on or about the Issue Date and any Currency Hedge Agreements
dated the Issue Date between the Issuer and the Currency Hedge Counterparty; and
a Class F Subordinated Note Purchase Agreement dated on or about the Issue Date between
the Issuer and Octagon Credit Investors, LLC as Class F Subordinated Noteholder.
Copies of the Trust Deed, any such Asset Swap Agreement or Interest Rate Hedge Agreements, the
Agency Agreement and the Investment Management Agreement, are available for inspection during
usual business hours at the principal office of the Trustee (presently at Winchester House, 1 Great
Winchester Street, London EC2N 2DB) and at the specified offices of the Transfer Agent for the time
being. The holders of each Class of Notes are entitled to the benefit of, are bound by and are deemed
to have notice of all the provisions of the Trust Deed, and are deemed to have notice of, all the
provisions of the Agency Agreement, the Investment Management Agreement and the Class A1 Note
Purchase Agreement, applicable to them.
References in these Conditions to (i) "principal" shall be deemed to include Redemption Amounts and
all other amounts in the nature of principal payable pursuant to Condition 7 (Redemption) and (ii)
"interest" shall be deemed to include all interest amounts payable pursuant to Condition 6 (Interest) and
all other amounts payable pursuant to Condition 7 (Redemption). All capitalised items which are not
defined in the Conditions shall have the meanings given to them in the Trust Deed.
1. Definitions
"Accounts" means the Euro Principal Account, the Sterling Principal Account, the Dollar Principal
Account, the Euro Interest Account, the Sterling Interest Account, the Dollar Interest Account, the Euro
Unused Proceeds Principal Account, the Euro Unused Proceeds Interest Account, the Euro Payment
Account, the Sterling Payment Account, the Dollar Payment Account, the Synthetic Collateral Account,
the Derivative Termination Account, the Non-Euro Account, the Derivative Counterparty Downgrade
Collateral Account, the Collateral Enhancement Account, the Euro Unfunded Reserve Account, the
Sterling Unfunded Reserve Account, the Dollar Unfunded Reserve Account, the Custody Account, the
Class P OAT Custody Account, Class A1 Collateralising Noteholder Account and the Dutch Account.
"Accrual Period" means, in respect of each Class of Notes, the period from and including the Issue
Date to, but excluding, the first Payment Date and each successive period from and including each
Payment Date to, but excluding, the following Payment Date.
"Administrative Expenses" means amounts due and payable:
(a)
to the Collateral Administrator pursuant to the Investment Management Agreement and to the
Agents pursuant to the Agency Agreement;
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48

(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
to any Rating Agency which may from time to time be requested to assign (i) a rating to any of
the Notes, as the case may be, or (ii) a confidential credit estimate to any of the Collateral Debt
Obligations, for fees and expenses (including surveillance fees) in connection with any such
rating or confidential credit estimate including, in each case, the ongoing monitoring thereof;
to the Managing Directors pursuant to the Management Agreement;
to the Investment Manager pursuant to the Investment Management Agreement (including
indemnities provided for therein), but excluding any Investment Management Fees or any value
added tax payable thereon;
to any other Person in respect of any governmental fee or charge (for the avoidance of doubt
excluding any taxes) or any statutory indemnity;
to the Irish Stock Exchange, or such other stock exchange or exchanges upon which any of the
Notes are listed from time to time;
to the independent accountants, auditors, agents and counsel of the Issuer including amounts
payable to Agents (including the Custodian), the Collateral Administrator and any other Person
in respect of any other fees, expenses or indemnities contemplated in the Terms and
Conditions and in the Transaction Documents or any other documents delivered pursuant to or
in connection with the issue and sale of the Notes or otherwise in respect of fees, expenses or
indemnities properly incurred by the Issuer from time to time including expenses for any loan
pricing services;
to the payment of any amounts due and payable by the Issuer to any Selling Institution
pursuant to any Participation Agreement after the date of entry into any Participation (excluding
any accrued interest paid pursuant to paragraph (9) of Condition 3(j)(ii) (Interest Accounts);
to the payment of any amounts due and payable by the Issuer to any Selling Institution
pursuant to any Collateral Acquisition Agreement after the date of entry into any such Collateral
Acquisition Agreement (excluding any accrued interest paid pursuant to paragraph (9) of
Condition 3(j)(ii) (Interest Accounts);
to the payment of any applicable value added tax required to be paid by the Issuer in respect of
any of the foregoing;
to the payment of any amounts due and payable by the Issuer as a member of a loan syndicate
for costs and expenses incurred on account of any insolvency work-out up to an aggregate
maximum amount paid as Administrative Expenses of €25,000 multiplied by the number of
days from the Issue Date to, but excluding the date of determination, divided by 360;
to the payment of any costs and expenses incurred by the Issuer in connection with the
provision of ongoing reporting information required by any Noteholder in assisting in the
preparation, provision or validation of data for purposes of that Noteholder's tax jurisdiction
from time to time up to an aggregate amount per annum of €17,500;
after payment in full of items (a) to (l), to the payment of amounts due to an agent bank in
relation to the performance of its duties under a Secured Senior Loan, Unsecured Senior Loan,
Mezzanine Obligation, Structured Finance Obligation, Delayed Drawdown Obligation or
Revolving Security but excluding any amounts paid in respect of the acquisition or purchase
price of such Secured Senior Loan, Unsecured Senior Loan, Mezzanine Obligation, Structured
Finance Obligation, Delayed Drawdown Obligation or Revolving Security (excluding any
accrued interest paid pursuant to paragraph (9) of Condition 3(j)(ii) (Interest Accounts); and
to the payment of any indemnities, fees, costs or expenses incurred in relation to the Class A1
Note Purchase Agreement.
"Affiliate" or "Affiliated" means with respect to a Person:
(a)
(b)
any other Person who, directly or indirectly, is in control of, or controlled by, or is under
common control with, such Person; or
any other Person who is a director, officer or employee:
(i)
of such Person;
(ii) of any subsidiary or parent company of such Person; or
49
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(iii)
of any Person described in paragraph (a) above.
For the purposes of this definition, control of a Person shall mean the power, direct or indirect, (A) to
vote more than 50 per cent. of the securities having ordinary voting power for the election of directors of
such Person, or (B) to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agent" means each of the Registrar, the Principal Paying Agent, the Irish Transfer and Paying Agent,
the Transfer Agent, the Exchange Agent, the Calculation Agent, the Account Bank and the Custodian,
and each of their permitted successors or assigns appointed as agents of the Issuer pursuant to the
Agency Agreement and "Agents" shall be construed accordingly.
"Aggregate Collateral Balance" means, as at any Measurement Date, the amount equal to the
aggregate of the following amounts, as at such Measurement Date:
(a)
the Aggregate Principal Balance of all Collateral Debt Obligations, save that:
(i)
(ii)
(iii)
for the purpose of calculating the Aggregate Principal Balance for the purposes of the
Portfolio Profile Tests and the Collateral Quality Tests and in each case where
Defaulted Obligations are specifically excluded, the Principal Balance of each Defaulted
Obligation shall be excluded; save that, for the purpose of the Collateral Quality Test
entitled "CDO Monitor Test" the Principal Balance of Defaulted Obligations shall be
included;
for all purposes other than as set forth in paragraph (i) above, for the purpose of
calculating the Aggregate Principal Balance, the Principal Balance of each Defaulted
Obligation shall be the lower of its S&P Collateral Value and its Moody’s Collateral
Value; and
the Principal Balance of each Current Pay Obligation shall be the lesser of (A) the
Market Value of such Current Pay Obligation and (B) 80 per cent. of the Principal
Balance of such Current Pay Obligation;
(b)
(c)
(d)
the Balances standing to the credit of the Principal Account and the Unused Proceeds Account;
Purchased Accrued Interest to the extent not realised or accounted for in (b) above; and
the Class A1 Available Commitment.
"Aggregate Principal Balance" means the aggregate of the Principal Balances of all the Collateral
Debt Obligations and, when used with respect to some portion of the Collateral Debt Obligations, means
the aggregate of the Principal Balances of such Collateral Debt Obligations, in each case, as at the date
of determination.
"AI Notes" means the €2,600,000 of Class F Subordinated Notes offered in the United States in reliance
on Regulation D under the Securities Act.
"Applicable Exchange Rate" means in respect of Sterling Collateral Debt Obligations or Dollar
Collateral Debt Obligations:
(a)
(b)
to the extent that a Currency Hedge Transaction which is a currency swap transaction,
currency option transaction (which is exercisable and in the money for the Issuer), forward
foreign exchange contract, currency swaption or a cross currency and interest rate swap
transaction is entered into in connection with the acquisition of or holding of a Sterling
Collateral Debt Obligation or Dollar Collateral Debt Obligation, the rate at which the relevant
currency is exchangeable into Euro under such Currency Hedge Transaction in accordance
with the Investment Management Agreement; and
to the extent that paragraph (a) is not applicable, the Spot Rate.
"Applicable Margin" has the meaning given thereto in Condition 6(e)(A)(4) (Floating Rate of Interest).
"Asset Swap Agreement" means each 1992 or 2002 ISDA Master Agreement (Multicurrency-Cross
Border Currency) (or such other ISDA pro forma master agreement as may be published by ISDA from
time to time), together with the schedule and, where the context admits, any confirmations and any
ISDA credit support annexes relating thereto entered into by the Issuer with an Asset Swap
Counterparty in connection with Non-Euro Obligations under which the Issuer swaps cash flows
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50

eceivable on such Non-Euro Obligations for Euro-denominated cash flows from an Asset Swap
Counterparty.
"Asset Swap Counterparty" means each financial institution with which the Issuer enters into an Asset
Swap Agreement or any permitted assignee or successor thereto under the terms of the related Asset
Swap Agreement in each case, which satisfies the applicable Rating Requirement (taking into account
any guarantor thereof).
"Asset Swap Counterparty Principal Exchange Amount" means each interim and final principal
exchange amount scheduled to be paid to the Issuer by an Asset Swap Counterparty pursuant to the
terms of an Asset Swap Transaction, excluding any Scheduled Periodic Asset Swap Counterparty
Payments.
"Asset Swap Counterparty Termination Payment" means any amount payable by an Asset Swap
Counterparty to the Issuer upon termination of an Asset Swap Transaction.
"Asset Swap Issuer Principal Exchange Amount" means each interim and final principal or exchange
amount paid by the Issuer to an Asset Swap Counterparty pursuant to the terms of an Asset Swap
Transaction, excluding any Scheduled Periodic Asset Swap Issuer Payments.
"Asset Swap Issuer Replacement Payment" means any amount payable to an Asset Swap
Counterparty by the Issuer upon entry into of a Replacement Asset Swap Agreement (or transaction
thereunder) which is replacing an Asset Swap Agreement (or transaction thereunder) which was
terminated.
"Asset Swap Issuer Termination Payment" means any amount payable to an Asset Swap
Counterparty by the Issuer upon termination of an Asset Swap Transaction.
"Asset Swap Obligation" means a Non-Euro Obligation and the related Asset Swap Transaction.
"Asset Swap Replacement Receipt" means any amount payable to the Issuer by an Asset Swap
Counterparty upon entry into of a Replacement Asset Swap Agreement (or transaction thereunder)
which is replacing an Asset Swap Agreement (or transaction thereunder) which was terminated.
"Asset Swap Transaction" means, in respect of a Non-Euro Obligation, an asset swap transaction
entered into in respect thereof on the terms described in the Investment Management Agreement.
"Asset Swap Transaction Exchange Rate" means the exchange rate specified in each Asset Swap
Transaction, such exchange rate shall be the prevailing exchange rate at the time the Non Euro
Obligation related to such Asset Swap Transaction is required.
"Assignment" means an interest in a loan acquired directly by way of novation or assignment.
"Authorised Denomination" means, in respect of any Note, the Minimum Denomination and any
denomination equal to one or more multiples of the Authorised Integral Amount in excess of the
Minimum Denomination.
"Authorised Integral Amount" means €1,000, £1,000 or $1,000.
"Authorised Officer" means with respect to the Issuer, any Managing Director of the Issuer or person
who is authorised to act for the Issuer in matters relating to, and binding upon, the Issuer.
"Balance" means on any date, with respect to any cash or Eligible Investments standing to the credit of
an Account, the aggregate of the:
(a)
(b)
(c)
current balance of cash, demand deposits, time deposits, government-guaranteed funds and
other investment funds;
outstanding principal amount of interest-bearing corporate and government obligations and
money market accounts and repurchase obligations; and
purchase price, up to an amount not exceeding the face amount, of non interest-bearing
government and corporate obligations, commercial paper and certificates of deposit,
provided that in the event that a default as to payment of principal and/or interest has occurred and is
continuing (disregarding any grace periods provided for pursuant to the terms thereof) in respect of any
Eligible Investment or any obligation of the obligor thereunder which is senior or equal in right of
payment to such Eligible Investment, such Eligible Investment shall have a value equal to the lesser of
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51

its S&P Collateral Value and its Moody’s Collateral Value (determined as if such Eligible Investment
were a Collateral Debt Obligation).
"Break Cost" means:
(i)
in respect of a Class A1 Noteholder and the repayment of Class A1 Drawings on a Business
Day other than the Business Day following the last day of the related Interest Accrual Period an
amount (calculated by the Class A1 Note Agent) by which:
(a)
the interest which that Class A1 Noteholder should have received for the period from,
but excluding the date of repayment or date of the cancelled Class A1 Drawing (as
applicable) to the last day of the current or proposed (as applicable) Interest Accrual
Period in respect of Class A1 Notes, had the principal amount been paid on the
Business Day following the last day of that Interest Accrual Period;
exceeds:
(b)
the amount which that Class A1 Noteholder would be able to obtain by placing an
amount equal to the principal amount received by it or not advanced by it (as applicable)
on deposit with a lending bank in the Euro market for a period starting on the Business
Day following receipt or recovery or date of the cancelled Class A1 Drawing (as
applicable) and ending on the last day of the then current or proposed (as applicable)
Interest Accrual Period.
The Break Cost attributable to each Class A1 Noteholder will be payable on the date upon which the
relevant Class A1 Drawing is repaid or on the date that the Class A1 Drawing did not occur, as
applicable.
"Business Day" means (save to the extent otherwise defined) a day:
(a)
(b)
(c)
on which the TARGET System is open for settlement of payments in Euro;
on which commercial banks and foreign exchange markets settle payments in London , New
York City (other than a Saturday or a Sunday); and
for the purposes of the definition of Presentation Date, in relation to any place, on which
commercial banks and foreign exchange markets settle payments in that place.
"CCC Market Value" means, in respect of any CCC Obligation, the lower of:
(a)
(b)
its Market Value; and
the value that is the average of 100 per cent. and such CCC Obligation’s Moody’s Recovery
Rate.
"CCC Obligations" means the sum of (a) all Collateral Debt Obligations (other than Defaulted
Obligations) which have Moody’s Ratings of "Caa1" or less or in case of estimated ratings, a rating
factor exceeding 4080 and (b) all Collateral Debt Obligations (other than Defaulted Obligations) which
have S&P Ratings of "CCC+" or less, without double counting in the event that a Collateral Debt
Obligation is rated "Caa1" or less by Moody’s and "CCC+" or less by S&P.
"Cash Settlement Amount" means in respect of any Offsetting Credit Default Swap or Credit Short
Obligation (as the case may be) the amount payable by the Offsetting Credit Default Swap Counterparty
or Credit Short Obligation Counterparty (as the case may be) (each as credit protection seller) to the
Issuer (in each case, as the credit protection buyer) thereunder in accordance with the terms thereof.
"Class of Notes" means each of the following (including each Class of Combination Notes to the extent
that each such Class of Combination Notes includes Components corresponding to any such Class of
Notes but, for the avoidance of doubt, not the Class P Combination Notes as a separate class) being:
(a)
(b)
(c)
(d)
the Class A1 Notes;
the Class A2 Notes;
the Class A3 Notes;
the Class B Notes;
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52

(e)
(f)
(g)
(h)
the Class C Notes;
the Class D Notes;
the Class E Notes; and
the Class F Subordinated Notes,
and "Class of Noteholders" and "Class" shall be construed accordingly.
"Class A1/A2 Note Redemption Method" means the application of Interest Proceeds and Principal
Proceeds in the following order of priority:
(a)
on a Pro Rata basis (subject to and in accordance with the provisions of Condition 3(c)(iv) (FX
Conversion)):
(i) (A) firstly to repayment on a Pro Rata basis of each Class A1 Drawing;
(B)
(C)
secondly to the reduction of the Class A1 Allocated Amount by crediting to the
Unfunded Reserve Accounts and the Synthetic Collateral Account on a Pro Rata
basis in an amount equal to the aggregate of (a) the amount by which the
aggregate of the Unfunded Amounts of the Issuer under Delayed Drawdown
Obligations and Revolving Securities exceed the principal amount standing to the
credit of the Unfunded Reserve Account and (b) the amount by which the
aggregate of the unfunded liabilities of the Issuer under Synthetic Security
exceed the principal amount standing to the credit of the Synthetic Collateral
Account;
thirdly to the credit of the Principal Account in an amount sufficient to reduce the
Class A1 Commitment to zero;
(ii)
to redemption of the Class A2 Notes (the "Class A1/A2 Pro Rata Application").
Provided that if there is a Sterling Funding Mismatch and/or a Dollar Funding Mismatch and the
amount available to make the payments referred to in paragraphs (i)(A) and (B) above is less
than the amount that would be needed to reduce the Sterling Funding Mismatch or the Dollar
Funding Mismatch as applicable to zero, then, Euro Interest Proceeds, Sterling Interest
Proceeds and Dollar Interest Proceeds and Euro Principal Proceeds, Sterling Principal
Proceeds and Dollar Principal Proceeds, shall instead be applied subject to and in accordance
with the provisions of Condition 3(c)(iv) (FX Conversion) and the Pari Passu Provisions up to
an amount equal to the remaining Sterling Funding Mismatch and/or the remaining Dollar
Funding Mismatch, as applicable in the following order:
(i)
(ii)
firstly to repayment on a Pro Rata basis of each Class A1 Drawing (with the amount of
any Dollar Denominated Drawings or any Sterling Denominated Drawings being
converted into Euro at the Spot Rate);
secondly to the reduction of the Class A1 Allocated Amount by crediting to the
Unfunded Reserve Account and the Synthetic Collateral Account on a Pro Rata basis in
an amount equal to the aggregate of (a) the amount by which the aggregate of the
Unfunded Amounts of the Issuer under Delayed Drawdown Obligations and Revolving
Securities exceed the principal amount standing to the credit of the Unfunded Reserve
Account and (b) the amount by which the aggregate of the unfunded liabilities of the
Issuer under Synthetic Security exceed the principal amount standing to the credit of the
Synthetic Collateral Account;
to the extent necessary to reduce the Sterling Funding Mismatch and/or the Dollar Funding
Mismatch to zero; and
(b)
in accordance with the Class A1/A2 Pro Rata Application.
"Class A1/A2 Pro Rata Application" has the meaning ascribed to it in the definition of Class A1/A2
Note Redemption Method.
"Class A Coverage Tests" means the Class A Interest Coverage Test and the Class A Par Value Test.
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53

"Class A Interest Coverage Ratio" means, as of any Measurement Date, the ratio (expressed as a
percentage) obtained by dividing the Interest Coverage Amount by the sum of the scheduled interest
payments due on the Class A Notes.
"Class A Interest Coverage Test" means the test which will be satisfied as of any Measurement Date
if, on such Measurement Date, the Class A Interest Coverage Ratio is at least equal to the percentage
specified in the definition of "Coverage Test".
"Class A Noteholders" means the holders of any Class A Notes from time to time.
"Class A Par Value Ratio" means, as of any Measurement Date, the ratio (expressed as a percentage)
obtained by dividing (a) the amount equal to the Aggregate Collateral Balance less the Par Value Test
Excess Adjustment Amount by (b) the Principal Amount Outstanding of the Class A Notes and the Class
A1 Available Commitment.
"Class A Par Value Test" means the test which will be satisfied as of any Measurement Date if, on
such Measurement Date, the Class A Par Value Ratio is at least equal to the percentage specified in the
definition of "Coverage Test".
"Class A1 Aggregate Interest Amount" means the Class A1 Interest Amount plus any Break Cost and
any Class A1 Commitment Fee.
"Class A1 Allocated Amount" means, at any time, the aggregate principal amount of the Class A1
Commitment allocated by the Investment Manager on behalf of the Issuer as a reserve to fund the
payment of Unfunded Amounts in respect of Revolving Securities and Delayed Drawdown Obligations
and unfunded liabilities of the Issuer under Synthetic Securities which shall be such amount by which
the aggregate of such Unfunded Amounts and unfunded liabilities exceeds the sum of (i) the balance
standing to the credit of the Unfunded Reserve Accounts and (ii) the principal amount standing to the
credit of the Synthetic Collateral Account.
"Class A1 Available Commitment" means at any time the Class A1 Commitment minus the aggregate
of the Class A1 Drawn Amount and the Class A1 Allocated Amount at that time minus the aggregate of
all Class A1 Drawings redeemed on or before that date in accordance with Condition 7(c) (Redemption
upon Breach of Coverage Tests) and Condition 7(f) (Redemption upon Effective Date Rating Event), in
each case converted into Euro at the Initial Rate of Exchange. For the avoidance of doubt, any
repayments in accordance with Condition 7(c) (Redemption upon Breach of Coverage Tests), Condition
7(d) (Special Redemption), and Condition 7(f) (Redemption upon Effective Date Rating Events) shall not
increase the Class A1 Available Commitment.
"Class A1 Available Commitment Period" means the period beginning on and including the Issue
Date to and including the Class A1 Available Commitment Termination Date.
"Class A1 Available Commitment Termination Date" means the earliest of (i) the end of the
Reinvestment Period, (ii) the date on which an Enforcement Event occurs, (iii) the date on which the
Class A Notes are redeemed in full and (iv) the sale and disposition of all Collateral.
"Class A1 Collateralising Noteholder Account" means the account established on the books of the
Custodian in accordance with the provisions of the Agency Agreement into which all Class A1
Noteholder Collateral and all Class A1 Downgrade Draws will be deposited.
"Class A1 Commitment" means the obligation of the Class A1 Noteholders at any time to make Class
A1 Drawings in an aggregate amount up to but not exceeding €52,500,000 as reduced by paragraph (C)
of the Class A1/A2 Pro Rata Application.
"Class A1 Commitment Fee" has the meaning given thereto in Condition 6(q) (Class A1 Commitment
Fee).
"Class A1 Day Count Fraction" means the day count fraction based on the actual number of days on
which the relevant Class A1 Drawing remains outstanding within the relevant Class A1 Note Interest
Period (and with respect to the first payment of interest on any Class A1 Drawing made between
Payment Dates only, the actual number of days elapsed from (and including) the date of such Class A1
Drawing to (but excluding) the next following Payment Date) divided by (i) 360 days in the case of each
Euro Denominated Drawing and (ii) 365 days in the case of each Sterling Denominated Drawing or
Dollar Denominated Drawing, or in each case otherwise as market convention dictates, as determined
by the Class A1 Note Agent.
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"Class A1 Dollar Rate of Interest" has the meaning ascribed to it in Condition 6(k) (Interest on the
Class A1 Notes).
"Class A1 Downgrade Draw" has the meaning ascribed to it in the Class A1 Note Purchase
Agreement.
"Class A1 Drawing" means each Euro Denominated Drawing, Sterling Denominated Drawing or Dollar
Denominated Drawing made by the Class A1 Noteholders in respect of the Class A1 Notes to the Issuer
(which, for the avoidance of doubt, shall not include Class A1 Downgrade Draws but which shall include
amounts in respect of the Class A1 Notes withdrawn from the Class A1 Collateralising Noteholder
Account pursuant to Condition 3(j)(ix)(A) (Class A1 Collateralising Noteholder Account)).
"Class A1 Drawing Date" means the date a Class A1 Drawing is required to be made by a Class A1
Noteholder to the Issuer pursuant to a Class A1 Drawing Request.
"Class A1 Drawing Repayment Date" has the meaning given thereto in Condition 7(e) (Class A1
Repayments).
"Class A1 Drawing Request" means a notification by the Issuer or the Investment Manager to the
Class A1 Noteholder Agent and each Class A1 Noteholder (with a copy to the Collateral Administrator
and the Trustee) requesting a Class A1 Drawing from a Class A1 Noteholder.
"Class A1 Drawn Amount" means, at any time, in respect of the Class A1 Notes, the aggregate of
Class A1 Drawings in respect of Class A1 Notes which have not been repaid, prepaid or redeemed at
such time.
"Class A1 EURIBOR" means in relation to any Euro Denominated Drawing or unpaid sum denominated
in Euros under the Trust Deed and the Class A1 Note Purchase Agreement:
(a)
(b)
the percentage rate per annum of the offered quotation for deposits in Euros determined by the
Banking Federation of the European Union for a period equal or comparable to the required
period which appears on the Reuters Screen EURIBOR01 Page at or about 11.00 a.m.
(Brussels time) on the applicable Quotation Date (and, in respect of any Euro Denominated
Drawing made between Payment Dates, an appropriate straight line interpolated rate for the
period up to (but excluding) the next following Payment Date); or
if the rate cannot be determined under paragraph (a) above, the arithmetic mean (rounded
upwards to the nearest four decimal places with the midpoint rounded upwards) as supplied to
the Class A1 Note Agent at its request quoted by the Class A1 Reference Banks to prime
banks in the European interbank market, at or about 11.00 a.m. (Brussels time) on the
Quotation Date for the offering of deposits in Euro (for the avoidance of doubt, being, in respect
of any Euro Denominated Drawing made between Payment Dates, an appropriate straight line
interpolated rate for the period up to (but excluding) the next following Payment Date) and for a
period comparable to the required period for that Drawing or unpaid sum in Euro and for the
purposes of this definition "required period" means the applicable Class A1 Note Interest
Period for a Euro Denominated Drawing or the period in respect of which Class A1 EURIBOR
falls to be determined in relation to any unpaid sum denominated in Euro; and "Reuters
Screen EURIBOR01 Page" means the display designated as EURIBOR01 Page on the
Reuters service (or such other pages as may replace EURIBOR01 Page on that service or
such other service as may be nominated) as the information vendor for the purposes of
displaying rates for deposits in Euro).
"Class A1 Euro Rate of Interest" has the meaning ascribed to it in Condition 6(k) (Interest on the Class
A1 Notes).
"Class A1 Interest Amount" shall have the meaning given thereto in Condition 6(k) (Interest on the
Class A1 Notes).
"Class A1 LIBOR" means, in relation to any Sterling Denominated Drawing or unpaid sum denominated
in Sterling under the Trust Deed and the Class A1 Note Purchase Agreement:
(a)
(b)
GBP LIBOR (for the avoidance of doubt, being, in respect of any Sterling Denominated
Drawing made between Payment Dates, an appropriate straight line interpolated rate for the
period up to (but excluding) the next following Payment Date); or
(if no GBP LIBOR is available for Sterling for the required period) the arithmetic mean of the
rates (rounded upwards to four decimal places with the mid point rounded upwards) as
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supplied to the Class A1 Note Agent at its request quoted by the Class A1 Reference Banks to
leading banks in the London interbank market, at or about 11.00 a.m. (London time) on the
Quotation Date for the offering of deposits in Sterling (for the avoidance of doubt, being, in
respect of any Sterling Denominated Drawing made between Payment Dates, an appropriate
straight line interpolated rate for the period up to (but excluding) the next following Payment
Date) and for a period comparable to the required period for that Drawing or unpaid sum in
Sterling and for the purposes of this definition "required period" means the applicable Class
A1 Note Interest Period for a Sterling Denominated Drawing or the period in respect of which
Class A1 LIBOR falls to be determined in relation to any unpaid sum denominated in Sterling.
"Class A1 Note Agent" means the person (if any) acting as agent under the Class A1 Note Purchase
Agreement.
"Class A1 Note Commitment Accrual Period" has the meaning specified in Condition 6(a) (Payment
Dates).
"Class A1 Note Interest Period" means the period commencing on (and including) the Issue Date of
the Class A1 Note to but excluding the next Payment Date (and thereafter from and including one
Payment Date to and excluding the next Payment Date) (or such other period as may be determined in
accordance with the Class A1 Note Purchase Agreement and the definition of "Interest Accrual Period")
and in respect of the last Class A1 Note Interest Period, the period commencing on (and including) the
Payment Date that immediately precedes the Repayment Date to but excluding the Repayment Date.
"Class A1 Note Purchase Agreement" means the Note Purchase Agreement dated 10 July 2007
between, inter alia, the Issuer, the Trustee, the Capital Commitment Registrar and Gresham
Receivables (No. 1) Limited as the initial Class A1 Noteholder.
"Class A1 Noteholder Collateral" means cash or collateral in the form of Eligible Investments, credited
to the Class A1 Collateralising Noteholder Account pursuant to the terms of the Class A1 Note Purchase
Agreement.
"Class A1 Noteholders" means the holders of any Class A1 Notes from time to time.
"Class A1 Reference Bank" means the principal London office of each of four major banks in the
London interbank market as may be appointed by the Class A1 Note Agent after consultation with the
Issuer or the Investment Manager on behalf of the Issuer and with the consent of the Class A1
Noteholders and the Investment Manager.
"Class A1 Regulation S Definitive Certificate" means the Class A1 Notes initially sold to persons who
are not U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act will be
issued in the form of definitive physical certificates in fully registered form only.
"Class A1 Rule 144A Definitive Certificate" means the Class A1 Notes initially sold or transferred in
the United States to U.S. persons in reliance on Rule 144A of the Securities Act will be issued in the
form of definitive physical certificates in fully registered form only.
"Class A1 Sterling Rate of Interest" has the meaning ascribed to it in Condition 6(k) (Interest on the
Class A1 Notes).
"Class A1 USD LIBOR" means, in relation to any Dollar Denominated Drawing or unpaid sum
denominated in Dollars under the Trust Deed and the Class A1 Note Purchase Agreement:
(a)
(b)
USD LIBOR (for the avoidance of doubt, being, in respect of any Dollar Denominated Drawing
made between Payment Dates, an appropriate straight line interpolated rate for the period up
to (but excluding) the next following Payment Date); or
(if no USD LIBOR is available for Dollars for the required period) the arithmetic mean of the
rates (rounded upwards to four decimal places with the mid point rounded upwards) as
supplied to the Class A1 Note Agent at its request quoted by the Class A1 Reference Banks to
leading banks in the London interbank market, at or about 11.00 a.m. (London time) on the
Quotation Date for the offering of deposits in Dollars (for the avoidance of doubt, being, in
respect of any Dollar Denominated Drawing made between Payment Dates, an appropriate
straight line interpolated rate for the period up to (but excluding) the next following Payment
Date) and for a period comparable to the required period for that Drawing or unpaid sum in
Dollars and for the purposes of this definition "required period" means the applicable Class A1
Note Interest Period for a Dollar Denominated Drawing or the period in respect of which Class
A1 LIBOR falls to be determined in relation to any unpaid sum denominated in Dollars.
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"Class A2 Floating Rate of Interest" has the meaning given to it thereto in Condition 6(e)(A) (Floating
Rate of Interest).
"Class A3 Floating Rate of Interest" has the meaning given to it thereto in Condition 6(e)(A) (Floating
Rate of Interest).
"Class B Coverage Tests" means the Class B Interest Coverage Test and the Class B Par Value Test.
"Class B Floating Rate of Interest" has the meaning given to it thereto in Condition 6(e)(A) (Floating
Rate of Interest).
"Class B Interest Coverage Ratio" means, as of any Measurement Date, the ratio (expressed as a
percentage) obtained by dividing the Interest Coverage Amount by the sum of the scheduled interest
payments due on the Class A Notes and the scheduled Class A1 Commitment Fees due on the Class
A1 Notes and the Class B Notes.
"Class B Interest Coverage Test" means the test which will be satisfied as of any Measurement Date
if, on such Measurement Date, the Class B Interest Coverage Ratio is at least equal to the percentage
specified in the definition of "Coverage Test".
"Class B Par Value Ratio" means, as of any Measurement Date, the ratio (expressed as a percentage)
obtained by dividing (a) the amount equal to the Aggregate Collateral Balance less the Par Value Test
Excess Adjustment Amount by (b) the sum of the Principal Amount Outstanding of each of the Class A
Notes and the Class B Notes and the Class A1 Available Commitment.
"Class B Par Value Test" means the test which will be satisfied as of any Measurement Date if, on
such Measurement Date, the Class B Par Value Ratio is at least equal to the percentage specified in the
definition of "Coverage Test".
"Class B Noteholders" means the holders of any Class B Notes from time to time.
"Class C Coverage Tests" means the Class C Interest Coverage Test and the Class C Par Value Test.
"Class C Interest Coverage Ratio" means, as of any Measurement Date, the ratio (expressed as a
percentage) obtained by dividing the Interest Coverage Amount by the sum of the scheduled interest
payments due on the Class A Notes and the scheduled Class A1 Commitment Fees due on the Class
A1 Notes, the Class B Notes and the Class C Notes.
"Class C Interest Coverage Test" means the test which will be satisfied as of any Measurement Date
if, on such Measurement Date, the Class C Interest Coverage Ratio is at least equal to the percentage
specified in the definition of "Coverage Test".
"Class C Noteholders" means the holders of any Class C Notes from time to time.
"Class C Par Value Ratio" means, as of any Measurement Date, the ratio (expressed as a percentage)
obtained by dividing (a) the amount equal to the Aggregate Collateral Balance less the Par Value Test
Excess Adjustment Amount by (b) the sum of the Principal Amount Outstanding of each of the Class A
Notes, the Class B Notes and the Class C Notes and the Class A1 Available Commitment.
"Class C Par Value Test" means the test which will be satisfied as of any Measurement Date if, on
such Measurement Date, the Class C Par Value Ratio is at least equal to the percentage specified in the
definition of "Coverage Test".
"Class D Coverage Tests" means the Class D Interest Coverage Test and the Class D Par Value Test.
"Class D Floating Rate of Interest" has the meaning given to it thereto in Condition 6(e)(A) (Floating
Rate of Interest).
"Class D Interest Coverage Ratio" means, as of any Measurement Date, the ratio (expressed as a
percentage) obtained by dividing the Interest Coverage Amount by the sum of the scheduled interest
payments due on the Class A Notes and the scheduled Class A1 Commitment Fees due on the Class
A1 Notes, the Class B Notes, the Class C Notes and the Class D Notes.
"Class D Interest Coverage Test" means the test which will be satisfied as of any Measurement Date
if, on such Measurement Date, the Class D Interest Coverage Ratio is at least equal to the percentage
specified in the definition of "Coverage Test".
"Class D Noteholders" means the holders of any Class D Notes from time to time.
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"Class D Par Value Ratio" means, as of any Measurement Date, the ratio (expressed as a percentage)
obtained by dividing (a) the amount equal to the Aggregate Collateral Balance less the Par Value Test
Excess Adjustment Amount by (b) the sum of the Principal Amount Outstanding of each of the Class A
Notes, the Class B Notes, the Class C Notes and the Class D Notes and the Class A1 Available
Commitment.
"Class D Par Value Test" means the test which will be satisfied as of any Measurement Date if, on
such Measurement Date, the Class D Par Value Ratio is at least equal to the percentage specified in the
definition of "Coverage Test".
"Class E Coverage Tests" means the Class E Interest Coverage Test and the Class E Par Value Test.
"Class E Floating Rate of Interest" has the meaning given to it thereto in Condition 6(e)(A) (Floating
Rate of Interest).
"Class E Interest Coverage Ratio" means, as of any Measurement Date, the ratio (expressed as a
percentage) obtained by dividing the Interest Coverage Amount by the sum of the scheduled interest
payments due on the Class A Notes and the scheduled Class A1 Commitment Fees due on the Class
A1 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes.
"Class E Interest Coverage Test" means the test which will be satisfied as of any Measurement Date
if, on such Measurement Date, the Class E Interest Coverage Ratio is at least equal to the percentage
specified in the definition of "Coverage Test".
"Class E Noteholders" means the holders of any Class E Notes from time to time.
"Class E Par Value Ratio" means, as of any Measurement Date, the ratio (expressed as a percentage)
obtained by dividing (a) the amount equal to the Aggregate Collateral Balance less the Par Value Test
Excess Adjustment Amount by (b) the sum of the Principal Amount Outstanding of each of the Class A
Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and the Class
A1 Available Commitment.
"Class E Par Value Test" means the test which will be satisfied as of any Measurement Date if, on such
Measurement Date, the Class E Par Value Ratio is at least equal to the percentage specified in the
definition of "Coverage Test".
"Class F Subordinated Component" means, in respect of the Class P Combination Notes, a
component thereof, the terms and conditions applicable to which (save for those relating to issuance or
transfer thereof) are the same as €7,900,000 principal amount of Class F Subordinated Notes in respect
of each €15,000,000 in original principal amount of Class P Combination Notes.
"Class F Subordinated Noteholder Report" means the report defined as such in the Investment
Management Agreement which is prepared by the Collateral Administrator (in consultation with the
Investment Manager) on behalf of the Issuer, and delivered to the Issuer, the Trustee and the
Investment Manager and, upon request therefor in accordance with Condition 4(f) (Information
Regarding the Collateral), to any Class F Subordinated Noteholder and which shall include information
regarding the status of certain of the Collateral pursuant to the Investment Management Agreement.
"Class F Subordinated Noteholders" means the holders of any Class F Subordinated Notes from time
to time.
"Class F Subordinated Note Purchase Agreement" means the Class F subordinated note purchase
agreement dated 10 July 2007 between the Issuer and Octagon Credit Investors, LLC as Class F
Subordinated Noteholder of the AI Notes.
"Class P Combination Noteholders" means any holders of the Class P Combination Notes from time
to time.
"Class P Combination Notes Coupon Interest" has the meaning ascribed to it in Condition 6(g)
(Interest on the Combination Notes).
"Class P OAT Custody Account" means the custody account or accounts (including any cash account
relating to any securities account) established on the books of the Custodian in accordance with the
provisions of the Agency Agreement and to which the Class P OAT Strips will be credited.
"Class P OAT Relevant Sale Portion" means in relation to a Payment Date, that portion of the Class P
OAT Strips to be sold on that Payment Date by the Custodian acting on behalf of the Issuer as
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determined by the Collateral Administrator in consultation with the Investment Manager and the
Custodian and notified to the Issuer, the Investment Manager, the Trustee and the Custodian on the
related Determination Date in accordance with the Class P OAT Sale Formula or such lower amount as
communicated in writing by 100% of the Class P Combination Noteholders to the Collateral
Administrator not later than 10 Business Days before the relevant Payment Date.
"Class P OAT Sale Formula" means, the formula according to which the Class P OAT Strips which
collateralise the Class P OAT Security Component may be sold as set out below:
= −
Where: X = the principal amount of the Class P OAT Strips to be sold on
the relevant date;
E =
P =
OAT Market Value =
the distribution received on the Class F Subordinated
Component of the Class P Combination Notes on the relevant
Payment Date;
the OAT Market Value of the Class P OAT Strip on the relevant
date; and
the best bid price from three market makers in the OAT market;
provided that, when P is greater than or equal to 100.00 per cent., X will be equal to the principal
amount of the Class P OAT Strip available.
"Class P OAT Security Component" means in respect of the Class P Combination Notes, a
component thereof, that represents an interest in the Class P OAT Strips.
"Class P OAT Strip Collateral" means the security granted by the Issuer to the Trustee pursuant to the
Trust Deed and the Class P OAT Strips Pledge Agreement.
"Class P OAT Strips" means the €15,000,000 principal amount of 17 year Obligation Assimilable du
Trésor securities issued by the French treasury which have been stripped by Spécialities en Valeurs du
Trésor into zero coupon bonds.
"Class P OAT Strips Pledge Agreement" means the Belgian law pledge agreement entered into
between the Issuer and the Trustee on the Issue Date pursuant to the terms of the Trust Deed in
respect of the Class P OAT Strips.
"Class P OAT Strips Sale Proceeds" means, in relation to a Payment Date, the net proceeds of sale
received by the Custodian in relation to the sale by the Custodian, acting on behalf of the Issuer
pursuant to the terms of the Agency Agreement, of the Class P OAT Relevant Sale Portion of the Class
P OAT Strips on such Payment Date.
"Class P Residual Interest" has the meaning ascribed to it in Condition 6(g) (Interest on the
Combination Notes).
"Clearing Systems" has the meaning given thereto in the Trust Deed.
"Code" means United States Internal Revenue Code of 1986.
"Collateral" means the property, assets and rights described in Condition 4(a) (Security) which are
charged and/or assigned to the Trustee or held on trust from time to time for the benefit of the Secured
Parties pursuant to the Trust Deed and the Euroclear Pledge Agreement and when used in relation to
the Class P Combination Notes shall include the Class P OAT Strips which are charged and assigned to
the Trustee for the benefit of the Class P Combination Notes.
"Collateral Acquisition Agreements" means each of the agreements entered into by the Issuer in
relation to the purchase by the Issuer of Senior Loans, Mezzanine Obligations, Structured Finance
Obligations and other Collateral Debt Obligations from time to time.
"Collateral Debt Obligation" means any debt obligation or debt security purchased or acquired by or
on behalf of the Issuer from time to time (or, if the context so requires, to be purchased by or on behalf
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of the Issuer) each of which satisfies the Eligibility Criteria (in the case of Synthetic Securities, to the
extent required to do so). References to Collateral Debt Obligations shall not include Collateral
Enhancement Obligations, Eligible Investments or Exchanged Equity Securities. Obligations which are
to constitute Collateral Debt Obligations in respect of which the Issuer has entered into a binding
commitment to purchase but which have not yet settled shall be included as Collateral Debt Obligations
in the calculation of the Portfolio Profile Tests and the Collateral Quality Tests at any time as if such
purchase had been completed. For the avoidance of doubt, the failure of any obligation to satisfy the
Eligibility Criteria at any time after the Issuer or the Investment Manager on behalf of the Issuer has
entered into a binding agreement to purchase it, shall not cause such obligation to cease to constitute a
Collateral Debt Obligation.
"Collateral Enhancement Account" means an interest-bearing account in the name of the Issuer, held
with the Account Bank, the amounts standing to the credit of which from time to time may be applied in
the acquisition of Collateral Enhancement Obligations by or on behalf of the Issuer in accordance with
the Investment Management Agreement.
"Collateral Enhancement Obligation" means any warrant or equity security which is related to or
connected with a Collateral Debt Obligation, excluding Exchanged Equity Securities, but including
without limitation, warrants relating to Mezzanine Obligations and any equity security received upon
conversion or exchange of, or exercise of an option under, or otherwise in respect of a Collateral Debt
Obligation; or any warrant or equity security purchased as part of a unit with a Collateral Debt Obligation
(but in all cases, excluding, for the avoidance of doubt, the Collateral Debt Obligation), in each case,
the acquisition of which will not result in the imposition of any present or future, actual or contingent
liabilities or obligations on the Issuer other than those which may arise at its option; provided that no
Collateral Enhancement Obligation may be a Dutch Ineligible Security or be converted into a Dutch
Ineligible Security.
"Collateral Enhancement Obligation Proceeds" means all Distributions and Sale Proceeds received
in respect of any Collateral Enhancement Obligation.
"Collateral Enhancement Obligation Proceeds Priority of Payments" means the priority of payments
in respect of Collateral Enhancement Obligation Proceeds as set out in Condition 3(c)(iii) (Application of
Collateral Enhancement Obligation Proceeds).
"Collateral Quality Tests" means the Collateral Quality Tests set out in the Investment Management
Agreement being each of the following:
(a)
so long as any Notes rated by S&P are Outstanding:
(i)
(ii)
(as at the Effective Date and until the end of the Reinvestment Period) the CDO Monitor
Test; and
the S&P Minimum Weighted Average Recovery Rate Test;
(b)
so long as any Notes rated by Moody’s are Outstanding:
(i)
(ii)
(iii)
the Moody’s Minimum Diversity Test;
the Moody’s Maximum Weighted Average Rating Factor Test; and
the Moody’s Minimum Weighted Average Recovery Rate Test;
(c)
at all times:
(i)
(ii)
the Minimum Weighted Average Spread Test; and
the Weighted Average Maturity Test,
each as defined in the Investment Management Agreement.
"Collateral Tax Event" means at any time, as a result of the introduction of a new, or any change in,
any home jurisdiction or foreign tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial
decision or interpretation (whether proposed, temporary or final), interest payments due from the
Obligors of any Collateral Debt Obligations in relation to any Due Period becoming properly subject to
the imposition of home jurisdiction or foreign withholding tax (other than where such withholding tax is
compensated for by a "gross-up" provision in the terms of the Collateral Debt Obligation or such
requirement to withhold is eliminated pursuant to a double taxation treaty so that the Issuer as holder
thereof is held completely harmless from the full amount of such withholding tax on an after-tax basis)
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so that the aggregate amount of such withholding tax on all Collateral Debt Obligations in relation to
such Due Period is equal to or in excess of six per cent. of the aggregate interest payments due (other
than any additional interest arising as a result of the operation of any gross-up provision) on all
Collateral Debt Obligations in relation to such Due Period.
"Collateralised Credit Default Swap" means a Synthetic Security entered into by the Issuer which is
an unfunded credit default swap under which the Issuer will be required to provide Synthetic Collateral
for its contingent obligations to the Synthetic Counterparty thereunder and excludes, for the avoidance
of doubt, any Offsetting Credit Default Swap or Credit Short Obligation.
"Commitment Amount" means, (a) with respect to any Delayed Drawdown Obligation or Revolving
Security (that is not a Synthetic Security), the maximum aggregate outstanding principal amount
(whether at the time funded or unfunded) of advances or other extensions of credit at any one time
outstanding that the Issuer could be required to make to the Obligor under the Underlying Instruments
relating thereto or to a funding bank in connection with any ancillary facilities related thereto and (b) with
respect to any Delayed Drawdown Obligation or Revolving Security that is a Synthetic Security, the
maximum aggregate net amount (whether at the time funded or unfunded) that the Issuer could be
required to pay to the related Synthetic Counterparty thereunder.
"Component" means the Class F Subordinated Component of which the Class P Combination Notes
consists.
"Conditions" means these terms and conditions, being the terms and conditions of the Notes from time
to time.
"Controlling Class" means the Class A1 Notes and the Class A2 Notes and thereafter (to the extent
there are no longer any Class A1 Notes or Class A2 Notes Outstanding) the Class A3 Notes and
thereafter (to the extent there are no longer any Class A Notes Outstanding) the Class B Notes, and
thereafter (to the extent there are no longer any Class A Notes or Class B Notes Outstanding) the Class
C Notes, and thereafter (to the extent there are no longer any Class A Notes, Class B Notes or Class C
Notes Outstanding) the Class D Notes, and thereafter (to the extent there are no longer any Class A
Notes, Class B Notes, Class C Notes or Class D Notes Outstanding) the Class E Notes, and thereafter
(to the extent there are no longer any Class A Notes, Class B Notes, Class C Notes or Class D Notes
Outstanding) the Class F Subordinated Notes, in each case being the most senior ranking Class of
Notes Outstanding at the relevant time.
"Coverage Test" means each of the Class A Par Value Test, the Class A Interest Coverage Test, the
Class B Par Value Test, the Class B Interest Coverage Test, the Class C Par Value Test, the Class C
Interest Coverage Test, the Class D Par Value Test, the Class D Interest Coverage Test, the Class E
Par Value Test and the Class E Interest Coverage Test, and each shall be satisfied on a Measurement
Date if the corresponding Par Value Ratio or Interest Coverage Ratio (as the case may be) is at least
equal to the percentage specified in the table below in relation to that Coverage Test.
Coverage test and ratio
Percentage at which test is satisfied
Class A Par Value Ratio 128.7%
Class A Interest Coverage Ratio 130.0%
Class B Par Value Ratio 119.6%
Class B Interest Coverage Ratio 120.0%
Class C Par Value Ratio 112.1%
Class C Interest Coverage Ratio 110.0%
Class D Par Value Ratio 106.6%
Class D Interest Coverage Ratio 105.0%
Class E Par Value Ratio 101.1%
Class E Interest Coverage Ratio 100.0%
"Credit Impaired Obligation" means any Collateral Debt Obligation which, in the Investment Manager’s
judgement, has a significant risk of declining (or has significantly declined) in credit quality and, with a
lapse of time, becoming a Defaulted Obligation, provided however that, (unless the holders of the
Controlling Class of Notes have agreed by way of Extraordinary Resolution pursuant to the Trust Deed
to suspend this proviso), if:
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(a)
(b)
the ratings by Moody’s of any of the Class A Notes and the Class B Notes have been reduced
by Moody’s by at least one sub-category from the Initial Ratings or are withdrawn by Moody’s;
or
the ratings by Moody’s of any of the Class C Notes, the Class D Notes or the Class E Notes
have been reduced by Moody’s by at least two sub-categories from the Initial Ratings or are
withdrawn by Moody’s,
then the public credit rating or confidential credit estimate of such Collateral Debt Obligation must have
been downgraded by at least one rating sub-category by Moody’s or put on a watch list for possible
downgrade since the date of acquisition thereof or have decreased in price by one per cent. or more of
the original acquisition price thereof. A Synthetic Security shall constitute a Credit Impaired Obligation
in the event the Reference Obligation to which such Collateral Debt Obligation is linked would constitute
a Credit Impaired Obligation if it were itself a Collateral Debt Obligation.
"Credit Improved Obligation" means any Collateral Debt Obligation which, in the Investment
Manager’s judgment, has significantly improved in credit quality and:
(a)
(b)
(c)
(d)
(e)
which has been upgraded or put on a watch list for possible upgrade by S&P or Moody’s or any
other internationally recognised credit rating agency;
whose Obligor has shown improved financial results;
whose Obligor has raised equity capital or other capital which has improved the liquidity or
credit standing of such Obligor;
which has increased in price by one per cent. or more of the original purchase price thereof; or
which is so designated by the Investment Manager,
provided however that, (unless the holders of the Controlling Class of Notes have agreed by way of
Extraordinary Resolution to suspend this proviso), if:
(f)
(g)
the ratings by Moody’s of any of the Class A Notes and the Class B Notes have been reduced
by Moody’s by at least one sub-category from the Initial Ratings or are withdrawn by Moody’s;
or
the ratings by Moody’s of any of the Class C Notes, the Class D Notes or the Class E Notes
have been reduced by Moody’s by at least two sub-categories from those in existence at the
Issue Date or are withdrawn by Moody’s
then the public credit rating or confidential credit estimate of such Collateral Debt Obligation must have
been upgraded by at least one rating sub-category by Moody’s or put on a watch list for possible
upgrade since the date of acquisition thereof or have increased in price by one per cent. or more of the
original acquisition price thereof and provided further that a Synthetic Security shall constitute a Credit
Improved Obligation in the event that the Reference Obligation to which such Collateral Debt Obligation
is linked would constitute a Credit Improved Obligation if it were itself a Collateral Debt Obligation.
"Credit Short Obligation" means a credit default swap transaction (other than an Offsetting Credit
Default Swap) which complies with the provisions of the Investment Management Agreement which
apply to Credit Short Obligations entered into by the Issuer (as protection buyer) with a Credit Short
Obligation Counterparty (as protection seller) in respect of a Reference Obligation (or notional amount
thereof) which the Issuer does not own in respect of which (i) the Issuer purchasers credit protection
under a 1992 ISDA Master Agreement (Multicurrency Cross Border Currency) or 2002 ISDA Master
Agreement (or such other ISDA pro forma Master Agreement as may be published by ISDA from time to
time) (together with the schedule and confirmation relating thereto, and each as amended or
supplemented from time to time, a "Credit Short Obligation Agreement") and (ii) the Credit Short
Obligation Counterparty makes protection payments by way of cash or physical settlement to the Issuer
following the occurrence of specified credit events in respect of the related Reference Obligation.
"Credit Short Obligation Counterparty" means, pursuant to the terms of a Credit Short Obligation, any
entity or person which:
(a)
(b)
is required to make payments as protection seller directly to the Issuer, or any guarantor of
such entity; and
satisfies the Rating Requirement.
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"Credit Short Obligation Counterparty Termination Payment" means any amount payable by a
Credit Short Obligation Counterparty to the Issuer upon termination or modification of any Credit Short
Obligation in whole or in part excluding any Cash Settlement Amount or Physical Settlement Amount.
"Credit Short Obligation Issuer Replacement Payment" means any amount payable by the Issuer to
a Credit Short Obligation Counterparty upon entry into a Replacement Credit Short Obligation.
"Credit Short Obligation Issuer Termination Payment" means any amount payable by the Issuer to a
Credit Short Obligation Counterparty upon termination or modification of any Credit Short Obligation in
whole or in part. For the avoidance of doubt, Credit Short Obligation Issuer Termination Payments does
not include Defaulted Credit Short Obligation Issuer Termination Payment.
"Credit Short Obligation Replacement Receipt" means any amount payable by a Credit Short
Obligation Counterparty to the Issuer upon entry into a Replacement Credit Short Obligation.
"Currency Funding Mismatch" means a Dollar Funding Mismatch or a Sterling Funding Mismatch.
"Currency Hedge Agreement" has the meaning given thereto in the definition of Currency Hedge
Transaction.
"Currency Hedge Counterparty" means each financial institution with which the Issuer enters into a
Currency Hedge Transaction or any permitted assignee or successor thereto under the terms of the
related Currency Hedge Transaction and in each case which satisfies the applicable Rating
Requirement (taking into account any guarantor thereof) and provided always that such financial
institution has the regulatory capacity as a matter of Dutch law to enter into derivatives transactions with
Dutch residents.
"Currency Hedge Counterparty Termination Payment" means the amount payable by a Currency
Hedge Counterparty to the Issuer upon termination of a Currency Hedge Transaction, including any due
and unpaid scheduled amounts payable thereunder.
"Currency Hedge Counterparty Initial Exchange Payment" means, in respect of a Currency Hedge
Transaction which is a currency swap transaction or a cross currency and interest rate swap transaction
(including such a transaction entered into pursuant to the exercise of a currency swaption), the notional
principal amount due and payable by the Currency Hedge Counterparty to the Issuer on or about the
"Effective Date" (as defined in such Currency Hedge Transaction) or, in the case of a currency swaption,
on or about the date of exercise, of such Currency Hedge Transaction.
"Currency Hedge Issuer Initial Exchange Payment" means, in respect of a Currency Hedge
Transaction which is a currency swap transaction or a cross currency and interest rate swap transaction
(including such a transaction entered into pursuant to the exercise of a currency swaption), the notional
principal amount due and payable by the Issuer to the Currency Hedge Counterparty on or about the
"Effective Date" (as defined in such Currency Hedge Transaction) or, in the case of a currency swaption,
on or about the date of exercise, of such Currency Hedge Transaction.
"Currency Hedge Issuer (Principal) Payment" means, in respect of a Currency Hedge Transaction, (i)
which is a currency swap transaction or a cross currency and interest rate swap transaction (including
such a transaction entered into pursuant to the exercise of a currency swaption), any notional principal
amount due and payable by the Issuer to the Currency Hedge Counterparty under such a Currency
Hedge Transaction on termination (including early termination) or amortisation of such a Currency
Hedge Transaction or (ii) which is a currency forward transaction, a spot foreign exchange transaction or
a currency option, in each case relating to Principal Proceeds (whether in respect of a particular
Collateral Debt Obligation or in respect of a portfolio of Collateral Debt Obligations) as determined by
the Investment Manager, the amount payable by the Issuer to the Currency Hedge Counterparty, in
each case excluding any Currency Hedge Issuer Termination Payments.
"Currency Hedge Issuer (Principal) Receipt" means, in respect of a Currency Hedge Transaction, (i)
which is a currency swap transaction or a cross currency and interest rate swap transaction (including
such a transaction entered into pursuant to the exercise of a currency swaption), any principal amount
or notional principal amount require to e paid by the Currency Hedge Counterparty to the Issuer under
such a Currency Hedge Transaction on termination (including early termination) or amortisation of such
a Currency Hedge Transaction, (ii) which is a currency swaption which is disposed of, closed out or
realised prior to or on exercise, the amount receivable on such disposal, close out or realisation or (iii)
which is a currency forward transaction, a sport foreign exchange transaction or a currency option, in
each case relating to Principal Proceeds (whether in respect of a particular Collateral Debt Obligation or
in respect of a portfolio of Collateral Debt Obligations) as determined by the Investment Manager, the
amount payable by the Currency Hedge Counterparty to the Issuer.
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"Currency Hedge Issuer Termination Payment" means the amount payable to a Currency Hedge
Counterparty by the Issuer upon termination or modification of a Currency Hedge Transaction, including,
if applicable, any due and unpaid scheduled amounts payable thereunder.
"Currency Hedge Issuer Replacement Payment" means any amount payable to a Currency Hedge
Counterparty by the Issuer upon entry into a Replacement Currency Hedge which is replacing the
Currency Hedge Transaction which was terminated.
"Currency Hedge Replacement Receipt" means any amount payable to the Issuer by a Currency
Hedge Counterparty upon entry into a Replacement Currency Hedge which is replacing the Currency
Hedge Transaction which was terminated.
"Currency Hedge Transaction" means any cross currency and interest rate transaction, currency
option, spot foreign exchange contract, forward foreign exchange contract and currency swaption
(including any option with respect to any of these transactions and any combination of these
transactions) which is either (i) entered into in accordance with certain hedging procedures or (ii) to
which the Rating Agencies confirm that the entry into of which will not adversely affect the then ratings
of the Rated Notes; each Currency Hedge Transaction shall be entered into under a 1992 ISDA Master
Agreement (Multicurrency Cross Border Currency) or 2002 ISDA Master Agreement (or such other ISDA
pro forma Master Agreement as may be published by ISDA from time to time) (together with the
Schedule and confirmation thereto, including any guarantee thereof and any credit support annex
entered into pursuant to the terms thereof, and each as amended or supplemented from time to time, a
"Currency Hedge Agreement") (except, in the case of a spot foreign exchange contract which may be
entered into on standard market terms with any entity whose short term senior unsecured debt
securities are rated no lower than "A1+" by Standard & Poor's or "P-1" by Moody's). For the avoidance
of doubt, Currency Hedge Transactions do not include Asset Swap Transactions.
"Current Pay Obligation" means a Collateral Debt Obligation that would otherwise be a Defaulted
Obligation, but as to which:
(a)
(b)
(c)
(d)
the most recent interest payment due thereon was paid in cash and the Investment Manager
has provided written confirmation that it reasonably expects that the next interest payment due
will be paid in cash;
the Moody’s rating of such Collateral Debt Obligation is at least "Caa2";
if the Obligor under such Collateral Debt Obligation is subject to bankruptcy proceedings, a
bankruptcy court has authorised the payment of interest due and payable on such Collateral
Debt Obligation; and
the Market Value thereof at the relevant time is not less than 80 per cent. of its par amount.
provided that the Aggregate Principal Balance of all Collateral Debt Obligations which constitute
"Current Pay Obligations" may not exceed five per cent. of the Aggregate Collateral Balance and to the
extent that any Collateral Debt Obligations are in excess of such amount they shall not constitute
Current Pay Obligations provided further, that, where any Collateral Debt Obligations are in excess of
such amount, the Investment Manager, may, in its absolute discretion, select which Collateral Debt
Obligations comprise Current Pay Obligations for the purposes of this definition.
"Custody Account" means the custody account or accounts (including any cash account relating to any
securities account) established on the books of the Custodian in accordance with the provisions of the
Agency Agreement, which term shall include each custody account relating to each such Custody
Account (if any).
"Defaulted Asset Swap Issuer Termination Payment" means any amount payable by the Issuer to an
Asset Swap Counterparty upon termination of any Asset Swap Transaction or Asset Swap Agreement in
whole following the occurrence of an "Event of Default" or "Termination Event other than "Illegality" or a
"Tax Event" (as such terms are defined in such Asset Swap Agreement) thereunder in respect of which
an Asset Swap Counterparty was the "Defaulting Party" or sole "Affected Party" (as such terms are
defined in such Asset Swap Agreement).
"Defaulted Credit Short Obligation Issuer Termination Payment" means any amount payable by the
Issuer to a Credit Short Obligation Counterparty upon termination of any Credit Short Obligation in
whole or in part following the occurrence of (a) an "Event of Default" in respect of which the Credit Short
Obligation Counterparty was the sole "Defaulting Party" (each such term as defined therein) or (b) a
"Termination Event" in respect of which the Credit Short Obligation Counterparty was the sole "Affected
Party" (each such term as defined therein) to the extent such termination payment exceeds the amount
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of any Credit Short Obligation Replacement Receipts paid by the replacement Credit Short Obligation
Counterparty under the related replacement Credit Short Obligation.
"Defaulted Offsetting Credit Default Swap Issuer Termination Payment" means any amount
payable by the Issuer to an Offsetting Credit Default Swap Counterparty upon termination of any
Offsetting Credit Default Swap in whole following the occurrence of an "Event of Default" or "Termination
Event other than "Illegality" or a "Tax Event" (as such terms are defined in such Offsetting Credit Default
Swap Agreement) thereunder in respect of which an Offsetting Credit Default Swap Counterparty was
the "Defaulting Party" or sole "Affected Party" (as such terms are defined in such Offsetting Credit
Default Swap).
"Defaulted Derivative Issuer Termination Payment" means any amount payable by the Issuer to a
Derivative Counterparty upon termination of a Derivative Transaction in whole following the occurrence
of an "Event of Default" or "Termination Event" other than "Illegality" or a "Tax Event" (as such terms are
defined in such Derivative Agreement) thereunder in respect of which the Derivative Counterparty was
the "Defaulting Party" or sole "Affected Party" (as such terms are defined in such Derivative Agreement),
but excluding any Cash Settlement Amounts or Physical Settlement Amounts.
"Defaulted Interest Rate Hedge Issuer Termination Payments" means any amount payable by the
Issuer to an Interest Rate Hedge Counterparty upon termination of any Interest Rate Hedge Transaction
or Interest Rate Hedge Agreement in whole following the occurrence of an "Event of Default" or
"Termination Event" other than "Illegality" or a "Tax Event" (as such terms are defined in such Interest
Rate Hedge Agreement) thereunder in respect of which the Interest Rate Hedge Counterparty was the
"Defaulting Party" or sole "Affected Party" (as such terms are defined in such Interest Rate Hedge
Agreement).
"Defaulted Obligation" means a Collateral Debt Obligation in respect of which:
(a)
(b)
(c)
(d)
there has occurred and is continuing a default with respect to the payment of interest or
principal disregarding any grace periods applicable thereto unless the Investment Manager has
certified to the Trustee in writing that, to the knowledge of the Investment Manager, such
default resulted from non-credit related causes, for the lesser of three Business Days and any
grace period applicable thereto, and such default entitles the holders thereof, with notice or the
passage of time or both, to accelerate the maturity of all or a portion of the principal amount of
such obligation but only until such default has been cured;
any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the
issuer of such Collateral Debt Obligation provided such proceeding was not dismissed within
30 business days of proceedings being initiated;
a Distressed Exchange has become binding upon the holders of the Collateral Debt Obligation
generally, for the purposes of which "Distressed Exchange" means any distressed exchange or
other debt restructuring where the Obligor of such Collateral Debt Obligation has offered the
class of holders of the Collateral Debt Obligation generally a new obligation or package of
obligations which, in the reasonable judgment of the Investment Manager either (i) amounts to
a diminished financial obligation, or (ii) has the purpose of helping the Obligor of such Collateral
Debt Obligation to avoid default. For the avoidance of doubt, Collateral Debt Obligations the
subject of a Distressed Exchange which satisfies the Eligibility Criteria will not be a Defaulted
Obligation;
the Investment Manager knows the Obligor thereunder is in default as to payment of principal
and/or interest on another obligation, save for obligations constituting trade debts which the
applicable issuer is disputing in good faith (and such default has not been cured), but only if
one of the following conditions is satisfied:
(i)
(ii)
both such other obligation and the Collateral Debt Obligation are full recourse,
unsecured obligations and the other obligation is senior to, or pari passu with, the
Collateral Debt Obligation in right of payment; or
if the following conditions are satisfied:
(A)
(B)
both such other obligation and the Collateral Debt Obligation are full recourse,
secured obligations secured by identical collateral;
the security interest securing the other obligation is senior to or pari passu with
the security interest securing the Collateral Debt Obligation; and
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(C)
the other obligation is senior to or pari passu with the Collateral Debt Obligation
in right of payment,
(e)
(f)
such Collateral Debt Obligation is or becomes rated "D" or "SD" by S&P; or
any Collateral Debt Obligation which the Investment Manager determines in its reasonable
business judgement should be treated as a Defaulted Obligation,
provided, however, that no Collateral Debt Obligation that is deemed to be treated as a Current Pay
Obligation shall constitute a Defaulted Obligation. A Synthetic Security shall be considered a "Defaulted
Obligation" if the Reference Obligation to which such Synthetic Security relates would constitute a
"Defaulted Obligation" if it were itself a Collateral Debt Obligation and provided further that a Synthetic
Security which is an Uncollateralised CLN shall be considered a "Defaulted Obligation" in the event the
related Synthetic Counterparty is in default thereunder pursuant to the terms thereof. Collateral Debt
Obligations that have become Defaulted Obligations and are subject to an Offsetting Credit Default
Swap shall not be considered Defaulted Obligations for the purposes of the calculations of the
Aggregate Collateral Balance, the Portfolio Profile Tests, the S&P Minimum Weighted Average
Recovery Rate Test, the Moody's Minimum Weighted Average Recovery Rate Test and the Moody's
Maximum Weighted Average Rating Factor Test.
"Defaulting Class A1 Noteholder" means a Class A1 Noteholder who:
(a)
(b)
fails to satisfy certain rating criteria as described in the Class A1 Note Purchase Agreement
and to take any remedial action as described in the Class A1 Note Purchase Agreement; or
fails to fund any portion of a Class A1 Drawing in accordance with the terms of the Class A1
Note Purchase Agreement for as long as such failure continues and is not remedied by such
Class A1 Noteholder funding the Class A1 Drawing.
"Deferrable Obligation" means a Collateral Debt Obligation (including for the avoidance of doubt a
High Yield Bond) which by its terms permits the deferral of payment of accrued and unpaid interest.
"Deferred Interest" has the meaning given thereto in Condition 6(c)(i) (Deferred Interest).
"Deferring Obligation" means a Deferrable Obligation that is not a Purposely Deferring Obligation and
which is currently deferring interest and has been so deferring the payment of interest due thereon (i)
with respect to Collateral Debt Obligations that have a Moody's Rating of at least "Baa3", for the shorter
of two consecutive accrual periods or one year, and (ii) with respect to Collateral Debt Obligations that
have a Moody's Rating of "Ba1" or below, for the shorter of one accrual period or six consecutive
months, and in either case which deferred capitalised interest has not, as of the date of determination,
been paid in cash.
"Definitive Certificate" means a certificate representing one or more Notes in definitive, fully registered,
form.
"Delayed Drawdown Obligation" means a Collateral Debt Obligation that (a) requires the Issuer to
make one or more future advances to the borrower under the Underlying Instruments relating thereto,
(b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates and (c)
does not permit the re-borrowing of any amount previously repaid; but any such Collateral Debt
Obligation will be a Delayed Drawdown Obligation only until all commitments to make advances to the
borrower expire or are terminated or reduced to zero.
"Delayed Settlement Compensation" has the meaning ascribed to it in the Loan Market Association's
standard terms and conditions for par trade transactions.
"Deliverable Obligation" means an obligation referred to in an Offsetting Credit Default Swap or a
Credit Short Obligation as the "Deliverable Obligation" which is deliverable upon termination or prior to
the scheduled maturity thereof.
"Derivative Agreement" means any Asset Swap Agreement, Interest Rate Hedge Agreement,
Currency Hedge Agreement, Credit Short Obligation Agreement or Offsetting Credit Default Swap
Agreement.
"Derivative Counterparty" means any Asset Swap Counterparty, Interest Rate Hedge Counterparty,
Currency Hedge Counterparty, Credit Short Obligation Counterparty or Offsetting Credit Default Swap
Counterparty.
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"Derivative Counterparty Downgrade Collateral" means any cash and/or securities delivered to the
Issuer as collateral for the obligations of any Derivative Counterparty under a Derivative Transaction, as
applicable.
"Derivative Counterparty Downgrade Collateral Account" means one or more custodial accounts of
the Issuer with the Custodian into which all Derivative Counterparty Downgrade Collateral is to be
deposited.
"Derivative Counterparty Termination Payments" means Asset Swap Counterparty Termination
Payments, Interest Rate Hedge Counterparty Termination Payments, Currency Hedge Counterparty
Termination Payments, Offsetting Credit Default Swap Counterparty Termination Payments and Credit
Short Obligation Counterparty Termination Payments.
"Derivative Issuer Termination Payments" means Asset Swap Issuer Termination Payments, Interest
Rate Hedge Issuer Termination Payments, Currency Hedge Issuer Termination Payments, Offsetting
Credit Default Swap Issuer Termination Payments and Credit Short Obligation Issuer Termination
Payments.
"Derivative Issuer Replacement Payments" means Asset Swap Issuer Replacement Payments,
Interest Rate Hedge Issuer Replacement Payments, Currency Hedge Issuer Replacement Payments,
Credit Short Obligation Issuer Replacement Payments and Offsetting Credit Default Swap Issuer
Replacement Payments.
"Derivative Replacement Receipts" means Asset Swap Replacement Receipts, Interest Rate Hedge
Replacement Receipts, Currency Hedge Replacement Receipts, Offsetting Credit Default Swap
Replacement Receipts and Credit Short Obligation Replacement Receipts.
"Derivative Termination Account" means the custodial account of the Issuer with the Account Bank
into which all Derivative Counterparty Termination Payments will be deposited.
"Derivative Transaction" means any Asset Swap Transaction, Interest Rate Hedge Transaction,
Currency Hedge Transaction, Credit Short Obligation or Offsetting Credit Default Swap.
"Determination Date" means the last Business Day of each Due Period, or in the event of any
redemption of the Notes, following the occurrence of an Event of Default, two Business Days prior to the
applicable Redemption Date.
"DIP Loan" shall mean any interest in a loan or financing facility (i) which is an obligation of a debtor-inpossession
as described in § 1107 of the United States Bankruptcy Code or a trustee (if appointment of
such trustee has been ordered pursuant to § 1104 of the United States Bankruptcy Code) (a "Debtor")
organised under the laws of the United States or any State therein; (ii) which is paying interest on a
current basis; (iii) which the Investment Manager reasonably expects will continue to pay interest; (iv)
the terms of which have been approved by an order of the United States Bankruptcy Court, the United
States District Court, or any other court of competent jurisdiction, the enforceability of which order is not
subject to any pending contested matter or proceeding (as such terms are defined in the Federal Rules
of Bankruptcy Procedure) and which order provides that: (a) such DIP Loan is secured by liens on the
Debtor’s otherwise unencumbered assets pursuant to § 364(c)(2) of the United States Bankruptcy Code;
(b) such DIP Loan is secured by liens of equal or senior priority on property of the Debtor’s estate that is
otherwise subject to a lien pursuant to § 364(d) of the United States Bankruptcy Code; (c) such DIP
Loan is secured by junior liens on the Debtor’s encumbered assets and such DIP Loan is fully secured
based upon a current valuation or appraisal report; or (d) if the DIP Loan or any portion thereof is
unsecured, the repayment of such DIP Loan retains priority over all other administrative expenses
pursuant to § 364(c)(1) of the United States Bankruptcy Code; and (v) which is rated by S&P or has an
estimated rating by S&P. For the avoidance of doubt a DIP Loan shall not be considered as a Current
Pay Obligation.
"Discount Obligation" means any Collateral Debt Obligation acquired by, or on behalf of, the Issuer for
a purchase price (excluding accrued interest thereon):
(a)
in respect of a Collateral Debt Obligation which is not a High Yield Bond, of less than 85 per
cent. of the principal amount of such Collateral Debt Obligation, provided that such Collateral
Debt Obligation shall cease to be a Discount Obligation where the Market Value thereof for any
period of (excluding any period in which the Market Value of such Collateral Obligations cannot
be determined pursuant to paragraphs (a) or (b) of the definition of "Market Value")
30 consecutive days equals or exceeds 90 per cent. of the principal amount of such Collateral
Debt Obligation (as certified by the Investment Manager to the Issuer, Trustee and Collateral
Administrator); and
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(b)
in respect of a High Yield Bond, of less than 80 per cent. of the principal amount of such
Collateral Debt Obligation, provided that such Collateral Debt Obligation shall cease to be a
Discount Obligation where the Market Value thereof for any period of (excluding any period in
which the Market Value of such Collateral Obligations cannot be determined pursuant to
paragraphs (a) or (b) of the definition of "Market Value") 30 consecutive days equals or
exceeds 85 per cent. of the principal amount of such Collateral Debt Obligation (as certified by
the Investment Manager to the Issuer, Trustee and Collateral Administrator).
"Distribution" means any payment of principal or interest or any dividend or premium or other amount
(including any proceeds of sale) or asset paid or delivered on or in respect of any Collateral Debt
Obligation, any Collateral Enhancement Obligation, any Eligible Investment, any Exchanged Equity
Security or under or in respect of any Interest Rate Hedge Agreement, any Asset Swap Agreement or
any Currency Hedge Agreement, as applicable.
"Dollar Collateral Debt Obligation" means a Collateral Debt Obligation in Dollars.
"Dollar Denominated Drawing" has the meaning ascribed thereto in the Class A1 Note Purchase
Agreement.
"Dollar Funding Mismatch" means on any Determination Date or any other date of calculation, the
greater of (a) zero and (b) the sum of the aggregate Class A1 Drawings denominated in Dollars and the
Class A1 Allocated Amount denominated in Dollars minus the sum of (i) the aggregate Principal Balance
of all Dollar Collateral Debt Obligations which are not the subject of an Asset Swap Transaction on such
Determination Date and (ii) the Dollar Principal Proceeds standing to the credit of the Dollar Principal
Account on such Determination Date.
"Dollar Interest Account" means the account described as such in the name of the Issuer held with the
Account Bank.
"Dollar Interest Proceeds" means Interest Proceeds denominated in Dollars.
"Dollar Margin" means 0.30%.
"Dollar Payment Account" means the account described as such in the name of the Issuer held with
the Account Bank.
"Dollar Principal Account" means the account described as such in the name of the Issuer held with
the Account Bank.
"Dollar Principal Proceeds" means Principal Proceeds denominated in Dollars.
"Dollar Unfunded Reserve Account" means the account described as such in the name of the Issuer
held with the Account Bank.
"DTC" means The Depository Trust Company.
"Due Period" means, with respect to any Payment Date, the period commencing on and including the
day immediately following the eighth Business Day prior to the preceding Payment Date (or on the Issue
Date, in the case of the Due Period relating to the first Payment Date) and ending on and including the
eighth Business Day prior to such Payment Date (or, in the case of the Due Period applicable to the
Payment Date which is the Redemption Date of any Note, ending on and including the Business Day
preceding such Payment Date).
"Dutch Account" means the account in the name of the Issuer with Deutsche Bank Amsterdam.
"Dutch Ineligible Securities" means any and all:
(a)
(b)
securities or interests in securities which are bearer instruments (effecten aan toonder)
physically located in The Netherlands or registered shares (aandelen op naam) in a
Netherlands corporate entity where the Issuer owns such bearer instruments or registered
shares directly and in its own name;
securities or interests in securities the purchase or acquisition of which by or on behalf of the
Issuer would cause the breach of applicable selling or transfer restrictions or of applicable
Dutch laws relating to the offering of securities or of collective investment schemes; or
(c)
instruments or obligations that are convertible or exchangeable for any securities or interests in
securities as referred to under (a) above.
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"Effective Date" means the earlier of:
(a)
(b)
the date designated for such purpose by the Investment Manager by written notice to the
Trustee, the Issuer and the Collateral Administrator pursuant to the Investment Management
Agreement, subject to the Effective Date Requirements having been satisfied; and
the 365th day from (but excluding) the Issue Date, or if such day is not a Business Day, the
immediately following Business Day.
"Effective Date Rating Event" means:
(a)
(b)
either (i) the Initial Ratings of the Notes being downgraded or withdrawn or (ii) either or both of
the Rating Agencies notifying the Investment Manager on behalf of the Issuer that such Rating
Agency intends to reduce or withdraw its Initial Ratings of the Notes, in each case, upon
request for confirmation thereof by the Investment Manager following the Effective Date; and
either the failure by the Investment Manager to present to the Rating Agencies, or Rating
Agency Confirmation not being received in respect of a plan setting out the actions the
Investment Manager is intending to take in order to cause the Initial Ratings to be so confirmed
or reinstated;
provided that any downgrade or withdrawal of any of the Initial Ratings of the Notes which is not directly
related to the confirmation thereof required following the Effective Date or which occurs after
confirmation thereof by the Rating Agencies shall not constitute an Effective Date Rating Event.
"Effective Date Requirements" means each of the Portfolio Profile Tests, the Collateral Quality Tests
and the Coverage Tests being satisfied, and the Issuer having purchased or entered into binding
commitments to acquire Collateral Debt Obligations the Aggregate Principal Balance of which equals or
exceeds the Target Par Amount by such date (provided that, for the purposes of determining the
Aggregate Principal Balance as provided above, any repayments or prepayments of any Collateral Debt
Obligations subsequent to the date of acquisition thereof shall be disregarded and the Principal Balance
of a Collateral Debt Obligation which is a Defaulted Obligation will be the lower of its S&P Collateral
Value and its Moody’s Collateral Value).
"Eligibility Criteria" means the Eligibility Criteria specified in the Investment Management Agreement
which are required to be satisfied in respect of each Collateral Debt Obligation acquired by, or on behalf
of, the Issuer at the time of entering into a binding commitment to acquire such obligation.
"Eligible Investments" means any investment denominated in Euro, Sterling or Dollars that, in the
event that it is an obligation of a company incorporated in, or a sovereign issuer of, the United States, is
in registered form at the time it is acquired, and is one or more of the following obligations or securities,
including, without limitation, any Eligible Investments for which the Custodian, the Trustee or the
Investment Manager or an Affiliate of any of them provides services:
(a)
(b)
direct obligations of, and obligations the timely payment of principal of and interest under which
is fully and expressly guaranteed by, a Qualifying Country or any agency or instrumentality of a
Qualifying Country, the obligations of which are fully and expressly guaranteed by a Qualifying
Country and such Qualifying Country is rated at least "AA" by S&P (in the case of long-term
debt obligations) or "A1+" by S&P (in the case of commercial paper and short-term debt
obligations) and "Aa3" by Moody's (in the case of long-term debt obligations) or "P-1" by
Moody's (in the case of commercial paper and short-term debt obligations);
demand and time deposits in, certificates of deposit of and bankers’ acceptances issued by any
depository institution or trust company (including the Account Bank) incorporated under the
laws of a Qualifying Country with, in each case, a maturity of no more than 180 days and
subject to supervision and examination by governmental banking authorities so long as the
commercial paper and/or the debt obligations of such depository institution or trust company
(or, in the case of the principal depository institution in a holding company system, the
commercial paper or debt obligations of such holding company) at the time of such investment
or contractual commitment providing for such investment have:
(i)
a long-term senior unsecured debt credit rating of at least:
(A)
(B)
"AA" from S&P; and
"Aa2" from Moody's;
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in each case, for so long as there are Rated Notes which are Outstanding which are
rated by such Rating Agency (together, the "Eligible Investments Minimum Long-
Term Rating"); or
(ii)
a short-term debt credit rating of at least:
(A)
(B)
"A1+" from S&P; and
"P-1" from Moody’s,
in each case, for so long as there are Rated Notes which are Outstanding which are
rated by such Rating Agency (together, the "Eligible Investments Minimum Short-
Term Rating");
(c)
subject to receipt of Rating Agency Confirmation related thereto, unleveraged repurchase
obligations with respect to:
(i)
(ii)
any obligation described in paragraph (a) above; or
any other security issued or guaranteed by an agency or instrumentality of a Qualifying
Country, in either case entered into with a depository institution or trust company (acting
as principal) described in paragraph (b) above or entered into with a corporation (acting
as principal) whose long-term debt obligations are rated not less than the Eligible
Investments Minimum Long-Term Rating or whose short-term debt obligations are rated
not less than the Eligible Investments Minimum Short-Term Rating at the time of such
investment provided that, if such security has a maturity of longer than 91 days, the
issuer thereof must also have, at the time of such investment, a long-term credit rating
of not less than the Eligible Investments Minimum Long-Term Rating;
(d)
(e)
(f)
(g)
securities bearing interest or sold at a discount to the face amount thereof issued by any
corporation incorporated under the laws of a Qualifying Country that have a credit rating of not
less than the Eligible Investments Minimum Long-Term Rating at the time of such investment
or contractual commitment providing for such investment;
commercial paper or other short-term obligations having, at the time of such investment, a
credit rating of not less than the Eligible Investments Minimum Short-Term Rating and that
either are bearing interest or are sold at a discount to the face amount thereof and have a
maturity of not more than 183 days from their date of issuance; provided, that if such security
has a maturity of longer than 91 days, the issuer thereof must also have, at the time of such
investment, a long-term credit rating of not less than the Eligible Investments Minimum Long-
Term Rating;
offshore funds investing in the money markets rated, at all times, "AAAm" or "AAAm-G" by S&P
and "Aaa" and "MR1+" by Moody’s; and
any other investment similar to those described in paragraphs (a) to (f) (inclusive) above:
(i)
(ii)
in respect of which Rating Agency Confirmation has been received as to its inclusion in
the Portfolio as an Eligible Investment; and
which has, in the case of an investment with a maturity of longer than 91 days, a longterm
credit rating not less than the Eligible Investments Minimum Long-Term Rating or,
in the case of an investment with a maturity of 91 days or less, a short-term credit rating
of not less than the Eligible Investments Minimum Short-Term Rating,
and, in each case, such instrument or investment provides for payment of a pre-determined fixed
amount of principal on maturity that is not subject to change and either (A) has a Stated Maturity (giving
effect to any applicable grace period) no later than the second Business Day immediately preceding the
next following Payment Date or (B) may (and in the case of Eligible Investments standing to the credit of
the Derivative Counterparty Downgrade Collateral Account, the Unfunded Reserve Accounts, the
Derivative Termination Account and the Synthetic Collateral Account must) be capable of being
liquidated at par on demand without penalty, provided, however, that Eligible Investments shall not
include any mortgage-backed security, interest-only security, security subject to withholding or similar
taxes including securities which will subject the Issuer to any tax on its net income in any jurisdiction
outside The Netherlands, security rated with an "r" or "t" subscript by S&P, security purchased at a price
in excess of 100 per cent. of par, security whose repayment is subject to substantial non credit-related
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isk, any Dutch Ineligible Securities or an obligation that is convertible into or exchangeable for any
Dutch Ineligible Securities as determined by the Investment Manager in its discretion.
"Enforcement Action" has the meaning given to it in Condition 11(b) (Enforcement).
"Enforcement Event" means the security constituted by the Trust Deed over the Collateral becoming
enforceable pursuant to Condition 11 (Enforcement) following an acceleration of the Notes upon the
occurrence of an Event of Default pursuant to Condition 10 (Events of Default).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"EURIBOR" means the rate determined in accordance with Condition 6(e) (Interest on the Class A2
Notes, Class A3 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F
Subordinated Notes) as applicable to six-month Euro deposits.
"Euro", "Euros", "EUR" and "€" means the currency introduced at the start of the third stage of
European economic and monetary union pursuant to the Treaty establishing the European Community,
as amended from time to time.
"Euro Collateral Debt Obligations" means a Collateral Debt Obligation in Euro.
"Euro Denominated Drawings" has the meaning ascribed thereto in the Class A1 Note Purchase
Agreement.
"Euro Interest Account" means the account described as such in the name of the Issuer held with the
Account Bank.
"Euro Interest Proceeds" means Interest Proceeds denominated in Euro.
"Euro Margin" means 0.30%.
"Euro Payment Account" means the account described as such in the name of the Issuer held with the
Account Bank.
"Euro Principal Account" means the account described as such in the name of the Issuer held with the
Account Bank.
"Euro Principal Proceeds" means Principal Proceeds denominated in Euro.
"Euro Unfunded Reserve Account" means the account described as such in the name of the Issuer
held with the Account Bank.
"Euro Unused Proceeds Interest Account" means the account described as such in the name of the
Issuer held with the Account Bank.
"Euro Unused Proceeds Principal Account" means the account described as such in the name of the
Issuer held with the Account Bank.
"Euroclear Pledge Agreement" means the Belgian law pledge agreement which may be entered into
between (possibly amongst others) the Issuer, the Trustee and the Custodian (at any time after the
Issue Date pursuant to the terms of the Trust Deed).
"Euro-zone" means the region comprised of Member States of the European Union that have adopted
the single currency in accordance with the Treaty establishing the European Community, as amended.
"Event of Default" means each of the events defined as such in Condition 10(a) (Events of Default).
"Exchanged Equity Security" means an equity security which is not a Collateral Enhancement
Obligation, and which is delivered to the Issuer upon acceptance of an Offer in respect of a Defaulted
Obligation or received by the Issuer as a result of restructuring of the terms of a Defaulted Obligation in
effect as of the later of the Issue Date or date of issuance thereof.
"Extraordinary Resolution" means an Extraordinary Resolution as described in Condition 14 (Meetings
of Noteholders, Modification, Waiver and Substitution) and as further described in, and as defined in, the
Trust Deed.
"Financed Amount" means the portion of the amounts otherwise payable to Deutsche Bank AG,
London Branch or its Affiliates on the Issue Date that is not paid on the Issue Date but is deferred in an
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amount of €6,400,000 (as such amount may be reduced from time to time by the payment (other than
payments of Financed Amount Interest) made pursuant to paragraph (B) of Condition 3(c)(i) (Application
of Interest Proceeds)).
"Financed Amount Fee Letter" means a letter dated on or about the Issue Date between Deutsche
Bank AG, London Branch and the Issuer relating to payment of the Financed Amount.
"Financed Amount Interest" shall comprise, with respect to any Payment Date, (i) interest accrued on
the unpaid Financed Amount from the later of the Issue Date and the immediately preceding Payment
Date at a per annum rate of EURIBOR plus 0.20 per cent. calculated on the basis of the actual number
of days elapsed since such later date divided by 360, plus, (ii) any Financed Amount interest due
(pursuant to paragraph (B) of Condition 3(c)(i) (Application of Interest Proceeds)) but unpaid on previous
Payment Dates, plus (iii) interest accrued at the rate stated above on the unpaid amounts (if any)
referred to in (ii) above.
"Financed Amount Periodic Payment" means the amount payable to Deutsche Bank AG, London
Branch or its Affiliates in accordance with the Priorities of Payment on each Payment Date commencing
on and including 15 February 2008 and ending on and including 15 August 2012. The payment on 15
February 2008 will only be interest due on the Financed Amount, and thereafter a payment on each
Payment Date of €711,111 or such larger amount as the Investment Manager may determine in
consultation with Deutsche Bank AG, London Branch and the Trustee provided that the aggregate of the
Financed Amount Periodic Payments shall in any event equal (but not exceed) the Financed Amount in
full.
"Financed Amount Threshold" means with respect to any Payment Date the sum of:
(a)
(b)
the Financed Amount Periodic Payment payable on such date; and
any Financed Amount Periodic Payments previously payable and unpaid,
provided however, if (i) the Trustee has taken any Enforcement Action or (ii) on such Payment Date the
Class A Notes would be paid in full by redemption or otherwise, the Financed Amount Threshold shall
not apply.
"Floating Rate Collateral Debt Obligation" means a Collateral Debt Obligation, the interest or coupon
payable in respect of which is calculated by reference to a floating rate.
"Floating Rate Notes" means the Class A Notes, the Class B Notes, the Class C Notes, the Class D
Notes, the Class E Notes which bear interest at a rate equal to EURIBOR plus an Applicable Margin.
"Floating Rate of Interest" has the meaning given thereto in Condition 6 (Interest).
"Form-Approved Asset Swap" means an Asset Swap Transaction the documentation for and structure
of which conforms (save for the amount and timing of periodic payments, the name and economics of
the related Non-Euro Obligation, the notional amount, the Effective Date, the termination date and other
consequential and immaterial changes) to a form previously presented to the Rating Agencies and in
respect of which Rating Agency Confirmation has been received, provided that Rating Agency
Confirmation shall be deemed to have been so received in respect of any such form approved by the
Rating Agencies prior to the Issue Date.
"Form-Approved Credit Short Obligation" means a Credit Short Obligation the documentation for and
structure of which conforms to a form previously approved in relation to the Issuer by the Rating
Agencies, save for:
(a)
(b)
(c)
the amount and timing of periodic payments, the name of the Reference Obligation, the
notional amount, the effective date and/or the termination date;
the identity of the protection seller under such Credit Short Obligation; and
other inconsequential and immaterial changes which have been notified to the Rating Agencies
in writing.
"Form-Approved Offsetting Credit Default Swap" means an Offsetting Credit Default Swap the
documentation for and structure of which conforms to a form previously approved in relation to the
Issuer by the Rating Agencies, save for:
(a)
the amount and timing of periodic payments, the name of the Reference Obligation, the
notional amount, the effective date and/or the termination date;
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(b)
(c)
the identity of the protection seller under such Offsetting Credit Default Swap; and
other inconsequential and immaterial changes which have been notified to the Rating Agencies
in writing.
"Form-Approved Synthetic Security" means a Synthetic Security the documentation for and structure
of which conforms (save for the amount and timing of periodic payments the name of the Reference
Obligation and Reference Entity, the notional amount, the effective date, the termination date and
consequential and immaterial changes) to a form in respect of which Rating Agency Confirmation has
been received.
"Funded Amount" means, with respect to any Delayed Drawdown Obligation and Revolving Security
(excluding a Synthetic Security) at any time, the aggregate principal amount of advances or other
extensions of credit to the extent funded thereunder by the Issuer that are outstanding at such time.
"FX Conversion Provisions" means Condition 3 (c)(iv) (FX Conversion).
"Hedge Counterparty" means any Asset Swap Counterparty, Currency Hedge Counterparty or Interest
Rate Hedge Counterparty.
"High Yield Bond" means:
(a)
(b)
a debt security which, on acquisition by the Issuer, is either rated below Investment Grade by at
least one internationally recognised credit rating agency (provided that, if such debt security is,
at any time following acquisition by the Issuer, no longer rated by at least one internationally
recognised credit rating agency as below Investment Grade it will not, as a result of such
change in rating, fall outside this definition) or which is a high yielding debt security, in each
case as determined by the Investment Manager, excluding any debt security which is secured
directly on, or represents the ownership of, a pool of consumer receivables, auto loans, auto
leases, equipment leases, home or commercial mortgages, sovereign debt obligations or
similar assets, including, without limitation, collateralised bond obligations, collateralised loan
obligations or any similar security, and for the avoidance of doubt will not include any
Structured Finance Obligation; or
a Synthetic Security, the reference obligation applicable to which is a high yield bond of the
type described in paragraph (a) above.
"Incentive Investment Management Fee" means the fee payable (calculated at the Initial Rate of
Exchange) to the Investment Manager in arrear on each Payment Date, pursuant to the Investment
Management Agreement in an amount, as determined by the Collateral Administrator, equal to the
amounts specified in the Interest Proceeds Priority of Payments and the Principal Proceeds Priority of
Payments provided that such amount will only be payable to the Investment Manager if the Incentive
Investment Management Fee IRR Threshold has been reached.
"Incentive Investment Management Fee IRR Threshold" means the threshold which will have been
reached on the relevant Payment Date if the Class F Subordinated Notes Outstanding have received an
Internal Rate of Return of at least 12 per cent. (calculated on an annualised basis and on the basis of
the actual number of days divided by 360) on the initial principal amount of the Class F Subordinated
Notes from the Issue Date to the relevant Payment Date.
"Initial Investment Period" means the period from, and including, the Issue Date to, but excluding, the
Effective Date.
"Initial Purchaser" means Deutsche Bank AG, London Branch as initial purchaser pursuant to the
subscription agreement between it and the Issuer dated on or about 10 July 2007.
"Initial Rate of Exchange" means the following exchange rate for exchanging, respectively, Sterling for
Euro and Euro for Sterling: 0.6788:1.4732, rounded to four decimal places, and Dollar for Euro and Euro
for Dollar; 1.3373:0.7478, rounded to four decimal places.
"Initial Rating" means in respect of any Class of Notes and any Rating Agency, the ratings assigned to
such Class of Notes by such Rating Agency as at the Issue Date.
"Interest Accounts" means the Euro Interest Account, the Sterling Interest Account and the Dollar
Interest Account.
"Interest Accrual Period" means, in respect of:
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(a)
each Class A1 Drawing, either:
(i)
(ii)
(1) the period from and including the related Class A1 Drawing Date up to (but
excluding) the immediately succeeding Payment Date; and (2) the period from and
including a Payment Date to (but excluding) the immediately succeeding Payment Date;
or
(1) if so specified in the related Class A1 Drawing Request the period from and including
the related Class A1 Drawing Date up to (but excluding) the date falling one, three or six
months (or such other date as may be agreed by the Issuer and the Class A1
Noteholders) following the 15 th day of the month (or the next Business Day if not a
Business Day) in which the related Class A1 Drawing Date falls, and (2) thereafter
either (a) each successive period from and including the last day of the preceding
Interest Accrual Period to but excluding the immediately succeeding Payment Date; or
(2) if notified in writing by the Issuer or the Investment Manager to the Class A1
Noteholders (with copy to the Capital Commitment Registrar and the Trustee) not less
than two Business Days prior to the last day of the current Interest Accrual Period, such
other period of one, three or six months commencing on and including the last day of
the preceding Interest Accrual Period in respect thereof, provided that (i) no such
notification may be given which would result in such Interest Accrual Period ending on a
day following the last day of the Reinvestment Period and (ii) the Class A Interest
Coverage Test is satisfied; and
(b)
each Class A2 Note, Class A3 Note, Class B Note, Class C Note and Class D Note, Class E
Note and Class F Subordinated Note, the period from and including the Issue Date to, but
excluding, the first Payment Date and each successive period from and including each
Payment Date to, but excluding, the following Payment Date.
"Interest Amount" means, on each Payment Date, the amount of interest payable in respect of each
Minimum Denomination and Authorised Integral Amount in original principal amount of the Notes of any
Class indicated for any Accrual Period being:
(a)
(b)
(c)
in the case of the Class A1 Notes, the Class A1 Aggregate Interest Amount;
in the case of the Class A2 Notes, the Class A3 Notes, the Class B Notes, the Class C Notes,
the Class D Notes or the Class E Notes, as the case may be, the amount calculated by the
Calculation Agent as soon as practicable after 11.00 a.m. (Brussels time) on the relevant
Interest Determination Date in accordance with Condition 6(e) (Interest on the Class A2 Notes,
Class A3 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F
Subordinated Notes); and
in the case of the Class F Subordinated Notes, the amount calculated by the Calculation Agent
as soon as practicable after 11.00 a.m. (Brussels time) on the relevant Determination Date in
accordance with Condition 6(f) (Interest on the Class F Subordinated Notes),
together with, in each case, any interest payable on unpaid amounts pursuant to the terms of the Trust
Deed (which for the avoidance of doubt shall only be payable to the extent that any such non-payment
constitutes an Event of Default).
"Interest Coverage Amount" means, on any particular Measurement Date:
(a)
(b)
the Balance standing to the credit of the Interest Account;
plus the scheduled interest payments (and any commitment fees in respect of any Delayed
Drawdown Obligations but excluding any deferred interest on a Deferring Obligation) due but
not yet received (in each case regardless of whether the applicable due date has yet occurred)
(including for the avoidance of doubt interest on any Collateral Debt Obligation that is subject to
an Offsetting Credit Default Swap in the Due Period in which such Measurement Date occurs):
(i)
the Collateral Debt Obligations (excluding Non-Euro Obligations) excluding:
(A)
(B)
accrued and unpaid interest on Defaulted Obligations;
interest on any Collateral Debt Obligation to the extent that such Collateral Debt
Obligation does not provide for the scheduled payment of interest in cash;
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(C)
(D)
(E)
(F)
(G)
(H)
any amounts, to the extent that such amounts if not paid, will not give rise to a
default under the relevant Collateral Debt Obligation;
any amounts expected to be withheld at source or otherwise deducted in respect
of taxes;
interest on any Collateral Debt Obligation which has not paid cash interest on a
current basis for the lesser of 12 months and its most recent two interest periods;
any scheduled interest payments as to which the Issuer or the Investment
Manager has actual knowledge that such payment will not be made;
any Purchased Accrued Interest; and
any deferred interest on a Deferring Obligation.
(ii)
each of the Accounts (save in the case of the Synthetic Collateral Account and the
Derivative Counterparty Downgrade Collateral Account to the extent that interest
accrued in respect thereof is contractually payable by the Issuer to a third party)
including any portion of principal payments on any Eligible Investments purchased at a
discount which represents interest;
(c)
(d)
(e)
(f)
minus the amounts payable pursuant to paragraphs (A) through (G) inclusive of the Interest
Proceeds Priority of Payments on the following Payment Date;
minus (to the extent not already covered in (c) above) any Scheduled Periodic Issuer Offsetting
Credit Default Swap Payments payable on or prior to the following Payment Date to the extent
not already paid in the same Due Period (regardless of whether the applicable Payment Date
has yet occurred) on any Offsetting Credit Default Swap;
minus (to the extent not already covered in (c) above) any Scheduled Periodic Issuer Credit
Short Obligation Payments payable on or prior to the next Payment Date;
plus:
(i)
(ii)
any Scheduled Periodic Asset Swap Counterparty Payments under any Asset Swap
Transaction payable on or before the following Payment Date;
any Scheduled Periodic Interest Rate Hedge Counterparty Payments under any Interest
Rate Hedge Transaction payable on or before the following Payment Date;
(g)
any Scheduled Periodic Currency Hedge Counterparty Payments payable on or before to the
following Payment Date to the Issuer under any Currency Hedge Transaction.
For the purposes of calculating any Interest Coverage Amount, (i) the expected or scheduled interest
income on Floating Rate Collateral Debt Obligations and Eligible Investments and the expected or
scheduled interest payable on any Class of Floating Rate Notes and on any relevant Account shall be
calculated using then current interest rates applicable thereto; and (ii) the amount of any Dollar Interest
Proceeds or any Sterling Interest Proceeds shall be converted into Euro at the Spot Rate;
"Interest Coverage Ratio" means the Class B Interest Coverage Ratio, the Class C Interest Coverage
Ratio, the Class D Interest Coverage Ratio and the Class E Interest Coverage Ratio. For the purposes
of calculating an Interest Coverage Ratio, the expected interest income on Collateral Debt Obligations,
Eligible Investments and the Accounts (to the extent applicable) and the expected interest payable on
the relevant Senior Notes will be calculated using the then current interest rates applicable thereto.
"Interest Coverage Test" means the Class A Interest Coverage Test, the Class B Interest Coverage
Test, the Class C Interest Coverage Test, the Class D Interest Coverage Test and the Class E Interest
Coverage Test.
"Interest Determination Date" shall have the meaning given thereto in Condition 6(e)(A)(1) (Floating
Rate of Interest).
"Interest Proceeds" means all amounts paid or payable into the Interest Accounts from time to time
and, with respect to any Payment Date means any Interest Proceeds received or receivable by the
Issuer during the related Due Period, together with any other amounts to be disbursed out of the
Payment Accounts as Interest Proceeds on such Payment Date pursuant to the Interest Proceeds
Priority of Payments and pursuant to Condition 3(i) (Accounts).
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"Interest Proceeds Priority of Payments" means the priority of payments in respect of Interest
Proceeds set out in Condition 3(c)(i) (Application of Interest Proceeds).
"Interest Rate Hedge Agreement" means each 1992 or 2002 ISDA Master Agreement (Multicurrency-
Cross Border) (or such other ISDA pro forma master agreement as may be published by ISDA from time
to time), together with the Schedule (as defined therein and which shall be substantially in the form of
the Schedule executed on or about the Issue Date in respect of the Interest Rate Hedge Agreement)
and the transaction confirmation relating thereto and any ISDA credit support annexes, entered into by
the Issuer with the Interest Rate Hedge Counterparty, including any Replacement Interest Rate Hedge
Agreement.
"Interest Rate Hedge Counterparty" means each financial institution with which the Issuer enters into
an Interest Rate Hedge Agreement or any permitted assignee or successor thereto under the terms of
the related Interest Rate Hedge Agreement in each case, which satisfies the applicable Rating
Requirement (taking into account any guarantor thereof) and provided always that such financial
institution has the regulatory capacity as a matter of Dutch law to enter into derivatives transactions with
Dutch residents.
"Interest Rate Hedge Counterparty Termination Payment" means any amount payable by the
Interest Rate Hedge Counterparty to the Issuer upon termination of an Interest Rate Hedge Transaction.
"Interest Rate Hedge Issuer Termination Payment" means any amount payable to an Interest Rate
Hedge Counterparty upon termination of an Interest Rate Hedge Transaction.
"Interest Rate Hedge Replacement Payment" means any amount payable to an Interest Rate Hedge
Counterparty by the Issuer upon entry into of a Replacement Interest Rate Hedge Agreement (or
transaction thereunder) which is replacing an Interest Rate Hedge Agreement (or transaction
thereunder) which was terminated.
"Interest Rate Hedge Replacement Receipt" means any amount payable to the Issuer by an Interest
Rate Hedge Counterparty upon entry into a Replacement Interest Rate Hedge Agreement (or
transaction thereunder) which is replacing an Interest Rate Hedge Agreement (or transaction
thereunder) which has been terminated.
"Interest Rate Hedge Transaction" means an interest rate hedge transaction entered into under an
Interest Rate Hedge Agreement.
"Intermediary Obligation" means an interest in a loan which is structured to be acquired indirectly by
lenders therein at or prior to primary syndication thereof, including pursuant to a collateralised deposit or
guarantee, a sub-participation, a credit default swap or other arrangement which has the same
commercial effect and which, in each case, is 100 per cent. collateralised by such lenders.
"Internal Rate of Return" means, in respect of the Class F Subordinated Notes outstanding on any
date, the annual internal rate of return (calculated using Microsoft Excel XIRR) on the Class F
Subordinated Notes as of such date, being that discount rate which, when applied to all payments made
by the Issuer in respect of the Class F Subordinated Notes to such date produces a net present value of
those cash flows equal to the initial principal amount of the Class F Subordinated Notes on the Issue
Date as determined by the Collateral Administrator.
"Investment Company Act" means the United States Investment Company Act of 1940, as amended.
"Investment Grade" means a rating of at least "BBB-" by S&P or a rating of at least "Baa3" by Moody’s.
"Investment Manager Advance" means any amount which may be advanced by the Investment
Manager to the Issuer pursuant to the Investment Management Agreement on the terms set out therein
for the purpose of acquiring or exercising rights under any Collateral Enhancement Obligation.
"Investment Management Fee" means each of the Senior Investment Management Fee, the
Subordinated Investment Management Fee and the Incentive Investment Management Fee.
"Irish Stock Exchange" means Irish Stock Exchange Limited.
"Issue Date" means 10 July 2007 (or such other date as may shortly follow such date as may be agreed
between the Issuer and the Initial Purchaser and is notified to the Noteholders in accordance with
Condition 16 (Notices) and the Irish Stock Exchange).
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"Management Agreement" means the management agreement relating to the Issuer dated on or about
the date hereof between the Issuer and the Managing Directors.
"Managing Director" means Deutsche International Trust Company N.V. or such other person(s) who
may be appointed as Managing Director(s) of the Issuer from time to time.
"Market Value" means on any date of determination:
(a)
(b)
(c)
the mean bid price determined by an independent pricing service;
if such service is not available, the mean bid price determined by three independent brokerdealers
active in the trading of one or more Collateral Debt Obligations or, if three such brokerdealer
prices are not available, the lower of such two bid prices determined by two such brokerdealers
or if two such broker-dealer prices are not available, the mean bid price determined by
one such broker-dealer; or
if the determinations of such broker-dealers are not available, then the fair market value thereof
determined by the Investment Manager on a best efforts basis in a manner consistent with
reasonable and customary market practice, provided that for the purpose of the definition of
"CCC Market Value" the Market Value of a Collateral Debt Obligation will be the lower of: (a)
the higher of (x) 70% and (y) the S&P Recovery Rate, (b) the Moody's Recovery Rate and (c)
the Market Value as determined by the Investment Manager,
in each case, as notified to the Collateral Administrator by the Investment Manager on the date of
determination thereof, which shall, for the avoidance of doubt, be expressed as a percentage.
"Maturity Date" means the Payment Date falling on 15 August 2024.
"Measurement Date" means:
(a)
(b)
(c)
(d)
(e)
(f)
the Effective Date;
for the purposes of determining satisfaction of the Reinvestment Criteria after the Effective
Date, firstly, immediately prior to receipt of any Principal Proceeds which are to be reinvested
without taking into account such sale and, secondly, taking into account the proposed sale and
reinvestment of the Sale Proceeds thereof in Substitute Collateral Debt Obligations;
the date of acquisition of any additional Collateral Debt Obligation following the Effective Date;
each Determination Date;
the date as at which any Report is prepared; and
with reasonable (and not less than two Business Days’) notice in writing, any Business Day
requested by any Rating Agency.
"Mezzanine Obligation" means (a) a Deferrable Obligation; or (b) a mezzanine loan obligation, a
second lien loan or other comparable debt obligation (including any such loan or debt obligation with
attached warrants and including any such obligation which is evidenced by an issue of notes) (other
than notes which are High Yield Bonds), as determined by the Investment Manager, or a Participation
therein; or (c) a Synthetic Security, the Reference Obligation applicable to which is an obligation of the
type described in (a).
"Minimum Denomination" means:
(a) in the case of the Regulation S Notes of each Class, €100,000;
(b)
in the case of Rule 144A Notes of each Class, €250,000; and
(c) in the case of AI Notes, €250,000.
"Monthly Report" means any monthly report defined as such in the Investment Management
Agreement which is prepared by the Collateral Administrator (in consultation with the Investment
Manager) on behalf of the Issuer on such dates as are set forth in the Investment Management
Agreement, and which is deliverable to the Issuer, the Trustee, the Investment Manager and the Rating
Agencies and, upon request therefor in accordance with Condition 4(f) (Information Regarding the
Collateral), to any holder of a beneficial interest in any Note and which shall include information
regarding the status of certain of the Collateral pursuant to the Investment Management Agreement.
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"Moody’s" means Moody’s Investors Service, Inc. and any successor or successors thereto.
"Moody’s Collateral Value" means in the case of any applicable Collateral Debt Obligation the lower of:
(a)
(b)
its prevailing Market Value; and
the relevant Moody’s Recovery Rate;
in each case, multiplied by its outstanding principal amount (in the case of any Non-Euro Obligation, that
are subject to an Asset Swap Transaction converted into Euro at the applicable Asset Swap Transaction
Exchange Rate), provided that if the Market Value cannot be determined for any reason, the Market
Value shall be deemed to be for this purpose the relevant Moody’s Recovery Rate multiplied by its
outstanding principal amount (in the case of any Non-Euro Obligation, converted into Euro at the
Applicable Exchange Rate).
"Moody’s Recovery Rate" means, in respect of each Collateral Debt Obligation, the recovery rate
determined in accordance with the Investment Management Agreement.
"Non-Call Period" means the period from and including, the Issue Date, up to, but excluding, the
Payment Date falling on or about 15 August 2010.
"Non-Euro Account" means the account into which amounts due to the Issuer in respect of each Non-
Euro Obligation (excluding Dollar denominated amounts or Sterling denominated amounts) and out of
which amounts from the Issuer to each Asset Swap Counterparty under each Asset Swap Transaction
are to be paid, which shall be subdivided in the ledgers of the Account Bank in respect of each individual
currency received and each individual Non-Euro Obligation.
"Non-Euro Obligation" means any Collateral Debt Obligation purchased by or on behalf of the Issuer
which is not denominated in Euro (or in one of the predecessor currencies of those EU member states
which have adopted the Euro as their currency) but is denominated in the currency of a Qualifying
Country and satisfies each of the Eligibility Criteria.
"Noteholders" and "holders" means (a) in the case of a Global Certificate, the holder of such Note and
(b) in the case of a Definitive Certificate, the person in whose name such Definitive Certificate is
registered.
"Note Payment Sequence" means the application of Interest Proceeds in accordance with the Interest
Proceeds Priority of Payments or the application of Principal Proceeds in accordance with the Principal
Proceeds Priority of Payments, as applicable, in the following order:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
to the redemption of the Class A1 Notes and Class A2 Notes in accordance with the Class
A1/A2 Note Redemption Method;
to the redemption of the Class A3 Notes;
to the payment on a Pro Rata basis of accrued and unpaid Interest Amounts on the Class B
Notes and any Deferred Interest on the Class B Notes, until such amounts have been paid in
full;
to the redemption of the Class B Notes (on a Pro Rata basis) at the applicable Redemption
Price in whole or in part until the Class B Notes have been fully redeemed;
to the payment on a Pro Rata basis of accrued and unpaid Interest Amounts on the Class C
Notes and any Deferred Interest on the Class C Notes, until such amounts have been paid in
full;
to the redemption of the Class C Notes (on a Pro Rata basis) at the applicable Redemption
Price in whole or in part until the Class C Notes have been fully redeemed;
to the payment on a Pro Rata basis of accrued and unpaid Interest Amounts on the Class D
Notes and any Deferred Interest on the Class D Notes, until such amounts have been paid in
full;
to the redemption of the Class D Notes (on a Pro Rata basis) at the applicable Redemption
Price in whole or in part until the Class D Notes have been fully redeemed
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(i)
(j)
to the payment on a Pro Rata basis of accrued and unpaid Interest Amounts on the Class E
Notes and any Deferred Interest on the Class E Notes, until such amounts have been paid in
full; and
to the redemption of the Class E Notes (on a Pro Rata basis) at the applicable Redemption
Price in whole or in part until the Class E Notes have been fully redeemed,
provided that, for the purposes of any redemption of the Notes in accordance with the Note Payment
Sequence following any breach of Coverage Tests, only that Class of Notes referred to in the title of the
Coverage Test so breached, together with all Classes of Notes ranking in priority thereto, shall be
redeemed save for breaches of the Class E Par Value Test where only that Class of Notes referred to in
the title of the Par Value Test so breached shall be redeemed.
"Note Tax Event" means, at any time, the introduction of a new, or any change in, any home jurisdiction
or foreign tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial decision or
interpretation (whether proposed, temporary or final) which results in (or would on the next Payment
Date result in) any payment of principal or interest on the Class A Notes (including any Class A1
Commitment Fee and any Break Cost due to a Class A1 Noteholder), the Class B Notes, the Class C
Notes, the Class D Notes, the Class E Notes and/or the Class F Subordinated Notes (other than a
payment in respect of Deferred Interest) becoming subject to any withholding tax.
"Obligor" means, in respect of a Collateral Debt Obligation, the borrower thereunder or issuer thereof
or, in either case, the guarantor thereof (as determined by the Investment Manager on behalf of the
Issuer) including, where the context requires, the Reference Entity under any Synthetic Security.
"Offer" means, with respect to any Collateral Debt Obligation, (a) any offer by the Obligor under such
obligation or by any other Person made to all of the creditors of such Obligor in relation to such
obligation to purchase or otherwise acquire such obligation (other than pursuant to any redemption in
accordance with the terms of the related Underlying Instruments) or to convert or exchange such
obligation into or for cash, securities or any other type of consideration or (b) any solicitation by the
Obligor of such obligation or any other Person to amend, modify or waive any provision of such
obligation or any related Underlying Instrument.
"Offsetting Credit Default Swap" means an unfunded credit default swap which complies with the
provisions of the Investment Management Agreement which apply to Offsetting Credit Default Swap
entered into between the Issuer (as protection buyer) and an Offsetting Credit Default Swap
Counterparty (as protection seller), under an ISDA Master Agreement (Multicurrency Cross Border
Currency) or 2002 ISDA Master Agreement (or such other ISDA pro forma Master Agreement as may
be published by ISDA from time to time) (together with the schedule and confirmation relating thereto,
including any guarantee thereof and any credit support annex entered into pursuant to the terms thereof,
and each as amended or supplemented from time to time, an "Offsetting Credit Default Swap
Agreement"), the Reference Obligation(s) of which is a Collateral Debt Obligation owned by the Issuer,
the effect of which hedges the Issuer's credit exposure under such Collateral Debt Obligation.
"Offsetting Credit Default Swap Counterparty" means, pursuant to the terms of an Offsetting Credit
Default Swap, any entity or person which:
(a)
(b)
is required to make payments as protection seller directly to the Issuer, or any guarantor of
such entity; and
satisfies the Rating Requirement.
"Offsetting Credit Default Swap Counterparty Termination Payment" means any amount payable to
the Issuer by the Offsetting Credit Default Swap Counterparty upon termination or modification of an
Offsetting Credit Default Swap in whole or in part excluding any Cash Settlement Amount and Physical
Settlement Amount.
"Offsetting Credit Default Swap Issuer Replacement Payment" means any amount payable by the
Issuer to an Offsetting Credit Default Swap Counterparty upon entry into a Replacement Offsetting
Credit Default Swap.
"Offsetting Credit Default Swap Issuer Termination Payment" means any amount payable to the
Offsetting Credit Default Swap Counterparty by the Issuer upon termination or modification of any
Offsetting Credit Default Swap in whole or in part excluding any Defaulted Offsetting Credit Default
Swap Issuer Termination Payment or amounts which are netted off against sale proceeds received in
accordance with the definition of "Sale Proceeds".
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"Offsetting Credit Default Swap Obligation" is a Collateral Debt Obligation that has a corresponding
Offsetting Credit Default Swap associated with it.
"Offsetting Credit Default Swap Replacement Receipt" means any amount payable by an Offsetting
Credit Default Swap Counterparty to the Issuer upon entry into a Replacement Offsetting Credit Default
Swap.
"Ordinary Resolution" means an Ordinary Resolution as described in Condition 14 (Meetings of
Noteholders, Modification, Waiver and Substitution) and as further described in, and as defined in, the
Trust Deed.
"Outstanding" means in relation to the Notes of a Class as of any date of determination, all of the Notes
of such Class issued as further defined in the Trust Deed and, in relation to the Class A1 Notes and only
in respect of calculating voting rights, giving instructions to the Trustee, determining whether a quorum
has been met or in the event of any conflict between or within Classes of Notes, at any time, the Class
A1 Commitment which has not been cancelled at such time.
"Pari Passu Provisions" shall have the meaning given thereto in Condition 3(c)(v) (Pari Passu
Provisions).
"Participation" means an interest in a Mezzanine Obligation or a Senior Loan acquired indirectly by the
Issuer by way of sub-participation from a Selling Institution which shall, for the purposes of the Bivariate
Risk Table (as defined in the Investment Management Agreement) and the definitions of Secured Senior
Loan and Mezzanine Obligation only, include Intermediary Obligations.
"Participation Agreement" means an agreement between the Issuer and a Selling Institution in relation
to the purchase by the Issuer of a Participation.
"Par Value Ratio" means the Class A Par Value Ratio or the Class B Par Value Ratio or the Class C
Par Value Ratio or the Class D Par Value Ratio or the Class E Par Value Ratio (as applicable).
"Par Value Test" means the Class A Par Value Test or the Class B Par Value Test or the Class C Par
Value Test or the Class D Par Value Test or the Class E Par Value Test (as applicable).
"Par Value Test Excess Adjustment Amount" means, on any date of determination, the sum of:
(a)
an amount equal to the product of:
(i)
(ii)
the excess, if any, of (A) the Aggregate Principal Balance of the CCC Obligations as of
such date over (B) 5 per cent. of the Aggregate Collateral Balance; and
one minus the weighted average of the CCC Market Values (as a percentage of the
principal amount of the CCC Obligations and as determined by the Collateral
Administrator) of the CCC Obligations the Aggregate Principal Balance of which is in
excess of 5 per cent. of the Aggregate Collateral Balance; and
(b)
an amount equal to the product of:
(i)
(ii)
the Aggregate Principal Balance of all Discount Obligations as of such date; and
one minus the weighted average of the purchase prices (as a percentage of the
principal amount of the relevant Discount Obligation, expressed as a decimal amount,
as determined by the Collateral Administrator) paid by, or on behalf of, the Issuer
(excluding accrued interest thereon) of all Discount Obligations,
provided that, in the event that any Collateral Debt Obligation falls within more than one of the
paragraphs above, it shall be included in whichever of such paragraphs would result in the higher Par
Value Test Excess Adjustment Amount.
"Payment Accounts" means the Euro Payment Account, the Sterling Payment Account and the Dollar
Payment Account.
"Payment Date" means 15 February and 15 August in each year, commencing 15 February 2008, the
Maturity Date and any Redemption Date provided that if any Payment Date would otherwise fall on a
day which is not a Business Day, it shall be postponed to the next day that is a Business Day (unless it
would thereby fall in the following month, in which case it shall be brought forward to the immediately
preceding Business Day).
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"Payment Date Report" means the accounting report defined as such in the Investment Management
Agreement which is prepared by the Collateral Administrator (in consultation with the Investment
Manager) on behalf of the Issuer and deliverable to the Issuer, the Trustee, the Investment Manager,
the Initial Purchaser, to any Noteholder (upon written request of such holder) and each Rating Agency
not later than the second Business Day preceding the related Payment Date.
"Permitted Class P Combination Coupon" means 9.00 per cent. per annum.
"Person" means an individual, corporation (including a business trust), partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof), unincorporated association or
government or any agency or political subdivision thereof.
"Physical Settlement Amount" means, in respect of any Offsetting Credit Default Swap or Credit Short
Obligation (as the case may be) the terms of which specify that "physical settlement" applies, the
amount payable by the Offsetting Credit Default Swap Counterparty or Credit Short Obligation
Counterparty (as the case may be) (in each case as credit protection seller) to the Issuer (as credit
protection buyer) thereunder against delivery of Deliverable Obligations in the amount and with
characteristics required pursuant to the terms of such Offsetting Credit Default Swap or Credit Short
Obligation (as the case may be).
"Portfolio" means the Collateral Debt Obligations, Collateral Enhancement Obligations or Exchanged
Equity Securities and Eligible Investments held by or on behalf of the Issuer from time to time.
"Portfolio Profile Tests" means the Portfolio Profile Tests each as defined in the Investment
Management Agreement.
"Portfolio Weighted Average Life" of the Collateral Debt Obligations as at any Determination Date
shall be expressed as a number of years and calculated by (i) summing the products obtained by
multiplying (a) the Principal Balance (or portion thereof) of each Collateral Debt Obligation (excluding
Defaulted Obligations) that is then held by the Issuer and that matures or amortises on any date
subsequent to such date of determination by (b) the number of years from such Determination Date to
the date of such maturity or amortisation and (ii) dividing such sum by the Aggregate Principal Balance
(excluding Defaulted Obligations).
"Post-Enforcement Priority of Payments" means following the enforcement of security over the
Collateral, the priority of payments set out in Condition 11(c) (Post-Enforcement Priority of Payments).
"Pre-Enforcement Priority of Payments" means prior to enforcement of security over the Collateral in
the case of Interest Proceeds, the Interest Proceeds Priority of Payments, in the case of Principal
Proceeds, the Principal Proceeds Priority of Payments, in the case of Collateral Enhancement
Obligation Proceeds, the Collateral Enhancement Obligation Proceeds Priority of Payments.
"Presentation Date" means a day which (subject to Condition 12 (Prescription)):
(a)
(b)
(c)
is a Business Day;
is or falls after the relevant due date or, if the due date is not or was not a Business Day in the
place of presentation, is or falls after the next following Business Day which is a Business Day
in the place of presentation; and
if applicable, is a Business Day in which the account specified by the payee is open.
"Principal Account" means the Euro Principal Account, the Sterling Principal Account and the Dollar
Principal Account, (with the amount of any Dollar Principal Proceeds, or Sterling Principal Proceeds
being converted into Euro at the Spot Rate).
"Principal Amount Outstanding" means, in relation to any Class of Notes and at any time, the
aggregate principal amount outstanding under such Class of Notes at that time, for the purposes of
which any Class A1 Drawn Amount and Class A1 Allocated Amount in a currency other than euro shall
be converted into euro at the prevailing Spot Rate and which in the case of the Class A1 Notes means
the Class A1 Drawn Amount plus the Class A1 Allocated Amount save for the purposes of voting on any
matter, giving instructions or directions, determining whether any relevant quorum requirements have
been met or in the event of any conflict between or within the Notes of any Class, for which purpose the
Principal Amount Outstanding of the Class A1 Notes and the Class A1 Noteholders, shall be determined
by reference to, in respect of the Class A1 Notes, the aggregate of the principal amount outstanding of
the Class A1 Notes and the Class A1 Available Commitment (in each case determined in euro with
amounts in a currency other than euro converted into euro at the prevailing Spot Rate), as more fully set
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out in Condition 14 (Meetings of Noteholders, Modification, Waiver and Substitution), and, which in the
case of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes shall, for the
avoidance of doubt, include that element of the principal amount outstanding which represents Deferred
Interest which has been capitalised pursuant to Condition 6(c) (Deferral of Interest).
"Principal Balance" means, with respect to any Collateral Debt Obligation, as of any date of
determination, the outstanding principal amount thereof (excluding any interest capitalised pursuant to
the terms of such instrument unless it is Purchased Accrued Interest), provided however that:
(a)
the Principal Balance of a Collateral Debt Obligation received upon acceptance of an Offer to
exchange a Collateral Debt Obligation for such Collateral Debt Obligation where such Offer
expressly states that failure to accept such offer may result in a default under any applicable
Underlying Instrument shall be deemed to be the lowest of:
(i)
(ii)
(iii)
a percentage of the outstanding principal amount thereof equal to the S&P Class A
Recovery Rate for such Collateral Debt Obligation based upon its S&P Priority
Category, until such time as Interest Proceeds or Principal Proceeds, as applicable, are
first received when due with respect to such Collateral Debt Obligation;
a percentage of the outstanding principal amount thereof equal to Moody’s Recovery
Rate for such Collateral Debt Obligation, until such time as Interest Proceeds or
Principal Proceeds as applicable, are first received when due with respect to such
Collateral Debt Obligation; and
a percentage of the outstanding principal amount thereof equal to the Market Value
thereof, until such time as any payment is received by or on behalf of the Issuer in
respect of such Collateral Debt Obligation (provided that this sub-paragraph (iii) shall
not apply if the Market Value cannot be determined for any reason);
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
the Principal Balance of any Non-Euro Obligation that is the subject of an Asset Swap
Transaction shall be the Euro outstanding notional amount of any Asset Swap Transaction
entered into in respect thereof;
the Principal Balance of a Synthetic Security shall be the notional amount specified as such in
the Synthetic Security as reduced from time to time as a result of certain "Credit Events"
occurring in respect of the Reference Obligations specified therein;
the Principal Balance of any cash shall be the amount of such cash;
the Principal Balance of any Revolving Security and Delayed Drawdown Obligation as of any
date of determination, shall be the outstanding principal amount of such Revolving Security and
Delayed Drawdown Obligation, plus any undrawn commitments that have not been irrevocably
reduced with respect to such Revolving Security and Delayed Drawdown Obligation;
the Principal Balance of any Credit Short Obligation shall be zero (except when used in the
context of the calculation of paragraph (m) of the Portfolio Profile Tests and the calculation of
the Investment Management Fees when it shall be the notional amount specified as such in the
Credit Short Obligation);
for all purposes, notwithstanding paragraphs (b) and (c) above, the Principal Balance of any
Collateral Debt Obligation that is the subject of an Offsetting Credit Default Swap shall be the
outstanding principal amount thereof without taking into account any Offsetting Credit Default
Swap;
in the case of a Collateral Debt Obligation denominated in Sterling or Dollars which is not an
Asset Swap Obligation, the outstanding principal amount thereof in Sterling or Dollars,
converted into Euro at the Initial Rate of Exchange (except for the purpose of calculating any
Coverage Test, the definitions of CCC Market Value, Market Value and Moody's Collateral
Value, in which case the outstanding principal amount thereof in Sterling or Dollars will be
converted into Euro at the then prevailing Spot Rate); and
the Principal Balance of any Deferring Obligation shall be the lower of Moody's Collateral Value
and S&P Collateral Value.
"Principal Proceeds" means all amounts paid or payable into the Euro Principal Account or the Sterling
Principal Account or the Dollar Principal Account (as the case may be) from time to time (and, with
respect to any Payment Date, means Principal Proceeds to be applied in accordance with the Priorities
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of Payment on such Payment Date) and, in each case, shall include any other amounts to be disbursed
as Principal Proceeds on such Payment Date pursuant to Condition 3(i) (Accounts) (including for the
avoidance of doubt any amounts paid to the Issuer pursuant to any Offsetting Credit Default Swap).
"Principal Proceeds Priority of Payments" means the priority of payments in respect of Principal
Proceeds set out in Condition 3(c)(ii) (Application of Principal Proceeds).
"Priorities of Payment" means, the Pre-Enforcement Priority of Payments and the Post-Enforcement
Priority of Payments as set out in Condition 3(c) (Pre-Enforcement Priority of Payments) and Condition
11(c) (Post-Enforcement Priority of Payments).
"Pro Rata" means, when used in respect of any payment of any amount to two or more persons or of
two or more obligations (each "Pro Rated Obligations") which is to be allocated between such Pro
Rated Obligations "Pro Rata", the allocation of the amount available for payment between such Pro
Rated Obligations in proportions equal to the proportion that each such Pro Rated Obligation represents
of the sum of all such Pro Rated Obligations, which shall be determined upon redemption in full of any
Class of Notes or reduction in the amount of any Note outstanding down to €1 pursuant to Condition 7(l)
(Notice of Redemption) by reference to the amount of such Notes outstanding immediately prior to such
redemption or reduction.
"Purchased Accrued Interest" means, with respect to any Due Period, all payments of interest and
proceeds of sale received during such Due Period in relation to any Collateral Debt Obligation, in each
case, to the extent that such amounts represent accrued interest in respect of such Collateral Debt
Obligation (including but not limited to in respect of any Mezzanine Obligation or any accrued interest
which, as at the time of purchase had been capitalised and added to the principal amount of such
Mezzanine Obligation in accordance with its terms), which was purchased at the time of acquisition
thereof with Principal Proceeds, for the avoidance of doubt, excluding any such accrued interest that is
paid for out of the subscription proceeds of the Notes on the Issue Date or is owed to the Initial
Purchaser as part of the Financed Amount, details of which are notified to the Issuer, the Initial
Purchaser and the Collateral Administrator by the Investment Manager on or prior to the Issue Date.
With respect to any Dollar or Sterling denominated payments received these will be converted into Euro
at the Spot Rate;
"Purposely Deferring Obligation" means a Deferrable Obligation that was originally structured in
anticipation of the deferral of all, or a portion of the payment of accrued, unpaid interest other than a
Deferring Obligation.
"Put Option" means an option of the Issuer to sell Collateral Debt Obligations with a maturity longer
than the Stated Maturity to a Put Option Counterparty at any time on or prior to the Maturity Date at or
above par and in respect of which Rating Agency Confirmation shall have been obtained.
"Put Option Counterparty" means, pursuant to a Put Option, any entity or person which (i) is required
to purchase one or more Collateral Debt Obligations with a maturity longer than the Stated Maturity at
any time on or prior to the Maturity Date at or above a par and (ii) satisfies the Rating Requirement.
"QIB" means a Person who is a qualified institutional buyer as defined in Rule 144A.
"QIB/QP" means a Person who is both a QIB and a QP.
"QP" means a Person who is a qualified purchaser as defined in Section 2(a)(51) of the Investment
Company Act.
"Qualifying Country" means any of Australia, Austria, Belgium, Bermuda, Cayman Islands, the
Channel Islands, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein,
Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United
States or Canada, or any other EU member state with a foreign currency ceiling of at least "Aa3" by
Moody's and at least "AA-" by S&P or any other country in respect of which Rating Agency Confirmation
has been received.
"Rated Notes" means the Senior Notes.
"Rating Agency" means Moody’s or S&P, as applicable, provided that if at any time Moody’s and/or
S&P ceases to provide rating services, any other internationally recognised credit rating agency or rating
agencies (as applicable) selected by the Issuer and satisfactory to the Trustee (a "Replacement Rating
Agency", and "Rating Agency" means any such rating agency). In the event that at any time a Rating
Agency is replaced by a Replacement Rating Agency, references to rating categories of the original
Rating Agency in these Conditions, the Trust Deed and the Investment Management Agreement shall
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e deemed instead to be references to the equivalent categories of the relevant Replacement Rating
Agency as of the most recent date on which such other rating agency published ratings for the type of
security in respect of which such Replacement Rating Agency is used.
"Rating Agency Confirmation" means, with respect to any specified action or determination, receipt by
the Issuer and the Trustee of written confirmation by each Rating Agency which has assigned ratings to
the Notes that are Outstanding (or, if applicable, the Rating Agency specified) that such specified action,
determination or appointment will not result in the reduction or withdrawal of any of the ratings currently
assigned to the Notes by such Rating Agency.
"Rating Confirmation Plan" means a plan provided by the Investment Manager to the Rating Agencies
setting forth the timing and manner of acquisition of additional Collateral Debt Obligations and/or any
other intended action which will cause confirmation of the Initial Ratings, as further described and as
defined in the Investment Management Agreement.
"Rating Requirement" means:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
in the case of the Account Bank, a short-term issuer credit rating of at least "A1+" by S&P and
a short-term rating of "P-1" and a long-term senior unsecured rating of at least "A1" by
Moody’s; or
in the case, of the Custodian, a short-term issuer credit rating of at least "A1" by S&P and a
short-term rating of at least "P-1" and a long-term senior unsecured rating of at least "A2" by
Moody’s; or
in the case of any Asset Swap Counterparty, a short-term issuer credit rating of at least "A1+"
by S&P and a short-term rating of at least "P-1" and a long-term senior unsecured rating of at
least "A2" by Moody’s; or
in the case of any Interest Rate Hedge Counterparty, a short-term issuer credit rating of at least
"A1" by S&P and a short-term rating of "P-1" and a long-term senior unsecured rating of at
least "A2" by Moody's; or
in the case of any Currency Hedge Counterparty, a short-term issuer credit rating of at least
"A1+" by S&P and a short-term rating of "P-1" and a long-term senior unsecured rating of at
least "A2" by Moody's; or
in the case of any Selling Institution, a long-term issuer credit rating of at least "A" by S&P and
a short-term issuer credit rating of "P-1" and a long-term senior unsecured rating of at least
"A2" by Moody’s; or
in the case of any Synthetic Counterparty, a long-term issuer credit rating of at least "A" by
S&P and a short-term rating of "P-1" and a long-term senior unsecured rating of at least "A2"
by Moody’s; or
in the case of the Principal Paying Agent, a short-term rating of at least "P-1" by Moody's; or
in the case of any Offsetting Credit Default Swap Counterparty, a short-term issuer credit rating
of at least "A1+" by S&P and a short-term rating of "P-1" and a long-term senior unsecured
rating of at least "A2" by Moody's; or
in the case of any Credit Short Obligation Counterparty, a long-term issuer credit rating of at
least "A1" by S&P and a short-term rating of "P-1" and a long-term senior unsecured rating of
at least "A2" by Moody's; or
in the case of any Put Option Counterparty, a short-term issuer credit rating of at least "A1+" by
S&P and a short-term rating of at least "P-1" and a long-term senior unsecured rating of at least
"A1" by Moody's,
or, in each case, if any of the requirements is not satisfied, by any of the parties referred to above, (i)
Rating Agency Confirmation is received in respect of such party or (ii) where the obligations of such
party are guaranteed by an entity having the applicable Rating Requirement.
"Redemption Date" means each date specified for a redemption of the Notes of a Class pursuant to
Condition 7 (Redemption) or the date on which the Notes of such Class are accelerated pursuant to
Condition 10 (Events of Default), or in each case, if such day is not a Business Day, the next day that is
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a Business Day (unless it would fall in the following month, in which case such date shall be brought
forward to the immediately preceding Business Day).
"Redemption Notice" means a redemption notice in the form available from any of the Transfer Agent
which has been duly completed by a Noteholder and which specifies, amongst other things, the
applicable Redemption Date.
"Redemption Price" means, when used with respect to:
(a)
(b)
(c)
any Class F Subordinated Note, such Class F Subordinated Note’s Pro Rata share (calculated
in accordance with paragraphs (DD) and (EE) of Condition 3(c)(i) (Application of Interest
Proceeds) and paragraphs (E) and (F) of Condition 3(c)(ii) (Application of Principal Proceeds))
of the aggregate proceeds of liquidation of the Collateral, or realisation of the security thereover
in such circumstances, remaining following application thereof in accordance with the Priorities
of Payment;
any Class A1 Note, 100 per cent. of the Class A1 Drawn Amount thereof (if any), together with
accrued and unpaid interest in respect thereof and the related Break Cost (if a Class A1
Drawing is repaid on a Business Day other than the Business Day following the last day of the
related Interest Accrual Period due and payable by the Issuer, in addition to, in the case of a
redemption in full, any accrued and unpaid Class A1 Commitment Fee; and
any Rated Note (other than the Class A1 Notes), 100 per cent. of the Principal Amount
Outstanding thereof (if any), together with interest (if any) payable in respect thereof,
provided that, in the event that the Notes become subject to redemption in whole (but not in part)
pursuant to more than one Condition, the Redemption Price applicable upon redemption thereof shall be
that which relates to the redemption of the Notes which would occur first in time pursuant to the relevant
provisions thereof.
"Redemption Threshold Amount" means the aggregate of all amounts determined following
consultation with the Investment Manager on the basis of information available at the date of
determination thereof which would be due and payable on redemption of the Notes on the scheduled
Redemption Date, to the extent such amounts are ascertainable following consultation with the
Investment Manager pursuant to Condition 3(c) (Pre-Enforcement Priority of Payments) which rank in
priority to payments in respect of the Class F Subordinated Notes in accordance with the Priorities of
Payment (taking into account any termination payments payable under any Derivative Transaction upon
termination thereof in such circumstances and including a reasonable reserve determined by the
Investment Manager to cover expenses payable by the Issuer prior to or in connection with such
redemption in priority to the Rated Notes pursuant to the Priorities of Payment).
"Reference Banks" has the meaning given thereto in paragraph (2) of Condition 6(e)(A) (Floating Rate
of Interest).
"Reference Entity" means the entity to whose credit any Synthetic Security is linked.
"Reference Obligation" means an obligation with the characteristics of a Senior Loan or Mezzanine
Loan to which a Synthetic Security or a Credit Short Obligation or an Offsetting Credit Default Swap is
linked and which is not for the avoidance of doubt a Synthetic Security, a Credit Short Obligation or an
Offsetting Credit Default Swap.
"Register" means the register of holders of the legal title to the Definitive Notes kept by the Registrar
pursuant to the terms of the Agency Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Certificates" means the Regulation S Notes of each Class (other than the Class
A1 Notes) sold outside the United States to non U.S. Persons in reliance on Regulation S under the
Securities Act (which will be deposited on the Issue Date with Euroclear and Clearstream, Luxembourg)
will each be represented on issue by beneficial interests in one or more permanent global certificates of
such Class in fully registered form, without interest coupons or principal receipts.
"Regulation S Notes" means the Notes offered for sale to non-U.S. Persons outside of the United
States in reliance on Regulation S.
"Reinvestment Criteria" has the meaning set forth in the Investment Management Agreement.
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"Reinvestment Diversion Ratio" means the percentage derived on any date of determination by
dividing (i) the amount equal to the Aggregate Collateral Balance minus the Par Value Test Excess
Adjustment Amount by (ii) the aggregate Principal Amount Outstanding of all the Senior Notes, in each
case, as of such date.
"Reinvestment Diversion Test" means a test that will be satisfied on any date of determination if the
Reinvestment Diversion Ratio is greater than or equal to 102.1 per cent.
"Reinvestment Period" means the period from and including the Issue Date up to and including the
earliest of (a) the end of the Due Period preceding the Payment Date falling 15 August 2014, or, if such
day is not a Business Day, the immediately following Business Day, (b) the date of the acceleration of
the Notes pursuant to Condition 10(b) (Acceleration) and (c) the date on which the Investment Manager
reasonably believes and notifies the Issuer, the Rating Agencies and the Trustee that it can no longer
reinvest in additional Collateral Debt Obligations in accordance with the Reinvestment Criteria.
"Relevant Date" means whichever is the later of (a) the date on which any payment first becomes due
and (b) if the full amount payable has not been received by the Principal Paying Agent or the Trustee
(as applicable) on or prior to such due date, the date on which the full amount having been so received,
notice to that effect shall have been given to the Noteholders in accordance with Condition 16 (Notices).
"Replacement Asset Swap Agreement" means any Asset Swap Agreement entered into by the Issuer
in accordance with the provisions of the Investment Management Agreement upon termination of an
existing Asset Swap Agreement on substantially the same terms as such existing Asset Swap
Agreement, that preserves for the Issuer the economic effect of the terminated Asset Swap
Transactions outstanding thereunder, subject to such amendments thereto as may be agreed by the
Investment Manager and in respect of which Rating Agency Confirmation is obtained unless such
Replacement Asset Swap Agreement is a Form-Approved Asset Swap.
"Replacement Credit Short Obligation" means any Replacement Credit Short Obligation entered into
by the Issuer in accordance with the provisions of the Investment Management Agreement upon
termination of an existing Credit Short Obligation on substantially the same terms as such existing
Credit Short Obligation, that preserves for the Issuer the economic effect of the terminated Credit Short
Obligation outstanding thereunder, subject to such amendments thereto as may be agreed by the
Investment Manager, acting on behalf of the Issuer and in respect of which Rating Agency Confirmation
is obtained.
"Replacement Currency Hedge Agreement" means any Currency Hedge entered into by the Issuer,
or the Investment Manager on its behalf, in accordance with the provisions of the Investment
Management Agreement upon termination of an existing Currency Hedge on substantially the same
terms as such terminated Currency Hedge, that preserves for the Issuer the economic effect of the
terminated Currency Hedge, subject to such amendments thereto as may be agreed by the Investment
Manager, acting on behalf of the Issuer.
"Replacement Derivative Agreement" means any Replacement Asset Swap Agreement, Replacement
Interest Rate Hedge Agreement, Replacement Credit Short Obligation and Replacement Offsetting
Credit Default Swap.
"Replacement Interest Rate Hedge Agreement" means any Interest Rate Hedge Agreement entered
into by the Issuer in accordance with the provisions of the Investment Management Agreement upon
termination of an existing Interest Rate Hedge Agreement in full on substantially the same terms as
such existing Interest Rate Hedge Agreement, that preserves for the Issuer the economic effect of the
terminated Interest Rate Hedge Agreement, subject to such amendments thereto as may be agreed by
the Trustee and in respect of which Rating Agency Confirmation is obtained.
"Replacement Offsetting Credit Default Swap" means any Offsetting Credit Default Swap entered into
by the Issuer in accordance with the provisions of the Investment Management Agreement upon
termination of an existing Offsetting Credit Default Swap on substantially the same terms as such
existing Offsetting Credit Default Swap, that preserves for the Issuer the economic effect of the
terminated Offsetting Credit Default Swap outstanding thereunder, subject to such amendments thereto
as may be agreed by the Investment Manager, acting on behalf of the Issuer and in respect of which
Rating Agency Confirmation is obtained.
"Report" means each Monthly Report, the Payment Date Report and/or Class F Subordinated
Noteholder Report.
"Resolution" means any Ordinary Resolution or Extraordinary Resolution.
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"Revolving Security" means any Collateral Debt Obligation (other than a Delayed Drawdown
Obligation) that is a loan (including, without limitation, revolving loans, funded and unfunded portions of
revolving credit lines and letter of credit facilities, Unfunded Amounts under specific facilities and other
similar loans and investments) that pursuant to the terms of its Underlying Instruments may require one
or more future advances (such advances to be made in the currency in which the relevant Collateral
Debt Obligation is denominated) to be made to the borrower by the Issuer; but any such Collateral Debt
Obligation will be a Revolving Security only until all commitments to make advances to the borrower
expire or are terminated or reduced to zero.
"Rule 144A" means Rule 144A of the Securities Act.
"Rule 144A Global Certificate" means the Rule 144A Notes of each Class (other than the Class A1
Notes) sold in reliance on Rule 144A to U.S. Persons who are QIBs for the purposes of Rule 144A of
the Securities Act and QPs for the purposes of the Investment Company Act will each be represented
on issue by beneficial interests in one or more permanent global certificates of such class.
"Rule 144A Notes" means Notes (other than the AI Notes) offered for sale within the United States or to
U.S. Persons in reliance on Rule 144A.
"S&P" means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and
any successor or successors thereto.
"S&P Collateral Value" means in the case of any Collateral Debt Obligation which is a Defaulted
Obligation the lower of:
(a)
(b)
its prevailing Market Value; and
the relevant S&P Recovery Rate,
in each case, multiplied by its outstanding principal amount (in the case of any Non-Euro Obligation,
converted into Euro at the applicable Asset Swap Transaction Exchange Rate),
provided that if the Market Value cannot be determined for any reason, the Market Value shall be
deemed to be for this purpose the relevant S&P Recovery Rate multiplied by its outstanding principal
amount in the case of any Non-Euro Obligation, converted into Euro at the applicable Asset Swap
Transaction Exchange Rate.
"S&P Priority Category" means any of the categories set forth in the schedule attached to the
Investment Management Agreement setting out the S&P Priority Categories as amended from time to
time.
"S&P Recovery Rate" means in respect of any Collateral Debt Obligation, the recovery rate determined
in accordance with the Investment Management Agreement or as so advised by S&P.
"Sale Proceeds" means:
(a)
all proceeds received upon the sale of any Collateral Debt Obligation (save for a Non-Euro
Obligation that is subject to an Asset Swap Transaction), Collateral Enhancement Obligation or
Exchanged Equity Security, together with any recoveries received in respect of any Defaulted
Obligation, excluding any sale proceeds representing accrued interest designated as Interest
Proceeds by the Investment Manager in accordance with the Investment Management
Agreement, provided that no such designation may be made in respect of:
(i)
(ii)
Purchased Accrued Interest; or
any such proceeds of sale that represent deferred interest accrued in respect of any
Deferring Obligation; and
(b)
in the case of any Non-Euro Obligation that is subject to an Asset Swap Transaction, all
amounts in Euro (or other currencies if applicable) payable to the Issuer by the applicable
Asset Swap Counterparty in exchange for payment by the Issuer of the sale proceeds of any
Collateral Debt Obligation or any recoveries received in respect of any Defaulted Obligation, as
described in paragraph (a) above, under the related Asset Swap Transaction (for the avoidance
of doubt after reducing such amount by any Asset Swap Issuer Termination Payment payable
by the Issuer in such circumstances), together with any such amounts which are not payable to
such Asset Swap Counterparty pursuant to the terms of such Asset Swap Transaction,
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(c)
(d)
(e)
in the case of any Synthetic Security, Synthetic Collateral (or any amount received upon
liquidation thereof) that ceases to be subject to the applicable Synthetic Counterparty’s security
interest on termination (but not expiration) of such Synthetic Security at the option of the Issuer
and the proceeds of sale of any Deliverable Obligations delivered in respect thereof;
in the case of any Offsetting Credit Default Swap Obligation or Credit Short Obligation (as the
case may be), Derivative Counterparty Downgrade Collateral, if any, (or any amount received
upon liquidation thereof) or any Cash Settlement Amount, Physical Settlement Amount or
floating amounts (as defined therein), as applicable, received from the Credit Short Obligation
Counterparty or Offsetting Credit Default Swap Counterparty pursuant to such Credit Short
Obligation or Offsetting Credit Default Swap; and
in the case of any Put Option, the cash proceeds of the sale of such option in accordance with
the terms of the Investment Management Agreement or the proceeds paid by the Put Option
Counterparty to the Issuer as a result of the exercise of such option,
in each case net of any amounts expended by or payable by the Issuer or the Collateral Administrator
(on behalf of the Issuer) in connection with the sale, disposition or termination of such Collateral Debt
Obligation including any amounts payable by the Issuer upon termination of the relevant Asset Swap
Transaction, Interest Rate Hedge Transaction, Currency Hedge Transaction and/or Offsetting Credit
Default Swap and/or Credit Short Obligation.
"Scheduled Currency Hedge (Income) Payment" means, in respect of a Currency Hedge Transaction,
(i) which is a currency swap transaction or a cross currency and interest rate swap transaction (including
such a transaction entered into pursuant to the exercise of a currency swaption), any amount required to
be paid by the Issuer to the Currency Hedge Counterparty other than a Currency Hedge Issuer
(Principal) Payment or a Currency Hedge Issuer Initial Exchange Payment, (ii) which is a currency
option or currency swaption, any premium payable, in Sterling or Dollars, in connection with the
acquisition or entry into the Currency Hedge Transaction, or (iii) which is a currency forward transaction,
a spot foreign exchange transaction or a currency option, in each case relating to Sterling Interest
Proceeds or Dollar Interest Proceeds (whether in respect of a particular Collateral Debt Obligation or in
respect of a portfolio of Collateral Debt Obligations) as determined by the Investment Manager, the
amount payable by the Issuer to the Currency Hedge Counterparty, in each case excluding any
Currency Hedge Issuer Termination Payment.
"Scheduled Periodic Asset Swap Counterparty Payment" means, with respect to any Asset Swap
Transaction, the periodic amounts in the nature of coupon (and not the principal) scheduled to be paid to
the Issuer by the applicable Asset Swap Counterparty pursuant to the terms of such Asset Swap
Transaction, excluding any Asset Swap Counterparty Termination Payments and any Asset Swap
Counterparty Principal Exchange Amounts.
"Scheduled Periodic Asset Swap Issuer Payment" means, with respect to any Asset Swap
Transaction, the periodic amounts in the nature of coupon (and not principal) scheduled to be paid by
the Issuer to the applicable Asset Swap Counterparty pursuant to the terms of such Asset Swap
Transaction, excluding any Asset Swap Issuer Termination Payment and any Asset Swap Issuer
Principal Exchange Amounts.
"Scheduled Periodic Currency Hedge Counterparty Payments" means, in respect of a Currency
Hedge Transaction, (i) which is a currency swap transaction or a cross currency and interest rate swap
transaction (including such a transaction entered into pursuant to the exercise of a currency swaption),
any amount required to be paid by the Currency Hedge Counterparty to the Issuer other than a
Currency Hedge Issuer (Principal) Receipt or a Currency Hedge Counterparty Initial Exchange Payment
or (ii) which is a currency forward transaction, a spot foreign exchange transaction or a currency option,
in each case relating to Sterling Interest Proceeds or Dollar Interest Proceeds (whether in respect of a
particular Collateral Debt Obligation or in respect of a portfolio of Collateral Debt Obligations) as
determined by the Investment Manager, the amount payable by the Currency Hedge Counterparty to the
Issuer, in each case excluding any Currency Hedge Counterparty Termination Payment.
"Scheduled Periodic Interest Rate Hedge Counterparty Payments" means, with respect to any
Interest Rate Hedge Transaction, the amount scheduled to be paid to the Issuer by the Interest Rate
Hedge Counterparty pursuant to the terms thereof, excluding any Interest Rate Hedge Termination
Receipts.
"Scheduled Periodic Interest Rate Hedge Issuer Payments" means, with respect to any Interest Rate
Hedge Transaction, the amount scheduled to be paid to the Interest Rate Hedge Counterparty by the
Issuer pursuant to the terms of such Interest Rate Hedge Agreement, excluding any Interest Rate
Hedge Issuer Termination Payments.
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"Scheduled Periodic Issuer Credit Short Obligation Payment" means, with respect to any Credit
Short Obligation, the fixed amounts (as defined therein) scheduled to be paid to the applicable Credit
Short Obligation Counterparty by the Issuer under such Credit Short Obligation, but excluding any Credit
Short Obligation Issuer Termination Payment.
"Scheduled Periodic Issuer Offsetting Credit Default Swap Payment" means, with respect to any
Offsetting Credit Default Swap, the fixed amounts (as defined therein) scheduled to be paid to the
applicable Offsetting Credit Default Swap Counterparty by the Issuer under such Offsetting Credit
Default Swap, but excluding any Offsetting Credit Default Swap Issuer Termination Payment.
"Scheduled Principal Proceeds" means:
(a)
(b)
(c)
in the case of any Collateral Debt Obligation, save for any Non-Euro Obligations that are
subject to an Asset Swap Transaction, scheduled principal repayments received by the Issuer
(including scheduled amortisation, instalment or sinking fund payments);
in the case of any Asset Swap Obligation, scheduled final and interim payments in the nature of
principal exchanges paid to the Issuer by the applicable Asset Swap Counterparty under the
related Asset Swap Transaction; and
in the case of any Synthetic Security, any Synthetic Collateral relating thereto on any amount
received upon liquidation thereof to which the Issuer is entitled upon expiration or termination of
such Synthetic Security at its Scheduled Maturity
"Secured Party" means each of the Class A Noteholders, the Class B Noteholders, the Class C
Noteholders, the Class D Noteholders, the Class E Noteholders, the Class F Subordinated Noteholders,
the Class P Combination Noteholders, the Investment Manager, the Collateral Administrator, the
Trustee, the Agents, the Class A1 Note Agent, each Derivative Counterparty and Deutsche Bank AG
London Branch or its Affiliates, in respect of the Financed Amount Fee Letter and Subscription
Agreement.
"Secured Senior Loan" means a Collateral Debt Obligation (which may be a Revolving Security or a
Delayed Drawdown Obligation) that is a senior secured obligation as determined by the Investment
Manager in its reasonable business judgement or a Participation therein, provided that:
(a)
(b)
(c)
it is secured (i) by fixed assets of the Obligor or guarantor thereof (except a pledge of more
than 65 per cent. of the equity interest of any non U.S. subsidiary of a U.S. Obligor or guarantor
shall not be required) if and to the extent a pledge of fixed assets is permissible under
applicable law or regulation and is not economically unfeasible (save in the case of assets so
numerous or diverse that the failure to take such security is consistent with reasonable secured
lending practices), and otherwise (ii) by at least 80 per cent. of the equity interests in the stock
of an entity owning such fixed assets;
save to the extent specifically permitted thereunder, no other obligation of the Obligor has any
higher priority security interest in such shares and/or assets referred to in (a) above; and
if it is a Synthetic Security, the applicable Reference Obligation is an obligation of the type
described in (a) and (b) above,
in the case of (a) and (b) save to the extent Rating Agency Confirmation is received thereof.
"Securities Act" means the United States Securities Act of 1933, as amended.
"Selling Institution" means an institution which satisfies the applicable Rating Requirement from whom
a Participation is granted.
"Senior Expenses Cap" means in respect of each Due Period, €200,000 during the first three periods
and €150,000 thereafter plus an amount equal to 0.025 per cent. of the Aggregate Collateral Balance on
the first day of such Due Period. For the avoidance of doubt, any amount in excess of the limits
mentioned in items (k) and (l) of the definition of Administrative Expenses not paid under paragraph (D)
of the Interest Proceeds Priority of Payments shall be paid under paragraph (X) of the Interest Proceeds
Priority of Payments.
"Senior Investment Management Fee" means the fee payable to the Investment Manager in arrear on
each Payment Date in respect of each Due Period pursuant to the Investment Management Agreement
in an amount, as determined by the Collateral Administrator, equal to 0.15 per cent. per annum
(calculated on the basis of a 360-day year and the actual number of days elapsed in such Due Period)
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of the Aggregate Collateral Balance (calculated using the Initial Rate of Exchange) as at the beginning
of the Due Period immediately preceding such Payment Date.
"Senior Investment Management Fee Cap" means, in respect of each Due Period 0.15 per cent. per
annum (calculated semi-annually on the basis of a 360-day year and the actual number of days elapsed
in such Due Period) of the Aggregate Collateral Balance as at the first day of the Due Period
immediately preceding the Payment Date in respect of such Due Period.
"Senior Loan" means a Collateral Debt Obligation that is a Secured Senior Loan or an Unsecured
Senior Loan.
"Special Redemption" has the meaning given to it in Condition 7(d) (Special Redemption).
"Special Redemption Amount" has the meaning given to it in Condition 7(d) (Special Redemption).
"Special Redemption Date" has the meaning given to it in Condition 7(d) (Special Redemption).
"Spot Rate" means the relevant spot rate of exchange quoted by the Collateral Administrator at the date
of calculation.
"Stated Maturity" means, with respect to any Collateral Debt Obligation, Synthetic Collateral or Eligible
Investment the date specified in such obligation as the fixed date on which the final payment or
repayment of principal of such obligation is due and payable or, in the case of a Synthetic Security, the
scheduled date of termination of such instrument or agreement.
"Sterling Collateral Debt Obligation" means a Collateral Debt Obligation denominated in Sterling.
"Sterling Denominated Drawings" has the meaning ascribed thereto in the Class A1 Note Purchase
Agreement.
"Sterling Funding Mismatch" means on any Determination Date or any other date of calculation, the
greater of (a) zero, or (b) the sum of the aggregate Class A1 Drawings denominated in Sterling and the
Class A1 Allocated Amount denominated in Sterling minus the sum of (i) the aggregate Principal
Balance of all Sterling Collateral Debt Obligations which are not the subject of an Asset Swap
Transaction on such Determination Date and (ii) the Sterling Principal Proceeds standing to the credit of
the Sterling Principal Account on such Determination Date.
"Sterling Interest Account" means the account described as such in the name of the Issuer held with
the Account Bank.
"Sterling Interest Proceeds" means Interest Proceeds denominated in Sterling.
"Sterling Margin" means 0.30%.
"Sterling Payment Account" means the account described as such in the name of the Issuer held with
the Account Bank.
"Sterling Principal Account" means the account described as such in the name of the Issuer held with
the Account Bank.
"Sterling Principal Proceeds" means Principal Proceeds denominated in Sterling.
"Sterling Unfunded Reserve Account" means the account described as such in the name of the
Issuer held with the Account Bank.
"Structured Finance Obligation" means any debt security which is secured directly, or represents the
ownership of collateralised loan obligations or Whole Business Securitisations; provided (a) that such
security is not issued by an entity for which the Investment Manager or an Affiliate thereof is the
investment manager or portfolio advisor and (b) that if the issuer thereof is organised under the laws of,
or is a resident of The Netherlands, the acquisition of such security by or on behalf of the Issuer does
not cause a breach of applicable selling or transfer restrictions and (c) that such debt security must have
been rated by S&P or S&P must have provided a credit estimate in relation to it and (d) that such debt
security has not deferred interest.
"Subordinated Investment Management Fee" means the fee payable to the Investment Manager in
arrear on each Payment Date in respect of the immediately preceding Due Period, pursuant to the
Investment Management Agreement equal to 0.50 per cent. per annum (calculated semi-annually on the
basis of a 360-day year and the actual number of days elapsed in such Due Period) of the Aggregate
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Collateral Balance (calculated using the Initial Rate of Exchange) as at the first day of the Due Period
immediately preceding such Payment Date, as determined by the Collateral Administrator.
"Substitute Collateral Debt Obligation" means a Collateral Debt Obligation purchased out of Principal
Proceeds pursuant to the terms of the Investment Management Agreement and which satisfies both the
Eligibility Criteria and the Reinvestment Criteria.
"Synthetic Collateral" means any collateral which shall be in the form of cash or securities which
satisfies the requirements of the definition of Eligible Investment, save for that relating to the Stated
Maturity thereof (in each case as permitted by the terms of the applicable Synthetic Security) required to
be delivered by the Issuer as security for its obligations to any Synthetic Counterparty under any
Synthetic Security pursuant to the terms thereof provided that Synthetic Collateral may not consist of
any securities that are Dutch Ineligible Securities or that are convertible into or exchangeable for Dutch
Ineligible Securities. References to the price payable upon the acquisition of or entry into a Synthetic
Security acquired or entered into by the Issuer on an unfunded basis shall be deemed to be the
aggregate principal amount of Synthetic Collateral required to be delivered by the Issuer to the
applicable Synthetic Counterparty.
"Synthetic Collateral Account" means the Account of the Issuer with the Custodian into which all
Synthetic Collateral is to be deposited.
"Synthetic Counterparty" means any counterparty required to make payments on a Synthetic Security,
which counterparty satisfies the applicable Rating Requirement (or whose obligations are guaranteed by
a guarantor which satisfies the applicable Rating Requirement) provided always that such financial
institution has the regulatory capacity as a matter of Dutch law to enter into derivatives transactions with
Dutch residents.
"Synthetic Security" means any Euro, Sterling or Dollar (which, for the avoidance of doubt, includes
securities denominated in a legacy currency of those EU Member States which have adopted the Euro
as their currency) denominated swap transaction, debt security, security issued by a trust or similar
vehicle or other investment purchased from or entered into by the Issuer with a Synthetic Counterparty
that satisfies, save to the extent Rating Agency Confirmation is received in respect of any nonsatisfaction
thereby, the Eligibility Criteria save for that relating to the jurisdiction of the Obligor
thereunder, the returns on which (as determined by the Investment Manager) are linked to the credit
and/or price performance of a Reference Obligation or to unlevered exposure to a portfolio of Reference
Obligations but which may provide for a different maturity, payment dates, interest rate, credit exposure
or other non-credit related characteristics than such Reference Obligations; provided that:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
such Synthetic Security will not require the Issuer to make any payment to the Synthetic
Counterparty after the initial purchase thereof by the Issuer other than the delivery or payment
to the Synthetic Counterparty of any Synthetic Collateral pledged in accordance with the terms
thereof and provided that any obligations of the Issuer thereunder are limited to such Synthetic
Collateral;
such Synthetic Security contains limited recourse and non-petition provisions in substantially
the same form as those set out in Condition 4(c) (Limited Recourse);
the ownership of such Synthetic Security will not subject the Issuer to net income tax;
all scheduled payments made pursuant to the terms of such Synthetic Security are at a fixed
interest rate, or at a variable interest rate based on an interest rate used for borrowings or
financings in domestic or international markets or are linked to the payments on one or more
Reference Obligations (which payments are themselves at a fixed interest rate or a variable
interest rate based on an interest rate used for borrowings or financings in domestic or
international markets);
such Synthetic Security will not constitute a commodity option, leverage transaction or futures
contract that is subject to the jurisdiction of the U.S. Commodities Futures Trading
Commission;
Rating Agency Confirmation is received for the entry into or purchase of such Synthetic
Security, save in the case of a Form-Approved Synthetic Security; and
such Synthetic Security will not be a Dutch Ineligible Security or convertible into or
exchangeable for a Dutch Ineligible Security.
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For the avoidance of doubt, neither an Offsetting Credit Default Swap nor a Credit Short Obligation shall
constitute Synthetic Security.
"Target Par Amount" means, in respect of the initial Portfolio, €350,000,000.
"TARGET System" means the Trans-European Automated Real-Time Gross Settlement Express
Transfer System (or, if such system ceases to be operative, such other system (if any) determined by
the Trustee to be a suitable replacement).
"Transaction Documents" means the Trust Deed, the Agency Agreement, the Investment
Management Agreement, Collateral Acquisition Agreements, the Participation Agreements, the
Management Agreement, the Class A1 Note Purchase Agreement, the Class F Subordinated Note
Purchase Agreement, the Derivative Agreements, the Euroclear Pledge Agreement, the Class P OAT
Strips Pledge Agreement and the Financed Amount Fee Letter.
"Trustee Fees and Expenses" means the fees and expenses and other amounts payable to the
Trustee pursuant to the Trust Deed from time to time.
"Uncollateralised CLN" means a Synthetic Security that is a credit-linked note (a) issued by a
corporate entity that is not a special purpose vehicle or a trust and (b) which is not secured by any
collateral.
"Underlying Instrument" means the agreements or instruments pursuant to which a Collateral Debt
Obligation has been issued or created and each other agreement that governs the terms of, or secures
the obligations represented by, such Collateral Debt Obligation or under which the holders or creditors
under such Collateral Debt Obligation are the beneficiaries.
"Unfunded Amount" means, with respect to any Delayed Drawdown Obligation or Revolving Security
or Synthetic Security, the excess, if any, of (i) the Commitment Amount under such Delayed Drawdown
Obligation, Revolving Security or Synthetic Security, as the case may be, at such time over (ii) the
Funded Amount thereof at such time.
"Unfunded Reserve Accounts" means the Euro Unfunded Reserve Account, the Sterling Unfunded
Reserve Account and the Dollar Unfunded Reserve Account.
"Unscheduled Principal Proceeds" means:
(a)
(b)
(c)
(d)
with respect to any Collateral Debt Obligation (other than an Asset Swap Obligation), principal
repayments prior to the Stated Maturity thereof received as a result of optional redemptions,
prepayments (including any acceleration) or Offers (excluding any premiums or Break Costs in
excess of the principal amount of such Collateral Debt Obligation), and any other principal
repayments with respect to Collateral Debt Obligations (to the extent not included in Sale
Proceeds); and
in the case of any Non-Euro Obligation, any Asset Swap Counterparty Principal Exchange
Amount payable to the Issuer in such circumstances pursuant to the related Asset Swap
Transaction, together with any amounts that are not payable to such Asset Swap Counterparty
pursuant to the terms of such Asset Swap Transaction; and
in the case of any Synthetic Security, Synthetic Collateral (or any amount received upon
liquidation thereof) that ceases to be subject to the applicable Synthetic Counterparty’s security
interest on termination (but not expiration) of such Synthetic Security other than at the option of
the Issuer; and
proceeds from any transfer of assets where the Issuer was obliged to transfer its participation
under the terms of the related Underlying Instruments.
"Unsecured Senior Loan" means a Collateral Debt Obligation (which may be a Revolving Security or a
Delayed Drawdown Obligation) that is:
(a)
(b)
(c)
a loan obligation senior to any unsecured, subordinated obligation of an Obligor as determined
by the Investment Manager in its reasonable business judgement or a Participation therein;
is not a Secured Senior Loan; and
if it is a Synthetic Security, the applicable Reference Obligation is an obligation of the type
described in (a) and (b) above.
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"Unused Proceeds Accounts" means the Unused Proceeds Principal Account and the Unused
Proceeds Interest Account.
"Unused Proceeds Interest Account" means the Euro Unused Proceeds Interest Account.
"Unused Proceeds Principal Account" means the Euro Unused Proceeds Principal Account.
"U.S. Person" has the meaning given thereto in Regulation S.
"U.S. Source Income" means income that is treated for U.S. income tax purposes as being from
sources within the United States.
"Whole Business Securitisations" means a form of securitisation which attaches to the general
operating cash flow arising from a particular line or area of business of the originator and is secured by
the business generating assets of the originator.
"Withholding Tax Event" means either a Collateral Tax Event or a Note Tax Event.
"Written Resolution" means any Resolution of the Noteholders in writing, as described in Condition 14
(Meetings of Noteholders, Modification, Waiver and Substitution) and as further described in, and as
further defined in, the Trust Deed.
2. Form and Denomination, Title and Transfer
(a)
Form and Denomination
The Notes, if represented by one or more Definitive Certificates, are in fully registered form
("Registered Notes"), without interest coupons or principal receipts attached, in an Authorised
Denomination. A Definitive Certificate will be issued to each Noteholder in respect of its
registered holding or holdings of Notes. Each Definitive Certificate will be numbered serially
with an identifying number which will be recorded in the register (the "Register") which the
Issuer shall procure to be kept by the Registrar. The Duplicate Register shall be kept at the
registered office of the Issuer.
(b)
Title to the Registered Notes
Title to the Registered Notes passes upon registration of transfers in the Register in
accordance with the provisions of the Agency Agreement and the Trust Deed. Registered
Notes will be transferable only on the books of the Register. The registered holder of any
Registered Note will (except as otherwise required by law) be treated as its absolute owner for
all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or
any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating
the holder.
(c)
Transfer
One or more Notes may be transferred in whole or in part in nominal amounts the applicable
Authorised Denomination only upon the surrender, at the specified office of the Registrar, of the
Definitive Certificate representing such Note(s) to be transferred, with the form of transfer
endorsed on such Definitive Certificate duly completed and executed and together with such
other evidence as the Registrar may reasonably require, including, the relevant form of transfer
certificate as specified in the Trust Deed. In the case of a transfer of part only of a holding of
Notes represented by one Definitive Certificate, a new Definitive Certificate will be issued to the
transferee in respect of the part transferred and a further new Definitive Certificate in respect of
the balance of the holding not transferred will be issued to the transferor. No transfer of a
Definitive Certificate will be valid unless and until entered on the Register.
(d)
Delivery of New Definitive Certificates
Each new Definitive Certificate to be issued pursuant to Condition 2(e) (Transfer Free of
Charge) will be available for delivery within seven Business Days of receipt of such form of
transfer or of surrender of an existing Definitive Certificate upon partial redemption. Delivery of
new Definitive Certificate(s) shall be made at the specified office of the Transfer Agent or of the
Registrar, as the case may be, to whom delivery or surrender shall have been made or, at the
option of the holder making such delivery or surrender as aforesaid and as specified in the form
of transfer or otherwise in writing, shall be mailed by pre-paid first class post at the risk of the
holder entitled to the new Definitive Certificates, to such address as may be so specified. In
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this Condition 2(d) "Business Day" means a day, other than a Saturday or Sunday, on which
banks are open for business in the place of the specified office of the Registrar.
(e)
Transfer Free of Charge
Transfer of Definitive Certificates representing such Notes in accordance with these Conditions
on registration or transfer will be effected without charge by or on behalf of the Issuer, the
Registrar or the Transfer Agent, but upon payment (or the giving of such indemnity as the
Registrar or the relevant Transfer Agent may require in respect thereof) of any tax or other
governmental charges which may be imposed in relation to it.
(f)
Closed Periods
No Noteholder may require the transfer of a Note to be registered (i) during the period of 15
calendar days ending on the due date for redemption (in full) of that Note or (ii) during the
period of seven calendar days ending on (and including) any Record Date.
(g)
Regulations Concerning Transfer and Registration
All transfers of Notes, and entries on the Register will be made subject to the detailed
regulations concerning the transfer of Notes, scheduled to the Trust Deed, including without
limitation, that a transfer of Notes, in breach of certain of such regulations will result in such
transfer being void ab initio. The regulations may be changed by the Issuer in any manner
which is reasonably required by the Issuer (after consultation with the Trustee) to reflect
changes in legal or regulatory requirements or in any other manner which, in the opinion of the
Issuer (after consultation with the Trustee and subject to not less than 60 days'notice of any
such change having been given to the Noteholders in accordance with Condition 16 (Notices)),
is not prejudicial to the interest of the holders of the relevant Class of Notes. A copy of the
current regulations may be inspected at the offices of the Issuer during usual business hours
on any weekday (Saturdays, Sundays and public holidays excepted) for the terms of the Notes
and will be sent by the Registrar to any Noteholder who so requests.
(h)
Forced Transfer of Certain Notes
(i)
(ii)
If the Issuer or the Registrar determines at any time that a U.S. holder of (I) a Rule 144A
Note is not a QIB/QP or (II) an AI Note is not an institutional "accredited investor" within
the meaning of Sections 5.01(a), 1, 2, 3, 7 or 8 of Regulation D under the Securities Act
and QPs, knowledgeable employees as defined in Rule 3c-5 of the Investment
Company Act ("Knowledgeable Employees") with respect to the Issuer or a company
owned exclusively by QPs and/or Knowledgeable Employees, or (III) that a holder of a
Class F Subordinated Note has made or been deemed to have made an ERISA related
representation that is false or misleading regarding the beneficial ownership of such
Notes that causes a violation of the 25 per cent. Limitation (any such person, a "Non-
Permitted Holder"), the Issuer or the Registrar may direct such holder to sell or transfer
its Notes outside the United States to a non-U.S. Person or within the United States to a
U.S. Person that is a QIB/QP within 30 days (or, in the case of an ERISA related
representation, 14 days) following receipt of such notice.
If such holder fails to sell or transfer its Notes within such period, such holder may be
required by the Issuer or the Registrar to sell such Rule 144A Notes or AI Notes (as
applicable) to a purchaser selected by the Issuer or the Registrar on such terms as the
Issuer or the Registrar may choose, subject to the transfer restrictions set out herein.
The Issuer or the Registrar may select the purchaser by soliciting one or more bids from
one or more brokers or other market professionals that regularly deal in securities
similar to such Rule 144A Notes or AI Notes, as applicable, and selling such Notes to
the highest such bidder. However, the Issuer or the Registrar may select a purchaser
by any other means determined by it in its sole discretion. Each Noteholder and each
other Person in the chain of title from the permitted Noteholder to the Non-Permitted
Holder by its acceptance of an interest in such Rule 144A Notes or AI Notes, as
applicable, agrees to co-operate with the Issuer and the Registrar to effect such
transfers. The proceeds of such sale, net of any commissions, expenses and taxes due
in connection with such sale shall be remitted to the selling Noteholder. The terms and
conditions of any sale hereunder shall be determined in the sole discretion of the Issuer,
or the Registrar, subject to the transfer restrictions set out herein, and neither the Issuer
nor the Registrar shall be liable to any Person having an interest in the Notes sold as a
result of any such sale or the exercise of such discretion. The Issuer and the Registrar
reserve the right to require any holder of Notes to submit a written certification
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substantiating that it is a QIB/QP (in the case of a Rule 144A Note) an institutional
"accredited investor" within the meaning of Sections 5.01(a), 1, 2, 3, 7 or 8 of Regulation
D under the Securities Act which is also a QP (in the case of an AI Note) or a non-U.S.
Person. If such holder fails to submit any such requested written certification on a
timely basis, the Issuer and the Registrar have the right to assume that the holder of the
Notes from whom such a certification is requested is not a QIB/QP (in the case of a
Rule 144A Note) or a non-U.S. Person. Furthermore, the Issuer and the Registrar
reserve the right to refuse to honour a transfer of beneficial interests in a Rule 144A
Note or an AI Note (as applicable) to any person who is not either a non-U.S. Person or
a U.S. Person that is a QIB/QP or an institutional "accredited investor" within the
meaning of Sections 5.01(a), 1, 2, 3, 7 or 8 of Regulation D under the Securities Act
which is also a QP (in the case of an AI Note), in the case of the transfer of a Class F
Subordinated Note to a person with respect to whom the Issuer or the Registrar become
aware that such transfer would cause a violation of the 25 per cent. limitation or the
ERISA representations are false or misleading.
(iii)
If a Class A1 Noteholder (i) fails to take any Class A1 Rating Action following its failure
to comply with the Class A1 Rating Criteria or (ii) fails to transfer the relevant Class A1
Noteholder's Class A1 Note within the required time period following a default in respect
of its obligation to make any Class A1 Drawing when required to do so under the Class
A1 Note Purchase Agreement, the relevant Class A1 Noteholder may be required by the
Issuer to sell or otherwise transfer such Notes to a purchaser selected by the Issuer on
the best reasonable terms obtainable, subject to the transfer restrictions set out herein
and, in the case of the sale or transfer of a Class A1 Note, the transferee satisfying the
Class A1 Rating Criteria. Each Class A1 Noteholder and each other Person in the chain
of title from a Class A1 Noteholder, by its acceptance of an interest in such Notes,
agrees to co-operate with the Issuer and the Trustee, to the extent required to effect
such transfers. Neither the Issuer nor the Trustee shall be liable to any Person having
an interest in the Notes sold or otherwise transferred as a result of any such sale or
transfer.
(i)
Exchange of Class P Combination Notes
So long as the Class P Combination Notes remain Outstanding, exchanges of Class P
Combination Notes, in whole or in part, for the Class P OAT Strips and Class F Subordinated
Notes represented thereby shall be permitted. A Class P Combination Notes may be
exchanged for the Class F Subordinated Component represented by such Class P
Combination Notes and for the Class P OAT Strips represented by the Class P OAT Security
Component of such Class P Combination Notes in accordance with the provisions set out
herein, in the Trust Deed and in the Class P OAT Strips Pledge Agreement as follows: a Class
P Combination Notes may be exchanged for (i) Class F Subordinated Notes in a principal
amount equal to the corresponding Class F Subordinated Component and (ii) either Class P
OAT Strips having a face value at maturity equal to the Principal Amount Outstanding of such
Class P Combination Notes, or upon request of the relevant Noteholder, the proceeds of sale
of Class P OAT Strips realised by the Custodian using the best bid price from three market
makers in the OAT market selected by the Custodian (net of any amounts expended by or
payable by the Custodian in connection with such sale), provided that Class P Combination
Notes may only be exchanged for the Class F Subordinated Component thereof to the extent
that the principal amounts of the Class F Subordinated Notes to which such Class F
Subordinated Component relates and for the Class P OAT Security Component and in respect
of which such exchange is expected to be effected are equal to an applicable Authorised
Denomination thereof in excess of the applicable Minimum Denominations.
(j)
Exchange of Class A1 Notes
On the first Payment Date following the reduction of the Class A1 Available Commitment to
zero following expiry of the Reinvestment Period, each Class A1 Noteholder shall surrender its
respective Class A1 Definitive Notes to the Registrar in exchange for an interest in a global
Class A1 Note in a principal amount equal to the Principal Amount Outstanding of the Class A1
Definitive Notes held by it at the time of such surrender. Each Class A1 Noteholder shall
surrender its Class A1 Definitive Notes at the offices of the Registrar. The Registrar shall notify
the Capital Commitment Registrar and the Trustee of such surrender and the Capital
Commitment Registrar shall confirm that the Class A1 Available Commitment has been
reduced to zero. Upon receipt of such confirmation, the Registrar shall: (i) reduce the Principal
Amount Outstanding of the Class A1 Definitive Notes surrendered to it to zero; (ii) cancel such
Class A1 Definitive Notes; (iii) issue the Class A1 Notes in global form; and (iv) register the
amount of such issue in the name of the related Class A1 Noteholder who will subsequently
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3. Status
become a Class A1 Noteholder. For the avoidance of doubt, all exchanges described in the
foregoing sentences of this paragraph will comply with applicable DTC/Euroclear procedures
and all applicable transfer restrictions as disclosed herein. See "Transfer Restrictions".
(a)
Status
The Notes of each Class constitute direct, general, secured, unconditional obligations of the
Issuer, recourse in respect of which is limited in the manner described in Condition 4(c)
(Limited Recourse). The Notes of each Class are secured in the manner described in Condition
4(a) (Security) and, within each Class, shall at all times rank pari passu and without any
preference amongst themselves (other than the Class A1 Notes and Class A2 Notes which
shall be redeemed and repaid in accordance with the Class A1/A2 Note Redemption Method)
or, as the case may be, the Pari Passu Provisions.
(b)
Relationship Among the Classes
The Notes of each Class are constituted by the Trust Deed and are secured on the Collateral
as further described in the Trust Deed. Payments of interest on each Class of Notes will be
subordinated to payments of principal on each Class of Notes (if any) ranking in priority thereto
pursuant to the Note Payment Sequence and payments of principal on each Class of Notes will
be subordinated to payments of principal on each Class of Notes (if any) ranking in priority
thereto pursuant to the Note Payment Sequence (other than in the event that the Class E Par
Value Test has not been satisfied, the Class E Notes will be redeemed to the extent necessary
to cause the Class E Par Value Test to be met if recalculated following such redemption).
Notwithstanding the foregoing, in the circumstances described below payment of interest on a
more junior ranking Class of Notes may be paid prior to payment of principal on a Class of
Notes ranking senior in priority thereto as a result of the operation of the Interest Proceeds
Priority of Payments, including following enforcement of the security over the Collateral.
For purposes of subordination and the Priorities of Payment set out in Condition 3(c) (Pre-
Enforcement Priority of Payments), the Class P Combination Notes shall not be treated as
separate Classes of Notes but the Class F Subordinated Component of the Class P
Combination Notes will be treated as Class F Subordinated Notes, and all amounts received by
the Issuer in respect of Class P OAT Strips shall be applied pro rata and pari passu in or
towards redemption of the Class P Combination Notes.
(c)
Pre-Enforcement Priority of Payments
The Collateral Administrator shall (on the basis of the Payment Date Report prepared by the
Collateral Administrator in consultation with the Investment Manager pursuant to the terms of
the Investment Management Agreement on each Determination Date), on behalf of the Issuer,
on each Payment Date cause the Account Bank to disburse Interest Proceeds and Principal
Proceeds transferred to the Payment Account by the second Business Day prior thereto, or, in
the case of (iii) below, the Collateral Enhancement Account in accordance with the following
priorities of payment, in each case in accordance with the FX Conversion Provisions, save to
the extent that the Pari Passu Provisions are specified to apply and, in each case, as
calculated by the Collateral Administrator pursuant to the Investment Management Agreement
(the "Pre-Enforcement Priority of Payments") (for the avoidance of doubt, the Issuer is not
required to satisfy any of the Coverage Tests prior to the Effective Date):
(i)
Application of Interest Proceeds:
Interest Proceeds in respect of a Due Period shall be paid on the Payment Date
immediately following such Due Period as follows (with payments to be made from Euro
Interest Proceeds transferred to the Euro Payment Account for amounts denominated in
Euro, payments to be made from Sterling Interest Proceeds transferred to the Sterling
Payment Account for amounts denominated in Sterling and payments to be made from
Dollar Interest Proceeds transferred to the Dollar Payment Account for amounts
denominated in Dollars, in each case subject to Condition 3(c)(iv) (FX Conversion)):
(A)
first to the payment of taxes owed by the Issuer, as accrued in respect of the
related Due Period (other than Dutch corporate income tax on the minimum profit
referred to hereafter), if any, as certified by an Authorised Officer of the Issuer to
the Trustee (save for any value added tax payable in respect of any Investment
Management Fee); and second, to the payment of amounts equal to the
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minimum profit required to be retained by the Issuer for Dutch tax purposes, for
deposit into the Dutch Account from time to time;
(B)
(C)
(D)
(E)
(F)
(G)
(H)
to the payment of any unpaid Financed Amount then due and payable, provided
that such amount paid on any Payment Date may not exceed the Financed
Amount Threshold for such Payment Date plus any Financed Amount Interest
payable in respect of such Payment Date;
to the payment of accrued and unpaid Trustee Fees and Expenses and fees up
to an amount equal to the Senior Expenses Cap in respect of any Due Period,
provided that the Senior Expenses Cap shall not apply to this paragraph at any
time following the taking of any Enforcement Action by the Trustee;
to the payment of Administrative Expenses (firstly, to Administrative Expenses
referred to in paragraph (a) of the definition thereof and secondly, to
Administrative Expenses referred to in paragraphs (b) through (n) of the
definition thereof on a Pro Rata basis) in relation to each item thereof, up to an
amount equal to the Senior Expenses Cap in respect of the related Due Period
less any amounts paid pursuant to paragraph (C) above;
to the payment on a Pro Rata basis to the Investment Manager of the Senior
Investment Management Fee due and payable on such Payment Date and any
value added tax in respect thereof (whether payable to the Investment Manager
or directly to the relevant taxing authority) up to an amount in aggregate of such
fee and value added tax equal to the Senior Investment Management Fee Cap
and, thereafter, to the payment of any Senior Investment Management Fee and
to the payment of any value added tax in respect thereof (whether payable to the
Investment Manager or directly to the relevant taxing authority) in each case, due
and payable but not paid pursuant to this paragraph (E) on any prior Payment
Date (otherwise than by reason of the limitation of the amount payable pursuant
to the Senior Investment Management Fee Cap), together with interest accrued
thereon in accordance with the Investment Management Agreement to the extent
it remains unpaid in accordance with the Investment Management Agreement,
plus any value added tax in respect thereof (whether payable to the Investment
Manager or directly to the relevant taxing authority);
to the payment on a Pro Rata basis of (i) any Scheduled Periodic Asset Swap
Issuer Payments due and payable under any Asset Swap Transaction (to the
extent not paid from funds available in the account applicable to the related
Asset Swap Transaction within the Non-Euro Account), (ii) any Scheduled
Periodic Interest Rate Hedge Issuer Payments due and payable to any Interest
Rate Hedge Counterparty, (iii) any Scheduled Periodic Issuer Credit Short
Obligation Payments due and payable under any Credit Short Obligation (iv) any
Scheduled Periodic Issuer Offsetting Credit Default Swap Issuer Payments due
and payable under any Offsetting Credit Default Swap, and (v) any Scheduled
Currency Hedge (Income) Payments due and payable under any Currency
Hedge Transaction;
to the payment, on a Pro Rata basis, of any Derivative Issuer Termination
Payments (to the extent not covered by the corresponding Derivative
Replacement Receipts) save for any Defaulted Derivative Issuer Termination
Payments;
to the payment on a Pro Rata basis and in accordance with the Pari Passu
Provisions of:
(1) all Interest Amounts due and payable on the Class A1 Notes in respect of
each related Interest Accrual Period ending on such Payment Date to the
Class A1 Noteholders;
(2) the Class A1 Commitment Fees due and payable in respect of the related
Class A1 Note Interest Period;
(3) any Break Costs due and payable to Class A1 Noteholders in respect of
(i) any Class A1 Drawings repaid on such Payment Date or (ii) if for any
reason (other than a default by such Class A1 Noteholder or the Class A1
Note Agent) a Class A1 Drawing does not occur; and
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(4) all Interest Amounts due and payable on the Class A2 Notes in respect of
each related Interest Accrual Period,
provided that, to the extent that in aggregate Euro Interest Proceeds and Sterling
Interest Proceeds and Dollar Interest Proceeds are insufficient to pay such
Interest Amounts on the Class A1 Notes and Class A2 Notes in full, the
provisions of Condition 3(c)(iv) (FX Conversion) shall not apply and the Pari
Passu Provisions shall be applied instead between the Class A1 Notes and the
Class A2 Notes on a pro rata and pari passu basis;
(I)
(J)
(K)
(L)
(M)
(N)
(O)
(P)
(Q)
(R)
(S)
to the payment of all Interest Amounts due and payable on the Class A3 Notes in
respect of each related Interest Accrual Period ending on such Payment Date to
the Class A3 Noteholders;
to the payment on a Pro Rata basis of any Derivative Issuer Replacement
Payments, to the extent that such amounts exceed the corresponding Derivative
Counterparty Termination Payments;
following the Effective Date in the event that either of the Class A Coverage
Tests is not satisfied on the related Determination Date, in payment in
accordance with the Note Payment Sequence to the extent necessary to cause
the Class A Coverage Tests to be met if recalculated following such payment;
to the payment on a Pro Rata basis of the Interest Amounts due and payable on
the Class B Notes in respect of the Accrual Period ending on such Payment Date
and thereafter to the payment on a Pro Rata basis of any Deferred Interest on
the Class B Notes which is due and payable pursuant to Condition 6(c) (Deferral
of Interest);
following the Effective Date in the event that either of the Class B Coverage
Tests is not satisfied on the related Determination Date, to the payment in
accordance with the Note Payment Sequence to the extent necessary to cause
the Class B Coverage Tests to be met if recalculated following such payment;
to the payment on a Pro Rata basis of the Interest Amounts due and payable on
the Class C Notes in respect of the Accrual Period ending on such Payment Date
and thereafter to the payment on a Pro Rata basis of any Deferred Interest on
the Class C Notes which is due and payable pursuant to Condition 6(c) (Deferral
of Interest);
following the Effective Date in the event that either of the Class C Coverage
Tests is not satisfied on the related Determination Date, to the payment in
accordance with the Note Payment Sequence to the extent necessary to cause
the Class C Coverage Tests to be met if recalculated following such payment;
to the payment on a Pro Rata basis of the Interest Amounts due and payable on
the Class D Notes in respect of the Accrual Period ending on such Payment Date
and thereafter to the payment on a Pro Rata basis of any Deferred Interest on
the Class D Notes which is due and payable pursuant to Condition 6(c) (Deferral
of Interest);
following the Effective Date in the event that either of the Class D Coverage
Tests is not satisfied on the related Determination Date, to the payment in
accordance with the Note Payment Sequence to the extent necessary to cause
the Class D Coverage Tests to be met if recalculated following such payment;
to the payment on a Pro Rata basis of the Interest Amounts due and payable on
the Class E Notes in respect of the Accrual Period ending on such Payment Date
and thereafter to the payment on a Pro Rata basis of any Deferred Interest on
the Class E Notes which is due and payable pursuant to Condition 6(c) (Deferral
of Interest);
following the Effective Date in the event that (i) the Class E Par Value Test is not
satisfied on the related Determination Date, to the payment of the Class E Notes
to the extent necessary to cause the Class E Par Value Test to be met if
recalculated following such payment and (ii) the Class E Interest Coverage Test
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is not satisfied on the related Determination Date to the payment in accordance
with the Note Payment Sequence;
(T)
(U)
(V)
(W)
(X)
(Y)
(Z)
(AA)
(BB)
on any Payment Date following the Effective Date and each Payment Date
thereafter to the extent required, in the event of the occurrence of an Effective
Date Rating Event which is continuing on the Business Day prior to such
Payment Date, to redeem the Notes in accordance with the Note Payment
Sequence to the extent necessary to cause the Rating Agencies confirm or affirm
the Initial Ratings of the Notes;
during the Reinvestment Period, in the event that the Reinvestment Diversion
Test is not satisfied, Interest Proceeds shall be applied either (at the discretion of
the Investment Manager (acting on behalf of the Issuer)), (i) to the payment into
the Euro Principal Account, Sterling Principal Account or Dollar Principal Account
(as the case may be) for the acquisition of additional Collateral Debt Obligations
or (ii) to payment in accordance with the Note Payment Sequence, in either case
in an amount equal to the lesser of (1) 50 per cent. of all remaining Interest
Proceeds available for payment and (2) the amount which would be sufficient to
cause the Reinvestment Diversion Test to be met if recalculated following such
payment;
to the payment on a Pro Rata basis of any Defaulted Derivative Issuer
Termination Payments to the extent not paid out of any corresponding Derivative
Replacement Receipts;
to the payment of Trustee Fees and Expenses payable to the Trustee (if any) not
paid by reason of the Senior Expenses Cap;
to the payment of Administrative Expenses, if any, (firstly, to Administrative
Expenses referred to in paragraph (a) of the definition thereof and secondly, to
Administrative Expenses referred to in paragraphs (b) through (n) of the
definition thereof on a Pro Rata basis) not paid by reason of the Senior Expenses
Cap, in relation to each item thereof;
to the payment on a Pro Rata basis to the Investment Manager of any unpaid
Senior Investment Management Fee not paid pursuant to paragraph (E) above
on any prior Payment Dates (by reason of the limitation of the amount payable by
reference to the Senior Investment Management Fee Cap) and any value added
tax in respect thereof (whether payable to the Investment Manager or directly to
the relevant taxing authority) together with interest accrued thereon in
accordance with the Investment Management Agreement to the extent it remains
unpaid in accordance with the Investment Management Agreement, plus any
value added tax in respect thereof (whether payable to the Investment Manager
or directly to the relevant taxing authority);
to the payment on a Pro Rata basis to the Investment Manager of the
Subordinated Investment Management Fee due on such Payment Date and any
value added tax in respect thereof (whether payable to the Investment Manager
or directly to the relevant taxing authority) and, thereafter, to the payment on a
Pro Rata basis of any unpaid Subordinated Investment Management Fee and
any value added tax in respect thereof (whether payable to the Investment
Manager or directly to the relevant taxing authority), together with interest
accrued thereon in accordance with the Investment Management Agreement to
the extent it remains unpaid in accordance with the Investment Management
Agreement, plus any value added tax in respect thereof (whether payable to the
Investment Manager or directly to the relevant taxing authority);
at the discretion of the Investment Manager (acting on behalf of the Issuer) to
payment into the Collateral Enhancement Account up to a maximum aggregate
amount of €200,000 provided that the amount standing to the credit of the
Collateral Enhancement Account shall not exceed €3,000,000 following any such
payment;
to the extent not paid out of Collateral Enhancement Obligation Proceeds
pursuant to Condition 3(c)(iii) (Application of Collateral Enhancement Obligation
Proceeds) or the Balance standing to the credit of the Collateral Enhancement
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Account, and provided there is no Balance standing to the credit of the Collateral
Enhancement Account, to the repayment of any Investment Manager Advances;
(CC) during the Reinvestment Period, in the event that there is a Currency Funding
Mismatch (after giving effect to the above paragraphs), Interest Proceeds
denominated in a currency other than the currency of the Currency Funding
Mismatch converted into the currency of the Currency Funding Mismatch at the
then prevailing Spot Rate in an aggregate amount not exceeding such Currency
Funding Mismatch may be either at the option of the Investment Manager acting
on behalf of the Issuer (i) paid into the Principal Account to be applied to the
purchase of additional Collateral Debt Obligations denominated in the Currency
of the Currency Funding Mismatch and/or (ii) be applied in repayment of any
Class A1 Drawing denominated in the Currency of the Currency Funding
Mismatch;
(DD) until the Incentive Investment Management Fee IRR Threshold has been
reached (after taking into account all prior distributions to Class F Subordinated
Noteholders and any distribution to be made to Class F Subordinated
Noteholders on such Payment Date), to the payment of interest on the Class F
Subordinated Notes on a Pro Rata basis by reference to that proportion
immediately prior to such redemption provided, however, that prior to the end of
the Reinvestment Period, the Investment Manager will have the option (but not
the obligation) to divert a portion of this interest distribution into the Principal
Account in an amount up to but not exceeding one half of the excess (if any) of
the aggregate amount available to be distributed over 6 per cent. of the
aggregate principal amount of the Class F Subordinated Notes as at the Issue
Date. Any diversion will be entirely at the option of the Investment Manager,
including the amount of such diversion, subject to such limit as aforesaid; and
(EE)
after the Incentive Investment Management Fee IRR Threshold has been
reached (after taking into account all prior distributions to Class F Subordinated
Noteholders and any distribution to be made to Class F Subordinated
Noteholders on such Payment Date):
(ii)
(iii)
20 per cent. of any remaining Interest Proceeds, to the payment on a Pro
Rata basis to the Investment Manager as an Incentive Investment
Management Fee and to the payment of any value added tax in respect
thereof; and
80 per cent. of any remaining Interest Proceeds to the payment of interest
on the Class F Subordinated Notes on a Pro Rata basis.
(ii)
Application of Principal Proceeds
Principal Proceeds in respect of a Due Period shall be paid on the Payment Date
immediately following such Due Period as follows (with payments to be made from Euro
Principal Proceeds transferred to the Euro Payment Account for amounts denominated
in Euro, payments to be made from Sterling Principal Proceeds transferred to the
Sterling Payment Account for amounts denominated in Sterling and payments to be
made from Dollar Principal Proceeds Account transferred to the Dollar Principal
Payment Account for amounts denominated in Dollars, in each case subject to
Condition 3(c)(iv) (FX Conversion)):
(A)
(B)
to the payment on a sequential basis of the amounts referred to in paragraphs
(A) through (I) then paragraphs (K), (M), (O), and (T) of the Interest Proceeds
Priority of Payments, but only to the extent not paid in full thereunder;
to payment in accordance with the Note Payment Sequence and the Class
A1/A2 Note Redemption Method (1) in an amount equal to the Special
Redemption Amount (if any) applicable to such Payment Date if it is a Special
Redemption Date or (2) in an amount equal to all remaining Principal Proceeds
in the event of any redemption of the Notes pursuant to Condition 7(b)
(Redemption at the Option of the Class F Subordinated Noteholders);
(C) (1) during the Reinvestment Period, the Investment Manager, acting on
behalf of the Issuer, may subject to satisfaction of the Class E Coverage
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Tests elect to use Principal Proceeds in redemption of the Class A1 Notes
in accordance with Condition 7(e) (Class A1 Repayments);
(2) during the Reinvestment Period, either to the purchase of Substitute
Collateral Debt Obligations (including, to the extent such Substitute
Collateral Debt Obligations are Sterling Collateral Debt Obligations and
there are insufficient Sterling Principal Proceeds to acquire them or to the
extent such Substitute Collateral Debt Obligations are Dollar Collateral
Debt Obligations and there are insufficient Dollar Principal Proceeds to
acquire them, in the payment of any Currency Hedge Issuer Initial
Exchange Payment in respect of any Currency Hedge Transactions
entered into in connection with such acquisition) or to payment of an
amount at the discretion of the Investment Manager to the Euro Principal
Account, Sterling Principal Account or Dollar Principal Account pending
reinvestment in Substitute Collateral Debt Obligations at a later date;
(3) after the Reinvestment Period, all Principal Proceeds (other than those
permitted to be and actually designated for reinvestment in accordance
with the Investment Management Agreement), in redemption of the Rated
Notes in accordance with the Note Payment Sequence by reference to
that proportion immediately prior to such Redemption;
(D)
(E)
(F)
to the payment on a sequential basis of the amounts referred to in paragraphs (J)
and (V) through (BB) (inclusive) of the Interest Proceeds Priority of Payments,
but only to the extent not paid in full thereunder;
until the Incentive Investment Management Fee IRR Threshold has been
reached (after taking into account all prior distributions to Class F Subordinated
Noteholders and any distribution to be made to Class F Subordinated
Noteholders on such Payment Date), to the payment of principal on the Class F
Subordinated Notes on a Pro Rata basis, by reference to that proportion
immediately prior to such Redemption;
after the Incentive Investment Management Fee IRR Threshold has been
reached (after taking into account all prior distributions to Class F Subordinated
Noteholders and any distribution to be made to Class F Subordinated
Noteholders on such Payment Date):
(i)
(ii)
20 per cent. of any remaining Principal Proceeds, to the payment on a
Pro Rata basis to the Investment Manager as an Incentive Investment
Management Fee and to the payment of any value added tax in respect
thereof ; and
80 per cent. of any remaining Principal Proceeds to the payment of
principal on the Class F Subordinated Notes on a Pro Rata basis.
(iii)
Application of Collateral Enhancement Obligation Proceeds
Prior to the enforcement of the security over the Collateral, any Collateral Enhancement
Obligation Proceeds (save for amounts representing the Sale Proceeds in excess of the
purchase price for any Collateral Enhancement Obligation that is sold, which have been
either (i) credited or (ii) transferred (pursuant to Condition 3(j)(x) (Collateral
Enhancement Account)) to the Euro Principal Account, the Sterling Principal Account or
the Dollar Principal Account (as the case may be) at the Investment Manager's
discretion) received by the Issuer during a Due Period, will, on the relevant Payment
Date:
(A)
(B)
(firstly, be paid to the Investment Manager in the event that an Investment
Manager Advance has been made and is outstanding, such amount of any
Collateral Enhancement Obligation Proceeds as is required to repay such
Investment Manager Advance;
secondly, in an amount determined by the Investment Manager in its discretion,
be paid on the relevant Payment Date to the Class F Subordinated Noteholders
on a Pro Rata basis;
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(C)
(D)
thirdly, in an amount determined by the Investment Manager in its discretion, be
retained in the Collateral Enhancement Account; and
fourthly, to the extent of any remaining Collateral Enhancement Obligation
Proceeds, be paid to the Principal Account.
Following enforcement of the security over the Collateral, any Collateral Enhancement
Obligation Proceeds shall also be distributed in accordance with this Condition 3(c)(iii)
(Application of Collateral Enhancement Obligation Proceeds).
(iv)
FX Conversion
For the purposes of each of Conditions 3(c)(i) (Application of Interest Proceeds),
Condition 3(c)(ii) (Application of Principal Proceeds), Condition 3(c)(iii) (Application of
Collateral Enhancement Obligation Proceeds) and the Class A1/A2 Note Redemption
Method, Euro Interest Proceeds and Euro Principal Proceeds shall be applied first
towards amounts payable in Euro; Sterling Interest Proceeds and Sterling Principal
Proceeds shall be applied first towards amounts payable in Sterling and Dollar Interest
Proceeds and Dollar Principal Proceeds shall be applied first towards amounts payable
in Dollars provided that:
(A)
(B)
(C)
(D)
to the extent that there is a sufficient amount of Euro Interest Proceeds, Sterling
Interest Proceeds and Dollar Interest Proceeds available to make payment
obligations denominated respectively in Euro, Sterling or Dollars falling due
under the same paragraph of the Interest Priority of Payments or the same
paragraph of the Class A1/A2 Note Redemption Method on a Payment Date, the
Investment Manager (acting on behalf of the Issuer) shall direct the Collateral
Administrator to procure that Euro Interest Proceeds be applied towards the
payment of such amounts which are denominated in Euro, Sterling Interest
Proceeds be applied towards the payment of such amounts denominated in
Sterling, and Dollar Interest Proceeds be applied towards to payment of such
amount denominated in Dollars in applying any amounts payable pursuant to any
paragraph of Conditions 3(c)(i) (Application of Interest Proceeds) above or any
paragraph of the Class A1/A2 Note Redemption Method;
to the extent that there is a sufficient amount of Euro Principal Proceeds, Sterling
Principal Proceeds and Dollar Principal Proceeds available to make payment
obligations denominated respectively in Euro, Sterling or Dollars falling due
under the same paragraph of the Principal Priority of Payments or the same
paragraph of the Class A1/A2 Note Redemption Method on a Payment Date, the
Investment Manager (acting on behalf of the Issuer) shall direct the Collateral
Administrator to procure that Euro Principal Proceeds be applied towards the
payment of such amounts which are denominated in Euro, Sterling Principal
Proceeds be applied towards the payment of such amounts denominated in
Sterling, and Dollar Principal Proceeds be applied towards to payment of such
amount denominated in Dollars in applying any amounts payable pursuant to any
paragraph of Conditions 3(c)(i) (Application of Interest Proceeds) above or any
paragraph of the Class A1/A2 Note Redemption Method;
to the extent that following application as provided in (A) above, there are
insufficient Euro Interest Proceeds to pay in full amounts payable in Euro under
any of paragraphs (A) to (I) (inclusive) of Condition 3(c)(i) (Application of Interest
Proceeds) or any paragraph of the Class A1/A2 Note Redemption Method, then
the Collateral Administrator (on behalf of the Issuer) shall convert Pro Rata
amounts (determined with reference to the Initial Exchange Rate) of Sterling
Interest Proceeds and Dollar Interest Proceeds into Euro at the Applicable
Exchange Rate to pay in full the amounts payable in Euro pursuant to any of
such paragraphs but only to the extent of any excess Sterling Interest Proceeds,
or Dollar Interest Proceeds available at the appropriate level in the Priorities of
Payments or the Class A1/A2 Note Redemption Method, as the case may be;
to the extent that following application as provided in (C) above if there remain
insufficient Interest Proceeds to pay in full amounts payable in Euro under any of
paragraphs (A) to (I) (inclusive) of Condition 3(c)(i) (Application of Interest
Proceeds) or any paragraph of the Class A1/A2 Note Redemption Method, then
the Collateral Administrator (on behalf of the Issuer) shall apply Euro Principal
Proceeds and thereafter convert Pro Rata amounts (determined with reference to
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the Initial Rate of Exchange) of Sterling Principal Proceeds and Dollar Principal
Proceeds into Euro at the Applicable Exchange Rate to pay in full the amounts
payable in Euro pursuant to any such paragraphs, but only to the extent of any
excess Sterling Principal Proceeds or Dollar Principal Proceeds available at the
appropriate level in the Priorities of Payment or the Class A1/A2 Note
Redemption Method, as the case may be;
(E)
(F)
(G)
(H)
(I)
to the extent that following application as provided in (A) above, if there are
insufficient Sterling Interest Proceeds to pay in full amounts payable in Sterling
under any of paragraphs (A) to (I) (inclusive) of Condition 3(c)(i) (Application of
Interest Proceeds) or any paragraph of the Class A1/A2 Note Redemption
Method, then the Collateral Administrator (on behalf of the Issuer) shall convert
Pro Rata amounts (determined with reference to the Initial Rate of Exchange) of
Euro Interest Proceeds and Dollar Interest Proceeds into Sterling at the
Applicable Exchange Rate to pay in full the amounts payable in Sterling pursuant
to any of such paragraphs but only to the extent of any excess Euro Interest
Proceeds or Dollar Interest Proceeds available at the appropriate level in the
Priorities of Payments or the Class A1/A2 Note Redemption Method, as the case
may be;
to the extent that following application as provided in (E) above if there remain
insufficient Interest Proceeds to pay in full amounts payable in Sterling under any
of paragraphs (A) to (I) (inclusive) of Condition 3(c)(i) (Application of Interest
Proceeds) or any paragraph of the Class A1/A2 Note Redemption Method, then
the Collateral Administrator (on behalf of the Issuer) shall apply Sterling Principal
Proceeds and thereafter convert Pro Rata amounts (determined with reference to
the Initial Rate of Exchange) of Euro Principal Proceeds and Dollar Principal
Proceeds into Sterling at the Applicable Exchange Rate to pay in full the
amounts payable in Sterling pursuant to any such paragraphs, but only to the
extent of any excess Euro Principal Proceeds or Dollar Principal Proceeds
available at the appropriate level in the Priorities of Payment or the Class A1/A2
Note Redemption Method, as the case may be;
to the extent that following application as provided in (A) above, if there are
insufficient Dollar Interest Proceeds to pay in full amounts payable in Dollar
under any of paragraphs (A) to (I) (inclusive) of Condition 3(c)(i) (Application of
Interest Proceeds) or any paragraph of the Class A1/A2 Note Redemption
Method, then the Collateral Administrator (on behalf of the Issuer) shall convert
Pro Rata amounts (determined with reference to the Initial Rate of Exchange) of
Euro Interest Proceeds and Sterling Interest Proceeds into Dollars at the
Applicable Exchange Rate to pay in full the amounts payable in Dollar pursuant
to any of such paragraphs but only to the extent of any excess Sterling Interest
Proceeds or Euro Interest Proceeds available at the appropriate level in the
Priorities of Payments or the Class A1/A2 Note Redemption Method, as the case
may be;
to the extent that following application as provided in (G) above if there remain
insufficient Interest Proceeds to pay in full amounts payable in Dollars under any
of paragraphs (A) to (I) (inclusive) of Condition 3(c)(i) (Application of Interest
Proceeds) or any paragraph of the Class A1/A2 Note Redemption Method, then
the Collateral Administrator (on behalf of the Issuer) shall apply Dollar Principal
Proceeds and thereafter convert Pro Rata amounts (determined with reference to
the Initial Rate of Exchange) of Sterling Principal Proceeds and Euro Principal
Proceeds into Dollars at the Applicable Exchange Rate to pay in full the amounts
payable in Dollars pursuant to any such paragraphs, but only to the extent of any
excess Sterling Principal Proceeds or Euro Principal Proceeds available at the
appropriate level in the Priorities of Payment or the Class A1/A2 Note
Redemption Method as the case may be;
to the extent that following application as provided in (B) above, if there are
insufficient Euro Principal Proceeds to pay in full amounts payable in Euro under
any paragraph of the Principal Priority of Payment or any paragraph of the Class
A1/A2 Note Redemption Method, then the Collateral Administrator (on behalf of
the Issuer) shall convert Pro Rata amounts (determined with reference to the
Initial Rate of Exchange) of Sterling Principal Proceeds and Dollar Principal
Proceeds (to the extent available) into Euro at the Applicable Exchange Rate to
pay in full the amounts payable in Euro pursuant to any of such paragraphs but
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only to the extent of any excess Sterling Principal Proceeds or Dollar Principal
Proceeds available at the appropriate level in the Priorities of Payments;
(J)
(K)
(L)
(M)
(N)
to the extent that following application as provided in (B) above, if there are
insufficient Sterling Principal Proceeds to pay in full amounts payable in Sterling
under any paragraph of the Principal Priority of Payments or any paragraph of
the Class A1/A2 Note Redemption Method, then the Collateral Administrator (on
behalf of the Issuer) shall convert Pro Rata amounts (determined with reference
to the Initial Rate of Exchange) of Euro Principal Proceeds and Dollar Principal
Proceeds (to the extent available) into Sterling at the Applicable Exchange Rate
to pay in full the amounts payable in Sterling pursuant to any of the such
paragraphs but only to the extent of any excess Dollar Principal Proceeds or
Euro Principal Proceeds available at the appropriate level in the Priorities of
Payments;
to the extent that following application as provided in (B) above, if there are
insufficient Dollar Principal Proceeds to pay in full amounts payable in Dollars
under any paragraph of the Principal Priority of Payments or under any
paragraph of the Class A1/A2 Note Redemption Method then the Collateral
Administrator (on behalf of the Issuer) shall convert Pro Rata amounts
(determined with reference to the Initial Rate of Exchange) of Euro Principal
Proceeds and Sterling Principal Proceeds (to the extent available) into Dollars at
the Applicable Exchange Rate to pay in full the amounts payable in Dollar
pursuant to any of such paragraphs but only to the extent of any excess Sterling
Principal Proceeds or Euro Principal Proceeds available at the appropriate level
in the Priorities of Payments;
Interest Amounts pursuant to paragraph (I) of Condition 3(c)(i) (Application of
Interest Proceeds) are due and payable on the Class A Notes on a Pro Rata
basis, calculated based on amounts due and converted into either Euro, Sterling
or Dollar at the Applicable Exchange Rate;
after (i) payment in full of the Class A Notes and (ii) prior to the payment in full of
the Class A Notes and following payment of amounts payable pursuant to
paragraph (CC) of the Interest Proceeds Priority of Payment, the Collateral
Administrator (on behalf of the Issuer) shall convert any Sterling Interest
Proceeds or Dollar Interest Proceeds and/or, (as the case may be), any Sterling
Principal Proceeds or any Dollar Principal Proceeds (to the extent available) into
Euro at the Spot Rate to pay in full the amounts payable in Euro pursuant to such
priority of payment; and
if there are any excess Sterling Principal Proceeds, Dollar Principal Proceeds,
remaining after application in accordance with (M) above, such excess shall be
converted by the Collateral Administrator into Euro at the Spot Rate and during
the Reinvestment Period, at the option of the Investment Manager, used to
purchase further Euro denominated Collateral Debt Obligations.
(v)
Pari Passu Provisions
"Pari Passu Provisions" means that to the extent there is an insufficient amount of
Interest Proceeds or Principal Proceeds denominated in Sterling, Dollars or Euro to
meet the aggregate payment obligations falling due pursuant to the same paragraph of
the Priorities of Payment to which these Pari Passu provisions are specified as applying,
subject to the Class A1/A2 Note Redemption Method, the amounts payable pursuant to
such paragraph shall be adjusted so that the shortfall is borne in equal proportion by all
such liabilities regardless of their currency of denomination (determined by converting
the amount of any Sterling liabilities and Dollar liabilities into Euro at the then prevailing
Spot Rate) and effected by converting proceeds denominated in Sterling, Dollars or
Euro, as applicable, into the other currency(ies) at the then prevailing Spot Rate to the
extent required to ensure that such shortfall is borne equally on the basis specified
above and applying such amounts towards the liabilities denominated in the same
currency.
(d)
Non-payment of Amounts
Failure on the part of the Issuer to pay the Interest Amounts due and payable on any Class of
Notes pursuant to Condition 6 (Interest) and the Interest Proceeds Priority of Payments by
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eason solely that there are insufficient funds standing to the credit of the Payment Account
shall not be an Event of Default unless and until (i) such failure continues for a period of least
five days and (ii) (A) in the case of non-payment of interest due and payable on the Class B
Notes, the Class A Notes have been redeemed in full, (B) in the case of non-payment of
interest due and payable on the Class C Notes, the Class B Notes have been redeemed in full,
(C) in the case of non-payment of interest due and payable on the Class D Notes, the Class C
Notes have been redeemed in full and (D) in the case of non-payment of interest due and
payable on the Class E Notes, the Class D Notes have been redeemed in full, save in each
case as the result of any deduction therefrom or the imposition of withholding thereon as set
forth in Condition 9 (Taxation).
Subject always, in the case of Interest Amounts payable in respect of the Class B Notes, Class
C Notes, Class D Notes and Class E Notes to Condition 6(c) (Deferral of Interest) and save as
otherwise provided in respect of any unpaid Investment Management Fees (and value added
tax (if any) payable in respect thereof), in the event of non-payment of any amounts referred to
in the Interest Proceeds Priority of Payments of this Condition on any Payment Date, such
amounts shall remain due and shall be payable on each subsequent Payment Date in the
orders of priority provided for in this Condition. References to the amounts referred to in the
Interest Proceeds Priority of Payments and the Principal Proceeds Priority of Payments of this
Condition shall include any amounts thereof not paid when due in accordance with this
Condition on any preceding Payment Date.
(e)
Determination and Payment of Amounts
The Collateral Administrator will, in consultation with the Investment Manager, on each
Determination Date, calculate the amounts payable on the applicable Payment Date pursuant
to the Priorities of Payment and will notify the Issuer and the Trustee of such amounts. The
Account Bank (acting in accordance with the Payment Date Report compiled by the Collateral
Administrator on behalf of the Issuer) shall, on behalf of the Issuer not later than the second
Business Day preceding each Payment Date, cause available amounts standing to the credit of
the Euro Interest Account, the Euro Principal Account, the Sterling Interest Account, the
Sterling Principal Account, the Dollar Interest Account and the Dollar Principal Account to the
extent required to pay the amounts referred to in paragraphs (i), (ii), (iii) and (iv) of Condition
3(c) (Pre-Enforcement Priority of Payments) which are payable on such Payment Date to be
transferred to the Euro Payment Account or (as the case may be), the Sterling Payment
Account or (as the case may be), the Dollar Payment Account. The Collateral Administrator
shall, on behalf of the Issuer, cause available amounts standing to the credit of the Principal
Accounts and the Interest Accounts to the extent required to pay the amounts referred to in
paragraphs (i), (ii), (iii) and (iv) of Condition 3(c) (Pre-Enforcement Priority of Payments) which
are due and payable to be paid to the person entitled to such payment other than on any
Payment Date.
(f)
De minimis Amounts
The Collateral Administrator may, in consultation with the Investment Manager, adjust the
amounts required to be applied in payment of principal on the Class A Notes, the Class B
Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Subordinated
Notes from time to time pursuant to the Priorities of Payment so that the amount to be so
applied in respect of each Class A Note, Class B Note, Class C Note, Class D Note, Class E
Note and Class F Subordinated Note is a whole amount, not involving any fraction of a 0.01
Euro or, at the discretion of the Collateral Administrator, part of a Euro.
(g)
Publication of Amounts
The Collateral Administrator will cause details as to the amounts of interest and principal to be
paid, and any amounts of interest payable but not paid, on each Payment Date in respect of the
Notes to be notified at the expense of the Issuer to the Issuer, the Trustee, the Principal Paying
Agent, the Registrar and the Irish Stock Exchange by no later than 11.00 a.m. (London time) on
the second Business Day following the applicable Determination Date and the Registrar shall
procure that details of such amounts are notified at the expense of the Issuer to the
Noteholders of each Class in accordance with Condition 16 (Notices) as soon as possible after
notification thereof to the Registrar in accordance with the above but in no event later than (to
the extent applicable) the third Business Day after the last day of the applicable Due Period.
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(h)
Notifications to be Final
All notifications, opinions, determinations, certificates, quotations and decisions given,
expressed, made or obtained or discretions exercised for the purposes of the provisions of this
Condition will (in the absence of manifest error) be binding on the Issuer, the Collateral
Administrator, the Trustee, the Registrar, the Principal Paying Agent, the Transfer Agent and all
Noteholders and (in the absence as referred to above) no liability to the Issuer or the
Noteholders shall attach to the Collateral Administrator in connection with the exercise or nonexercise
by it of its powers, duties and discretions under this Condition.
(i)
Accounts
The Issuer shall, prior to the Issue Date, establish the following accounts with the Account
Bank:
• the Principal Accounts;
• the Interest Accounts;
• the Unused Proceeds Principal Account;
• the Unused Proceeds Interest Account;
• the Payment Accounts;
• the Derivative Termination Account;
• the Non-Euro Account;
• the Collateral Enhancement Account; and
• the Unfunded Reserve Accounts.
The Custody Account, Class P OAT Custody Account, the Synthetic Collateral Account, the
Derivative Counterparty Downgrade Collateral Account and the Class A1 Collateralising
Noteholder Account shall be established by the Issuer on the Issue Date with the Custodian.
Each of the Account Bank and the Custodian shall at all times be a financial institution
satisfying the Rating Requirement applicable thereto, which has the necessary regulatory
capacity and licences to perform the services required of the Account Bank or the Custodian. In
the event that the Account Bank or the Custodian as the case may be, at any time fails to
satisfy the applicable Rating Requirement, the Issuer shall use reasonable endeavours to
procure that a replacement Account Bank or the Custodian as the case may be, acceptable to
the Trustee, which satisfies the applicable Rating Requirement is appointed within 30 days of
such downgrade in accordance with the provisions of the Agency Agreement.
Amounts standing to the credit of the Accounts (other than the Synthetic Collateral Account)
from time to time may be invested by the Collateral Administrator at the written direction of the
Investment Manager on behalf of the Issuer in Eligible Investments.
All interest accrued on any of the Accounts from time to time shall be paid into the Euro Interest
Account, the Sterling Interest Account and the Dollar Interest Account (as applicable) save to
the extent that the Issuer is contractually bound to pay such amounts to a third party. All
principal amounts received in respect of Eligible Investments standing to the credit of any
Account from time to time shall be credited to that Account upon maturity, save to the extent
that the Issuer is contractually bound to pay such amounts to a third party. All interest accrued
on such Eligible Investments (including capitalised interest received upon the sale, maturity or
termination of any such investment) shall be paid to the Euro Interest Account, Sterling Interest
Account or Dollar Interest Account or the Unused Proceeds Interest Account (as applicable) as,
and to the extent provided above.
To the extent that any amounts required to be paid into any Account pursuant to the provisions
of this Condition are denominated in a currency which is not that in which the Account is
denominated, the Investment Manager may convert such amounts into the currency of the
Account at the spot rate of exchange as determined by the Calculation Agent at the direction of
the Investment Manager.
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Notwithstanding any other provisions of this Condition, all amounts standing to the credit of
each of the Accounts (other than (i) the Euro Interest Account, (ii) the Sterling Interest Account,
(iii) the Dollar Interest Account, (iv) the Euro Payment Account, (v) the Sterling Payment
Account, (vi) the Dollar Payment Account, (vii) all interest accrued on the Accounts, (viii) all
amounts standing to the credit of the Non-Euro Account representing amounts that would
constitute Interest Proceeds if denominated in Euro, (ix) the Collateral Enhancement Account
and (x) the Class A1 Collateralising Noteholder Account) shall be transferred to the Euro
Payment Account, the Sterling Payment Account or the Dollar Payment Account (as applicable)
and shall constitute Principal Proceeds on the second Business Day prior to any redemption of
the Notes in full, and all amounts standing to the credit of the Euro Interest Account, the
Sterling Interest Account or the Dollar Interest Account together with the other amounts not
payable into the Euro Principal Account, the Sterling Principal Account or the Dollar Principal
Account, as applicable, as described above, shall be transferred to the Euro Payment Account,
the Sterling Payment Account or the Dollar Payment Account (as the case may be) as Interest
Proceeds on the second Business Day prior to any redemption of the Notes in full, save (i) in
the case of amounts standing to the credit of the Synthetic Collateral Account, to the extent
payable to any Synthetic Counterparty and (ii) in the case of amounts standing to the credit of
the Class A1 Collateralising Noteholder Account, to the extent such amounts are payable to the
Class A1 Noteholders.
All references to the Issuer procuring that payments are made to or from Accounts shall be so
procured by the Collateral Administrator, acting on behalf of the Issuer and in accordance with
the Investment Management Agreement.
(j)
Payments to and from the Accounts
(i) Principal Accounts The Issuer will procure that the following Euro denominated
amounts, Sterling denominated amounts and Dollar denominated amounts are paid into,
respectively, the Euro Principal Account, the Sterling Principal Account and the Dollar
Principal Account, as applicable, in each case, promptly upon receipt thereof:
(A)
all principal payments received in respect of any Collateral Debt Obligation (save
for any Non-Euro Obligations denominated in a currency other than Sterling or
Dollars), including, without limitation:
(1) Scheduled Principal Proceeds;
(2) Unscheduled Principal Proceeds; and
(3) any other principal payments with respect to Collateral Debt Obligations,
but excluding any such payments received in respect of any Delayed Drawdown
Obligation or Revolving Security, to the extent required to be paid into the
Unfunded Reserve Accounts;
(B)
(C)
(D)
(E)
(F)
any Asset Swap Counterparty Principal Exchange Amount under any Asset
Swap Transaction to the Euro Principal Account;
any Currency Hedge Issuer (Principal) Receipts received by the Issuer from a
Currency Hedge Counterparty to the Euro Principal Account or the Sterling
Principal Account or the Dollar Principal Account, as the case may be;
any Derivative Counterparty Termination Payment or Derivative Replacement
Receipt transferred from the Derivative Termination Account to the Euro Principal
Account, the Sterling Principal Account or the Dollar Principal Account, as the
case may be;
all premiums (including prepayment premiums) receivable upon redemption of
any Collateral Debt Obligation at maturity or otherwise or upon exercise of any
put or call option in respect thereof which is above the outstanding principal
amount of any Collateral Debt Obligation to the Euro Principal Account, the
Sterling Principal Account or the Dollar Principal Account, as the case may be;
all fees and commissions received in connection with any Defaulted Obligation or
the work out or restructuring of any Collateral Debt Obligation;
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(G)
(H)
(I)
(J)
(K)
(L)
(M)
(N)
(O)
(P)
(Q)
(R)
(S)
all amendment and waiver fees, late payment fees, commitment fees,
syndication fees and all other fees and commissions received in connection with
any Collateral Debt Obligations, including, without limitation, upon purchase or
sale thereof, in each case, to the extent not included in paragraph (F) above,
provided that if, at any time after the first anniversary of the Issue Date; the Class
E Par Value Ratio is at least equal to the level the Class E Par Value Ratio is
anticipated to be as at the Effective Date, as determined by the Investment
Manager on or about the Issue Date (being 106.1 per cent.), such amounts may,
at the discretion of the Investment Manager, be paid into the Euro Interest
Account, the Sterling Interest Account or the Dollar Interest Account (as the case
may be) save to the extent received in respect of any Defaulted Obligation or the
work out or restructuring of any Collateral Debt Obligation;
all Sale Proceeds received in respect of a Collateral Debt Obligation (excluding
Sale Proceeds received in respect of Credit Short Obligations), including
amounts representing Sale Proceeds in excess of the purchase price of any
Collateral Enhancement Obligation that is sold which have been transferred to
the Euro Principal Account, the Sterling Principal Account or the Dollar Principal
Account (as the case may be) at the Investment Manager's discretion pursuant
to Condition 3(j)(x) (Collateral Enhancement Account) below;
all distributions and Sale Proceeds received in respect of Exchanged Equity
Securities;
all Purchased Accrued Interest to the Euro Principal Account, the Sterling
Principal Account or the Dollar Principal Account, as the case may be;
such amounts representing the element of deferred interest in any payments
received in respect of any Deferring Obligation equal to the sum of the
outstanding principal amount of such Deferring Obligation minus the aggregate
of all amounts previously paid into the Euro Principal Account, the Sterling
Principal Account or the Dollar Principal Account (as the case may be) in respect
of such Deferring Obligation pursuant to this paragraph (K);
the Balance standing to the credit of the Derivative Termination Account in the
circumstances described below under "Derivative Termination Account" to the
Euro Principal Account;
amounts transferred to the Principal Accounts from the Unused Proceeds
Accounts in the circumstances described under Condition 3(j)(iii) (Unused
Proceeds Principal Account and Unused Proceeds Interest Account) below;
all principal payments received in respect of any Synthetic Collateral to the
extent no longer subject to the security interest of the applicable Synthetic
Counterparty;
any other amounts received in respect of the Collateral which are not required to
be paid into another Account to the Euro Principal Account, the Sterling Principal
Account or the Dollar Principal Account, as the case may be;
amounts transferred to the Euro Principal Account or the Sterling Principal
Account or the Dollar Principal Account, as the case may be, from other
Accounts as required below;
all amounts payable into the Euro Principal Account, the Sterling Principal
Account and the Dollar Principal Account (as the case may be) pursuant to
Priorities of Payment upon the failure to meet the Reinvestment Diversion Test
during the Reinvestment Period;
all amounts payable into the Euro Principal Account, the Sterling Principal
Account and the Dollar Principal Account (as the case may be) pursuant to the
Collateral Enhancement Obligation Proceeds Priority of Payments;
all amounts transferred by the Investment Manager at its discretion to the
Principal Accounts from the Interest Accounts pursuant to Condition 3(j)(ii)(3)
(Interest Accounts);
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(T)
(U)
(V)
(W)
(X)
all amounts transferred by the Investment Manager at its discretion to the
Principal Accounts from the Collateral Enhancement Account pursuant to
Condition 3(j)(x) (Collateral Enhancement Account);
any Offsetting Credit Default Swap Counterparty Termination Payment, any
Offsetting Credit Default Swap Replacement Receipt, Cash Settlement Amounts
and Physical Settlement Amounts received by the Issuer under any Offsetting
Credit Default Swap (including, without limitation, any amounts paid as such from
the Derivative Counterparty Downgrade Collateral Account) to the Euro Principal
Account, the Sterling Principal Account or the Dollar Principal Account (as the
case may be);
after the Effective Date, any Class A1 Drawings received from any Class A1
Noteholder under the Class A1 Notes (except to the extent required to be paid
into the Unfunded Reserve Accounts);
all amounts transferred from the Class A1 Collateralising Noteholder Account in
respect of a Defaulting Class A1 Noteholder with respect to a Class A1 Drawing;
and
the proceeds of sale of Reference Obligations in respect of Credit Short
Obligations the subject of physical settlement to the extent of amounts paid out
of the Principal Accounts pursuant to paragraph 10 of Condition 3(j)(i) (Principal
Accounts).
The Issuer shall procure payment of the following Euro denominated amounts, Sterling
denominated amounts and Dollar denominated amounts out of, respectively, the Euro
Principal Account, the Sterling Principal Account and the Dollar Principal Account, as
applicable:
(1) on the second Business Day prior to each Payment Date, all Principal
Proceeds standing to the credit of the Euro Principal Account, the Sterling
Principal Account and the Dollar Principal Account to the Euro Payment
Account, the Sterling Payment Account and the Dollar Payment Account,
respectively, to the extent required for disbursement pursuant to the
Principal Proceeds Priority of Payments, save for (a) amounts deposited
after the end of the related Due Period and (b) any Principal Proceeds
deposited prior to the end of the related Due Period to the extent such
Principal Proceeds are permitted to be and have been designated for
reinvestment by the Investment Manager pursuant to the Investment
Management Agreement for a period beyond such Payment Date,
provided that no such payment shall be made to the extent that such
amounts are not required to be distributed pursuant to the Principal
Proceeds Priority of Payments on such Payment Date;
(2) at any time in accordance with the terms of, and to the extent permitted
under, the Investment Management Agreement, in the acquisition of
Collateral Debt Obligations including any payments to an Asset Swap
Counterparty in respect of initial principal exchange amounts pursuant to
an Asset Swap Transaction and/or the posting of Synthetic Collateral
upon the acquisition of any Synthetic Security and/or amounts equal to
the Unfunded Amounts of Delayed Drawdown Obligations and Revolving
Securities which are required to be deposited in the Euro Unfunded
Reserve Account or Sterling Unfunded Reserve Account or the Dollar
Unfunded Reserve Account, as applicable and/or any payment to a Put
Option Counterparty upon the entry into such Put Option;
(3) at any time, any Asset Swap Issuer Termination Payment or Interest Rate
Hedge Issuer Termination Payment payable by the Issuer, (excluding any
Defaulted Asset Swap Issuer Termination Payments or Defaulted Interest
Rate Hedge Issuer Termination Payments) to the extent required to be
paid pursuant to an Asset Swap Transaction or an Interest Rate Hedge
Transaction and, in respect of an Asset Swap Transaction, to the extent
not paid out of Sale Proceeds received in respect of the related Non-Euro
Obligation and, in respect of an Asset Swap Transaction and an Interest
Rate Hedge Transaction, to the extent not already paid out of the
Derivative Termination Account;
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(4) during the Reinvestment Period, in the acquisition of Collateral Debt
Obligations (including the purchase of any Put Options which shall be
included in the purchase price of such Collateral Debt Obligation), in an
amount up to the amount deposited into the Principal Accounts pursuant
to paragraph (P) above;
(5) in the case of any amounts paid into the Principal Accounts which
represent Sale Proceeds which are in excess of the purchase price paid
by or on behalf of the Issuer for a Collateral Debt Obligation and/or any
amounts received in respect of any Purposely Deferring Obligations which
are designated as deferred interest by the Investment Manager in
accordance with the Investment Management Agreement and subject to
satisfaction of each of the Portfolio Profile Tests, Collateral Quality Tests
and the Class E Par Value Ratio being at least equal to the level the
Class E Par Value Ratio is anticipated to be as at the Effective Date, as
determined by the Investment Manager on or about the Issue Date (being
106.1 per cent.) after giving effect to such payment, at the discretion of
the Investment Manager, to the Interest Accounts;
(6) at any time, any Offsetting Credit Default Swap Issuer Termination
Payment or any Defaulted Offsetting Credit Default Swap Issuer
Termination Payment payable by the Issuer provided that the Coverage
Tests and Collateral Quality Tests are satisfied after giving effect to such
payment and such amounts are not otherwise paid out of the Interest
Accounts and in the case of a Defaulted Offsetting Credit Default Swap
Issuer Termination Payment, only up to an amount not exceeding any
Offsetting Credit Default Swap Replacement Receipt paid to the Issuer by
a replacement Offsetting Credit Default Swap Counterparty under a
Replacement Offsetting Credit Default Swap and in the event that such
amount is insufficient to satisfy payment in full of such Defaulted
Offsetting Credit Default Swap Issuer Termination Payment or no
Replacement Offsetting Credit Default Swap is entered into then such
payment shall be paid in accordance with the Priorities of Payments on
the next Payment Date, in each case, from the Euro Principal Account or
the Sterling Principal Account or the Dollar Principal Account;
(7) at any time during the Reinvestment Period, in repayment of any Class
A1 Drawings under the Class A1 Notes and thereafter to the Unfunded
Reserve Accounts to reduce the Class A1 Allocated Amounts (excluding
any Break Costs) provided that the Class E Coverage Tests are satisfied;
(8) at any time, any Currency Hedge Issuer Termination Payment payable by
the Issuer (excluding any Defaulted Currency Hedge Issuer Termination
Payments), to the extent such amounts are not otherwise paid out of the
Derivative Termination Account, and in the case of a Replacement
Currency Hedge, only up to an amount not exceeding any Currency
Hedge Replacement Receipt paid to the Issuer by a Currency Hedge
Counterparty under a Replacement Currency Hedge and in the event that
such amount is insufficient to satisfy payment in full of such Currency
Hedge Issuer Termination Payment or no Replacement Currency Hedge
is entered into, then such payment shall be paid in accordance with the
Priorities of Payment on the next Payment Date from the Sterling
Principal Account, the Euro Principal Account or the Dollar Principal
Account, as the case may be;
(9) any Currency Hedge Issuer (Principal) Payments; and
(10) at any time, at the discretion of the Investment Manager, amounts
required to purchase Deliverable Obligations to be delivered by the Issuer
to a Credit Short Obligation Counterparty in respect of the physical
settlement of a Credit Short Obligation. For the avoidance of doubt, the
election of effect settlement by way of physical settlement may only be
made in accordance with the criteria set out in the Investment
Management Agreement.
(ii) Interest Accounts The Issuer will procure that the following Euro denominated
amounts and Sterling denominated amounts and Dollar denominated amounts are paid
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into, respectively, the Euro Interest Account, the Sterling Interest Account and the Dollar
Interest Account, as applicable, in each case, promptly upon receipt thereof:
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
all cash payments of interest in respect of the Collateral Debt Obligations (save
for Non-Euro Obligations) (other than any Purchased Accrued Interest), together
with all amounts received by the Issuer by way of gross-up in respect of such
interest and in respect of a claim under any applicable double taxation treaty but
excluding any amounts which represent deferred interest received in respect of
any Deferring Obligation;
if at any time after the first anniversary of the Issue Date, the Class E Par Value
Ratio is at least equal to the level the Class E Par Value Ratio is anticipated to
be as at the Effective Date, as determined by the Investment Manager on or
about the Issue Date (being 106.1 per cent.), all amendment and waiver fees,
late payment fees, commitment fees, syndication fees and other fees and
commissions received in connection with any Collateral Debt Obligation,
including, without limitation, upon sale or purchase thereof which the Investment
Manager determines in its discretion shall be paid into the Interest Account, save
to the extent received in respect of any Defaulted Obligation or the work out or
restructuring of any Collateral Debt Obligation;
all accrued interest included in the proceeds of sale of any Collateral Debt
Obligation that is designated by the Investment Manager as Interest Proceeds
pursuant to the Investment Management Agreement, provided that no such
designation may be made in respect of (i) any Purchased Accrued Interest or (ii)
any such proceeds that represent deferred interest accrued in respect of any
Deferring Obligation;
all Scheduled Periodic Asset Swap Counterparty Payments received by the
Issuer under an Asset Swap Transaction and all Scheduled Periodic Interest
Rate Hedge Counterparty Payments received by the Issuer under an Interest
Rate Hedge Transaction;
cash amounts (representing any excess standing to the credit of the Non-Euro
Account after provisioning by the Investment Manager for any amounts due to be
paid to any Asset Swap Counterparty pursuant to any Asset Swap Transaction)
transferred from the Non-Euro Account, converted into Euro at the prevailing
spot rate of exchange as determined by the Calculation Agent at the direction of
the Investment Manager;
all amounts received by the Issuer in respect of interest paid in respect of any
collateral deposited by the Issuer with a third party as security for any
reimbursement or indemnification obligations to any other lender under a
Delayed Drawdown Obligation in an account established pursuant to an ancillary
facility;
amounts transferred from the Unused Proceeds Interest Account upon
confirmation by the Rating Agencies of the Initial Ratings assigned to the Notes
after the Effective Date in the circumstances described under paragraph (iii)
(Unused Proceeds Principal Account and Unused Proceeds Interest Account)
below;
amounts transferred by the Investment Manager to the Interest Accounts
pursuant to Condition 3(j)(i)(F) (Principal Accounts);
all Credit Short Obligation Counterparty Termination Payments, Credit Short
Obligation Replacement Receipts, Cash Settlement Amounts and Physical
Settlement Amounts received in respect of any Credit Short Obligations;
all amounts received in respect of any Purposely Deferring Obligation which are
designated as deferred interest by the Investment Manager in accordance with
the Investment Management Agreement;
all amounts representing the element of deferred interest in payments received in
respect of any Deferring Obligation other than those referred to in paragraph (K)
of Condition 3(j)(i) (Principal Accounts);
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(L)
(M)
(N)
all Scheduled Periodic Currency Hedge Counterparty Payments received by the
Issuer under the Currency Hedge Transaction to the Euro Interest Account or the
Sterling Interest Account or the Dollar Interest Account, as the case may be;
any Delayed Settlement Compensation received in respect of the acquisition of
any Collateral Debt Obligations; and
all amounts transferred to the Interest Account from any other Account pursuant
to Condition 3(j) (Payments to and from Accounts) and Condition 3(i) (Accounts)
from time to time.
The Issuer shall procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted above) out
of the Euro Interest Account, the Sterling Interest Account and the Dollar Interest
Account, as applicable:
(1) on the second Business Day prior to each Payment Date, all Interest
Proceeds standing to the credit of the Euro Interest Account, the Sterling
Interest Account and the Dollar Interest Account, as applicable, shall be
transferred to the Euro Payment Account, the Sterling Payment Account
and the Dollar Payment Account (as the case may be) to the extent
required for disbursement pursuant to the Interest Proceeds Priority of
Payments, save for amounts deposited after the end of the related Due
Period and, on any Payment Date, other than a Payment Date on which
all of the Notes are to be redeemed in full;
(2) at any time, subject to insufficient amounts being available in the
Collateral Enhancement Account for the acquisition or exercise of any
Collateral Enhancement Obligation at such time, amounts required by the
Issuer or the Investment Manager for such purpose at such time, to be
deposited into the Collateral Enhancement Account, provided that:
(x)
(y)
each Coverage Test and Collateral Quality Test is satisfied if
recalculated following any such withdrawal and the receipt by the
Issuer of the related Collateral Enhancement Obligation proceeds;
and
the amount of funds withdrawn from the Interest Account or
pursuant to paragraph (AA) of the Interest Proceeds Priority of
Payment pursuant to this paragraph (2) for such purpose in each
case in aggregate in any particular Due Period, do not exceed
€200,000 or its Euro equivalent converted at the Spot Rate;
(3) at any time, any amount determined by the Investment Manager at its
discretion to be transferred to the Euro Principal Account, the Sterling
Principal Account or the Dollar Principal Account provided that (i)
following such transfer each of the Interest Coverage Tests is satisfied
and (ii) the most recent Monthly Report contains a statement that each of
the Interest Coverage Tests is satisfied;
(4) at any time, any Credit Short Obligation Issuer Termination Payments or
Defaulted Credit Short Obligation Issuer Termination Payments payable
by the Issuer provided that the Interest Coverage Tests and the Collateral
Quality Tests are satisfied after giving effect to such payments (provided
that, in the case of a Defaulted Credit Short Obligation Issuer Termination
Payment only up to an amount not exceeding any Credit Short Obligation
Replacement Receipt paid to the Issuer by a replacement Credit Short
Obligation Counterparty under a replacement Credit Short Obligation and
in the event that such amount is insufficient to satisfy payment in full of
such Defaulted Credit Short Obligation Issuer Termination Payment or no
Replacement Credit Short Obligation is entered into then such payment
shall be made in accordance with the Priorities of Payment on the next
Payment Date) to the extent not already paid out of the Derivative
Termination Account;
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(5) at any time, any Scheduled Periodic Issuer Credit Short Obligation
Payment to the extent required to be paid pursuant to a Credit Short
Obligation;
(6) at any time, any Scheduled Periodic Issuer Offsetting Credit Default Swap
Payments, to the extent required to be paid pursuant to an Offsetting
Credit Default Swap;
(7) at any time, to the payment of Class A1 Aggregate Interest Amounts;
(8) in respect of any Credit Short Obligation in respect of which the Issuer
elects for physical settlement, an amount up to the notional amount
thereof to the Collateral Enhancement Account on the date of entry by the
Issuer into such Credit Short Obligation (to the extent required pursuant to
the Investment Management Agreement);
(9) at any time in accordance with the terms of, and to the extent permitted
under, the Investment Management Agreement, in the acquisition of
Collateral Debt Obligations to the extent that any such acquisition costs
represent accrued interest; and
(10) at any time to the payment of Trustee Fees and Expenses and
Administrative Expenses in an amount in any Due Period not to exceed
the Senior Expenses Cap.
(iii)
Unused Proceeds Principal Account and Unused Proceeds Interest Account The
Issuer will procure that the following amounts are credited to the Euro Unused Proceeds
Principal Account or the Euro Unused Proceeds Interest Account, as the case may be:
(A)
(B)
an amount equal to the net proceeds of issue of the Notes remaining after the
payment of (1) all amounts due and payable in connection with the acquisition of
certain Collateral Debt Obligations purchased by the Issuer, or which the Issuer
has committed to purchase, including the repayment (to the extent required on
the Issue Date) of any amounts borrowed by the Issuer (together with any
interest thereon) in order to finance the acquisition thereof and (2) an amount
estimated by the Investment Manager as necessary to meet certain initial fees,
costs and expenses incurred in connection with the issue of Notes and
anticipated to be payable by the Issuer on or following completion of the issue of
the Notes, including expenses relating to the acquisition of Collateral Debt
Obligations, which has been deposited into the Euro Payment Account or the
Sterling Payment Account or the Dollar Payment Account, as the case may be,
which amounts shall, in each case, be divided between the Euro Unused
Proceeds Interest Account and Euro Unused Proceeds Principal Account as the
case may be, as directed by the Investment Manager; and
at any time prior to the Effective Date, all Euro Denominated Drawings and/or
Sterling Denominated Drawings and/or Dollar Denominated Drawings received
from any Class A1 Noteholder under the Class A1 Notes.
The Issuer shall procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted above) out
of the Unused Proceeds Accounts:
(1) certain fees, costs and expenses incurred in connection with the issue of
the Notes and anticipated to be payable by the Issuer on or following
completion of the issue of the Notes which amount shall be paid out of the
Euro Unused Proceeds Principal Account;
(2) at any time up to and including the last day of the Initial Investment
Period, in accordance with the terms of, and to the extent permitted
under, the Investment Management Agreement, in the acquisition of
Collateral Debt Obligations including any payments to an Asset Swap
Counterparty in respect of initial principal exchange amounts for Non-
Euro Obligations or a Put Option Counterparty in respect of a Put Option,
forming part of the initial Portfolio, which amounts shall be funded:
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(x)
(y)
to the extent that any such acquisition costs represent accrued
interest, out of the Euro Unused Proceeds Interest Account, as the
case may be, or to the extent that there are insufficient amounts
standing to the credit thereof out of the Euro Unused Proceeds
Principal Account;
in the case of any acquisition costs other than those that represent
accrued interest, out of the Euro Unused Proceeds Principal
Account, or, to the extent that there are insufficient amounts
standing to the credit thereof, out of the Euro Principal Account, the
Sterling Principal Account or the Dollar Principal Account (as the
case may be) or, to the extent that there are insufficient amounts
standing to the credit thereof, out of the Euro Unused Proceeds
Interest Account;
(3) in the event of the occurrence of an Effective Date Rating Event, the
Balance standing to the credit of the Euro Unused Proceeds Principal
Account and the Euro Unused Proceeds Interest Account, two Business
Days prior to the Payment Date falling immediately after the Effective
Date, to the extent required (with amounts standing to the credit of the
Euro Unused Proceeds Interest Account being so transferred first and
thereafter amounts standing to the credit of the Euro Unused Proceeds
Principal Account), to the Euro Payment Account for application as
Principal Proceeds in accordance with the Priorities of Payment in
redemption on a Pro Rata basis of the Notes in accordance with the Note
Payment Sequence or, if earlier, until the Rating Agencies confirm that
the ratings of the Notes have been reinstated to the Initial Ratings;
(4) upon confirmation by the Rating Agencies of the Initial Ratings after the
Effective Date, the Balance standing to the credit of the Unused Proceeds
Interest Account, to the Interest Accounts or to the Principal Accounts at
the discretion of the Investment Manager and the Balance standing to the
credit of the Unused Proceeds Principal Account to the Principal
Accounts;
(5) two Business Days prior to the first Payment Date only, at the discretion
of the Investment Manager, all or part of the Balance standing to the
credit of the Euro Unused Proceeds Interest Account to the Euro Payment
Account to be applied in accordance with the Interest Proceeds Priority of
Payments on such Payment Date that the Class E Coverage Tests are
satisfied; and
(6) at any time during the Reinvestment Period upon redemption of the Class
A1 Notes pursuant to Condition 7(e) (Class A1 Repayments) in payment
of any Class A1 Drawings.
(iv)
Payment Accounts The Issuer will procure that, (i) the net proceeds of enforcement of
the security over the Collateral shall be credited to the Euro Payment Account or the
Sterling Payment Account or the Dollar Payment Account, if applicable, (ii) on the
second Business Day prior to each Payment Date, all Euro amounts, Sterling amounts
and Dollar amounts standing to the credit of each of the Accounts which are required to
be transferred from the other accounts to, respectively, the Euro Payment Account, the
Sterling Payment Account and the Dollar Payment Account (as the case may be)
pursuant to Condition 3(i) (Accounts) are so transferred, and, on such Payment Date,
the Collateral Administrator shall disburse such amounts in accordance with the
Priorities of Payment. No amounts shall be transferred to or withdrawn from the
Payment Accounts at any other time or in any other circumstances, save that all interest
accrued on the Payment Accounts shall be credited to the Euro Interest Account, the
Sterling Interest Account and the Dollar Interest Account (as applicable);
(v) Derivative Termination Account The Issuer will procure that all Derivative
Counterparty Termination Payments, and all Derivative Replacement Receipts and all
proceeds of liquidation of any Derivative Counterparty Downgrade Collateral are paid
into a segregated sub-account within the Derivative Termination Account which is
opened and maintained in respect of the related hedge transaction promptly upon
receipt thereof.
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The Issuer will procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted above) out
of the Derivative Termination Account:
(A)
(B)
at any time, any Derivative Issuer Replacement Payment and Derivative Issuer
Termination Payment payable by the Issuer to any Derivative Counterparty upon
replacement or termination (as applicable) of a Derivative Transaction to which
the applicable sub-account relates up to an amount equal to the Derivative
Counterparty Termination Payment or Derivative Replacement Receipts received
by the Issuer in respect thereof;
to the extent that any Derivative Counterparty Termination Payment or Derivative
Replacement Receipt received by the Issuer exceeds any Derivative Issuer
Replacement Payment or Derivative Issuer Termination Payment payable upon
termination of the related Derivative Transaction upon entry into a Derivative
Transaction replacing the original Derivative Transaction, as applicable, the
Balance of the related Derivative Counterparty Termination Payment or
Derivative Replacement Receipt standing to the credit of the applicable subaccount
of the Derivative Termination Account shall be transferred to the relevant
Principal Account save for any amount relating to any Credit Short Obligation
which shall be transferred to the relevant Interest Account.
(vi)
Non-Euro Account The Issuer will procure that all amounts due to the Issuer in
respect of each Non-Euro Obligation that are subject to an Asset Swap Transaction not
including Sterling Obligations and Dollar Obligations (including any payments from an
Asset Swap Counterparty in respect of initial principal exchange amounts pursuant to an
Asset Swap Transaction but excluding any Asset Swap Counterparty Principal
Exchange Amount or Asset Swap Replacement Receipts) shall, on receipt, be
deposited in the relevant ledger within the Non-Euro Account in respect of, and
maintained in the currency of, each such individual Non-Euro Obligation.
The Issuer will procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted above) out
of the relevant ledger of the Non-Euro Account:
(1) at any time, to the extent of any initial principal exchange amount
deposited into the Non-Euro Account in accordance with the terms of, and
to the extent permitted under the Investment Management Agreement, in
the acquisition of Non-Euro Obligations;
(2) Scheduled Periodic Asset Swap Issuer Payments due to each Asset
Swap Counterparty pursuant to each Asset Swap Transaction;
(3) Asset Swap Issuer Principal Exchange Amounts due to each Asset Swap
Counterparty pursuant to each Asset Swap Transaction; and
(4) cash amounts (representing any excess standing to the credit of the Non-
Euro Account after provisioning for any amounts to be paid to any Asset
Swap Counterparty pursuant to any Asset Swap Transaction) to such
Interest Account or Principal Account as the Investment Manager shall
determine after conversion thereof at the prevailing spot rate of exchange
as applicable as determined by the Calculation Agent.
(vii)
Synthetic Collateral Account The Issuer shall procure that sums and/or securities
denominated in Sterling, Euro or Dollars, as applicable, deposited by the Issuer as
Synthetic Collateral to secure the Issuer’s obligations under a Synthetic Security
pursuant to the terms of such Synthetic Security are paid into the corresponding
currency ledger within (each relating to individual Synthetic Counterparties) Synthetic
Collateral Account, including:
(A)
upon the acquisition by or on behalf of the Issuer of any Synthetic Security, an
amount sufficient to ensure that immediately following such acquisition the sum
of (1) principal amounts standing to the credit of the Synthetic Collateral
Accounts at that time and (2) the Class A1 Allocated Amount in respect of
synthetic securities is not less than the aggregate of all Unfunded Amounts in
respect of synthetic securities; and
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(B)
all principal payments received by the Issuer in respect of any Synthetic Security,
if and to the extent that the amount of such principal payments may be re
borrowed under such Synthetic Security.
The Issuer shall procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted above) out
of the Synthetic Collateral Account:
(1) on any Business Day, any Synthetic Collateral (or any amount received
on liquidation or maturity thereof) to the Euro Principal Account, the
Sterling Principal Account or the Dollar Principal Account upon
termination or maturity of a Synthetic Security, to the extent not required
to be paid to the applicable Synthetic Counterparty; and
(2) in payment of any amounts due and payable by the Issuer to the
applicable Synthetic Counterparty under any Synthetic Security.
(viii)
(ix)
Derivative Counterparty Downgrade Collateral Account The Issuer will procure that
all Derivative Counterparty Downgrade Collateral pledged pursuant to a Derivative
Agreement shall be deposited in a sub-account within the Derivative Counterparty
Downgrade Collateral Account relating to each relevant Derivative Counterparty. All
Derivative Counterparty Downgrade Collateral deposited from time to time in any
Derivative Counterparty Downgrade Collateral Account shall be held and released
pursuant to the terms of the Derivative Agreement. Upon any default by a Derivative
Counterparty under a Derivative Agreement, the Issuer or the Investment Manager, on
its behalf, shall promptly exercise its remedies under the related agreement, including
liquidating the related Derivative Counterparty Downgrade Collateral, whereupon such
Derivative Counterparty Downgrade Collateral shall be transferred to the Derivative
Termination Account.
Class A1 Collateralising Noteholder Account The Issuer will procure that all sums
and/or securities delivered to the Issuer as Class A1 Noteholder Collateral and/or as
Class A1 Downgrade Draws to secure a Class A1 Noteholder's obligation pursuant to
the Class A1 Note Purchase Agreement are paid into separate segregated ledgers each
relating to an individual Class A1 Noteholder within the Class A1 Collateralising
Noteholder Account.
The Issuer shall procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted) out of the
Class A1 Collateralising Noteholder Account:
(A)
(B)
(C)
subject to the satisfaction of the conditions specified in the Class A1 Note
Purchase Agreement in respect of the amount proposed to be withdrawn from
the Class A1 Collateralising Noteholder Account on any Business Day, in respect
of a Defaulting Class A1 Noteholder, shall be paid, prior to the Effective Date,
into the Unused Proceeds Principal Account and after the Effective Date, the
Principal Account in an amount equal to the relevant Class A1 Noteholder's
obligation to fund its Class A1 pro rata share of a Class A1 Drawing;
on any Business Day, any Class A1 Noteholder Collateral or any amounts
standing to the credit of the Class A1 Collateralising Noteholder Account required
to be paid to a Class A1 Noteholder pursuant to the terms of the Class A1 Note
Purchase Agreement, including any Class A1 Commitment Fee; and
on any Business Day, any accrued interest on amounts standing to the credit of
the Class A1 Collateralising Noteholder Account in payment to the Class A1
Noteholder.
(x)
Collateral Enhancement Account The Issuer will procure that the following amounts
are credited to the Collateral Enhancement Account:
(A)
(B)
at any time, all Collateral Enhancement Obligation Proceeds;
at any time, the proceeds of an Investment Manager Advance, to the extent not
applied in the acquisition of or, in respect of any exercise of any option or warrant
comprised in, one or more Collateral Enhancement Obligations (in accordance
with the terms of the Investment Management Agreement);
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(C)
(D)
(E)
at any time, any amounts withdrawn from the Interest Accounts pursuant to
paragraph (2) of Condition 3(j)(ii) (Interest Accounts) for the purposes of the
acquisition of or, in respect of any exercise of any option or warrant comprised in,
one or more Collateral Enhancement Obligations;
on each Payment Date, all amounts of interest payable in respect of the Class F
Subordinated Notes which the Investment Manager determines at its discretion
shall be applied in payment into the Collateral Enhancement Account pursuant to
paragraph (AA) of the Interest Proceeds Priority of Payments, subject to the limit
specified in such paragraph; and
if the Issuer elects for physical settlement at the date it enters into the Credit
Short Obligation, an amount equal to the notional amount of any Credit Short
Obligation (if any) out of the Interest Account on such date.
The Issuer will procure payment of the following amounts (and shall ensure that
payment of no other amount is made, save to the extent otherwise permitted above) out
of the Collateral Enhancement Account:
(1) at any time, in the acquisition of, or in respect of any exercise of any
option or warrant comprised in, Collateral Enhancement Obligations, in
accordance with the terms of the Investment Management Agreement;
(2) at the discretion of the Investment Manager (on the second Business Day
prior to each Payment Date), all or part of the Balance standing to the
credit of the Collateral Enhancement Account to the Euro Payment
Accounts, the Sterling Payment Accounts or the Dollar Payment Accounts
(as the case may be) for distribution on such Payment Date in
accordance with the Collateral Enhancement Obligation Proceeds Priority
of Payments;
(3) at any time, at the discretion of the Investment Manager, amounts
required to repay any Investment Manager Advance outstanding;
(4) at any time, at the discretion of the Investment Manager, amounts
representing the Sale Proceeds in excess of the purchase price of any
Collateral Enhancement Obligation that is sold, to the Euro Principal
Account, the Sterling Principal Account or the Dollar Principal Account;
and
(5) at any time, at the discretion of the Investment Manager, amounts
required to purchase Deliverable Obligations to be delivered by the Issuer
to a Credit Short Obligation Counterparty in respect of the physical
settlement of a Credit Short Obligation. For the avoidance of doubt, the
election to effect settlement by way of physical settlement may only be
made in accordance with the criteria set out in the Investment
Management Agreement.
(xi)
Unfunded Reserve Accounts The Issuer will procure that the following amounts are
paid into the Euro Unfunded Reserve Account or the Sterling Unfunded Reserve
Account or the Dollar Unfunded Reserve Account promptly on receipt thereof:
(A)
(B)
upon the acquisition by or on behalf of the Issuer of any Revolving Security or
Delayed Drawdown Obligation, an amount sufficient to ensure that immediately
following such acquisition the sum of (1) principal amounts standing to the credit
of the related Unfunded Reserve Account at the time and (2) the Class A1
Allocated Amount in the relevant currency in respect of Revolving Securities or
Delayed Drawdown Obligations is not less than the aggregate of all Unfunded
Amounts in the related currency in respect of Revolving Securities and Delayed
Drawdown Obligations;
all principal payments received by the Issuer in respect of any Revolving
Security, if and to the extent that the amount of such principal payments may be
re borrowed under such Revolving Security and if such Revolving Security is
subject to an Asset Swap Transaction, any Asset Swap Counterparty Principal
Exchange Amounts under such Asset Swap Transaction.
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(C)
all repayments of collateral to the Issuer originally paid by the Issuer pursuant to
(1) below.
The Issuer shall procure payment of the following amounts out of the Euro Unfunded
Reserve Account and/or the Sterling Unfunded Reserve Account and/or the Dollar
Unfunded Reserve Account:
(1) all amounts required to fund any drawings under any Delayed Drawdown
Obligation or Revolving Security or (subject to Rating Agency
Confirmation) required to be deposited in the Issuer's name with any third
party as collateral for any reimbursement or indemnification obligations of
the Issuer owed to any other lender under such Revolving Security or
Delayed Drawdown Obligation (subject to such security documentation as
may be agreed between such lender, the Investment Manager (acting on
behalf of the Issuer) and the Trustee);
(2) (x) at any time at the direction of the Investment Manager (acting on
behalf of the Issuer) or (y) upon the sale (in whole or in part) of a
Revolving Security or a Delayed Drawdown Obligation or the reduction,
cancellation or expiry of any commitment of the Issuer to make future
advances or otherwise extend credit thereunder, any excess of (a) the
amount standing to the credit of the related Unfunded Reserve Account
and the amount of the Class A1 Allocated Commitment in the relevant
currency over (b) the sum of the Unfunded Amounts of all Revolving
Securities and Delayed Drawdown Obligations in the relevant currency,
after taking into account such sale or such reduction, cancellation or
expiry of commitment to the Principal Account;
(3) all initial principal exchange amounts scheduled to be paid by the Issuer
to an Asset Swap Counterparty under an Asset Swap Transaction on the
scheduled date for payment thereof which relate to any Revolving
Security or Delayed Drawdown Obligation; and
(4) all interest accrued on the Balance standing to the credit of the Unfunded
Reserve Accounts from time to time (including capitalised interest
received upon the sale, maturity or termination of any Eligible Investment)
to the Interest Accounts.
(xii) Class P OAT Custody Account The Issuer (acting through the Collateral
Administrator) shall procure that, prior to the Issue Date, the Class P OAT Custody
Account is established as a single segregated trust account in the name of the Issuer
subject to the security interest created in favour of the Trustee for the benefit of the
Class P Combination Noteholders (in respect of the Class P OAT Custody Account).
The Issuer shall deposit into the Class P OAT Custody Account the Class P OAT Strips.
All Class P OAT Strips deposited from time to time in the Class P OAT Custody Account
pursuant to the Trust Deed shall be held by the Custodian as part of the Collateral and
shall be applied solely for payment of amounts due to the Class P Combination
Noteholders unless the Class P OAT Strips are permitted to be sold in accordance with
these Conditions.
4. Security
(a)
Security
Pursuant to the Trust Deed, and subject to the security arrangements in respect of the Class P
OAT Strips for the Class P Combination Noteholders, the obligations of the Issuer under the
Notes of each Class, the Trust Deed, the Agency Agreement and the Investment Management
Agreement (together with the obligations owed by the Issuer to the other Secured Parties) are
secured in favour of the Trustee for the benefit of the Secured Parties by:
(i)
an assignment by way of security of the Issuer’s rights, title and interest, present and
future (and all entitlements or other benefits relating thereto) in respect of all Senior
Loans, Mezzanine Obligations, High Yield Bonds, Structured Finance Obligations,
Exchanged Equity Securities, Collateral Enhancement Obligations (save to the extent
that it would cause the Issuer to be in breach of any obligations by which it is bound
which relate to any such Collateral Enhancement Obligation), Eligible Investments
standing to the credit of each of the Accounts (subject to any third party's prior ranking
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security interest referred to in (iii) below) and any other investments, in each case held
by the Issuer from time to time (where such rights are contractual rights, other than
contractual rights the assignment of which would require the consent of a third party and
where such contractual rights arise other than under securities), including, without
limitation, moneys received in respect thereof, all dividends and distributions paid or
payable thereon, all property paid, distributed, accruing or offered at any time on, to or
in respect of or in substitution therefor and the proceeds of sale, repayment and
redemption thereof;
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
a first fixed charge and first priority security interest granted over the Issuer’s rights, title
and interest, present and future (and all entitlements or other benefits relating thereto) in
respect of all Senior Loans, Mezzanine Obligations, Structured Finance Obligations,
High Yield Bonds, Exchanged Equity Securities, Collateral Enhancement Obligations
(save to the extent that it would cause the Issuer to be in breach of any obligations by
which it is bound which relate to any such Collateral Enhancement Obligation), Eligible
Investments standing to the credit of each of the Accounts (subject to any third party's
prior ranking security interest referred to in (iii) below) and any other investments, in
each case held by the Issuer (where such assets are securities or contractual rights not
assigned by way of security pursuant to paragraph (i) above), including, without
limitation, all moneys received in respect thereof, all dividends and distributions paid or
payable thereon, all property paid, distributed, accruing or offered at any time on, to or
in respect of or in substitution therefor and the proceeds of sale, repayment and
redemption thereof;
subject as provided herein, a first fixed charge over all present and future rights of the
Issuer in respect of each of the Accounts and all moneys from time to time standing to
the credit of the Accounts subject to (a) in the case of the Synthetic Collateral Account,
the rights of any Synthetic Counterparty pursuant to the terms of the applicable
Synthetic Security for the benefit of such Synthetic Counterparty, (b) in the case of the
Derivative Counterparty Downgrade Collateral Account, the rights of any Derivative
Counterparty pursuant to the terms of the applicable Derivative Agreement for the
benefit of such Derivative Counterparty and the debts represented thereby and
including, without limitation, all interest accrued and other moneys received in respect
thereof provided that the foregoing shall, to the extent that the Issuer is obliged to repay
or deliver Counterparty Downgrade Collateral or other amounts standing to the credit of
the Counterparty Downgrade Collateral to a Derivative Counterparty (the "relevant
amount"), be held solely for the benefit of such Derivative Counterparty in order to
secure the Issuer's obligations to the Derivative Counterparty to account for the relevant
amount, and (c) in the case of the Class A1 Collateralising Noteholder Account, the
rights of any Class A1 Noteholder pursuant to the terms of the Class A1 Note Purchase
Agreement for the benefit of such Class A1 Noteholder;
an assignment by way of security of the Issuer’s rights, present and future, against the
Custodian under the Agency Agreement (save that in respect of the Class P OAT Strips,
the Class P OAT Custody Account and the Class P OAT Strips Sale Proceeds) and a
first fixed charge over all of the Issuer’s right, title and interest in and to the Custody
Account (including each cash account relating to the Custody Account) and any cash
held therein and the debts represented thereby;
an assignment by way of security of the Issuer’s rights, present and future, under each
Derivative Agreement and each Derivative Transaction entered into thereunder
(including the Issuer's rights under any guarantee or credit support annex entered into
pursuant to any Interest Rate Hedge Agreement, provided that such assignment by way
of security shall not in any way restrict the release of collateral granted thereunder in
whole or in part at any time pursuant to the terms thereof);
an assignment by way of security of the Issuer’s rights, present and future, under the
Investment Management Agreement;
a first fixed charge over all moneys held from time to time by the Principal Paying Agent
or the Registrar and each Transfer Agent for payment of principal, interest or other
amounts on the Notes (if any);
an assignment by way of security of the rights, present and future, under the Agency
Agreement, the Subscription Agreement and any other Transaction Document not
previously referred to above subject to in the case of the rights of the Issuer to make
Class A1 Drawings in respect of the Class A1 Allocated Amount pursuant to the Class
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A1 Note Purchase Agreement, the rights of any Synthetic Counterparty pursuant to the
terms of the applicable Synthetic Security for the benefit of such Synthetic Counterparty;
and
(ix)
a floating charge over the whole of the Issuer’s undertaking and assets to the extent that
such undertaking and assets are not subject to any other security created pursuant to
the Trust Deed (or if applicable the Euroclear Pledge Agreement)
excluding for the purpose of (i) to (ix) above, the Class P OAT Strips and amounts standing to
the credit of the Class P OAT Custody Account and the Dutch Account.
Pursuant to the Trust Deed, the obligations of the Issuer under the Class P Combination Notes
are also secured by:
(1) an assignment by way of security of all the Issuer's rights, title and
interest, present and future (and all entitlements or other benefits relating
thereto) in respect of the Class P OAT Strips, including, without limitation,
moneys received in respect thereof, all dividends and distributions paid or
payable thereon, all property paid, distributed, accruing or offered at any
time on, to or in respect of or in substitution therefore and the proceeds of
sale repayment and redemption thereof; and
(2) an assignment by way of security of all of the Issuer's present and future
rights against the Custodian under the Agency Agreement to the extent
that such rights relate to the Class P OAT Strips, the Class P OAT
Custody Account and/or the Class P OAT Strips Sale Proceeds.
If, for any reason, the purported assignment by way of security of, and/or the grant of first fixed
charge over, the property, assets, rights and/or benefits described above is found to be
ineffective in respect of any such property, assets, rights and/or benefits (together, the
"Affected Collateral"), the Issuer shall hold the benefit of the Affected Collateral and any sums
received in respect thereof or any security interest, guarantee or indemnity or undertaking of
whatever nature given to secure such Affected Collateral (together the "Trust Collateral") on
trust for the Trustee and shall (i) account to the Trustee for or otherwise apply all sums
received in respect of such Trust Collateral as the Trustee may direct (provided that, subject to
the Conditions and the terms of the Investment Management Agreement, if no Event of Default
has occurred and is continuing, the Issuer shall be entitled to apply the benefit of such Trust
Collateral and such sums in respect of such Trust Collateral received by it and held on trust
under this clause without prior direction from the Trustee), (ii) exercise any rights it may have in
respect of the Trust Collateral at the direction of the Trustee and (iii) at its own cost take such
action and execute such documents as the Trustee may in its sole discretion require.
The Issuer may from time to time grant, without the consent of the Noteholders or the Trustee,
security (i) by way of a first priority security interest to a Synthetic Counterparty over the
Synthetic Collateral deposited by the Issuer in the Synthetic Collateral Account as security for
the Issuer’s obligations under a Collateralised Credit Default Swap entered into with such
Synthetic Counterparty; and/or (ii) by way of first priority security interest to an Obligor over
amounts deposited with such Obligor in the Issuer's name under any Delayed Drawdown
Obligation or Revolving Security as security for the Issuer's obligations to fund any drawings
under the related Delayed Drawdown Obligation or Revolving Security and to a third party over
amounts representing all or part of the Unfunded Amount of any Delayed Drawdown Obligation
or Revolving Security and deposited in the Issuer's name with such third party as security for
any reimbursement or indemnification obligation of the Issuer owed to any other lender under
such Delayed Drawdown Obligation or Revolving Security, subject to the terms of Condition
3(j)(xi)(Unfunded Reserve Accounts) (including Rating Agency Confirmation); and/or (iii) to the
extent required, by way of a first priority security interest over any deposit established by the
Issuer with a Selling Institution in connection with the acquisition therefrom of an interest in a
Collateral Debt Obligation in respect of which the Issuer has agreed to guarantee or
undertaken to pay (to the extent of moneys standing to the credit of such deposit) all or part of
the liability of the related Obligor to such Selling Institution, and/or (iv) by way of a first priority
security interest to a Class A1 Noteholder over any Class A1 Noteholder Paid Amounts or
Class A1 Collateral deposited by such Class A1 Noteholder into the Class A1 Collateralising
Noteholder Account as security for the Issuer's obligations to repay or redeem the Class A1
Notes pursuant to the terms thereof (subject to such security documentation as may be agreed
between the Investment Manager acting on behalf of the Issuer and the Trustee) and/or (vi) by
way of first priority security interest to a Synthetic Counterparty over any the rights of the Issuer
to make Class A1 Drawings in respect of the Class A1 Allocated Amount. In granting any such
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security to a third party the Issuer may enter into such ancillary documentation as may be
necessary to effect such security and reflect the respective rights of the beneficiary thereof and
the Secured Parties, subject to the approval of the Trustee.
Each Class of Combination Notes will be secured solely to the extent to which the Classes of
Notes corresponding to the Components of such Class of Combination Notes are comprised
and secured.
In the event that the ratings of the Custodian are downgraded to below the Rating
Requirements or withdrawn, the Issuer shall use reasonable endeavours to procure that a
replacement Custodian with the Rating Requirements and who is acceptable to the Trustee is
appointed within 30 days of such downgrade in accordance with the provisions of the Agency
Agreement.
The obligation of the Issuer to apply the proceeds received from the Class P OAT Strips in
repayment of the Class P Combination Notes will be secured by a first priority security interest
in favour of the Trustee solely for the benefit of the Class P Combination Noteholders in the
Issuer's rights, title and interest in and to the Class P OAT Strips. All proceeds received in
respect of the Class P OAT Strips shall be paid to, or to the order of, the holders of the Class P
Combination Notes and shall not be available to any other Class of Noteholders.
Pursuant to the terms of the Trust Deed, the Trustee is exempted from any liability in respect of
any loss, theft or reduction in value of the Collateral, from any obligation to insure the Collateral
and from any claim arising from the fact that the Collateral is held in a clearing system or in
safe custody by the Custodian, a bank or other custodian. The Trustee has no responsibility for
the management of the Portfolio by the Investment Manager or to supervise the administration
of the Portfolio by the Collateral Administrator or any other party and is entitled to rely on the
certificates or notices of any relevant party without further enquiry. The Trust Deed also
provides that the Trustee shall accept without investigation, requisition or objection such right,
benefit, title and interest, if any, as the Issuer may have in and to any of the Collateral and is
not bound to make any investigation into the same or into the Collateral in any respect.
Pursuant to the Euroclear Pledge Agreement (if applicable and if required), the Issuer will also
create a Belgian law pledge over the Collateral Debt Obligations from time to time held by the
Custodian on behalf of the Issuer in Euroclear. Pursuant to the Class P OAT Strips Pledge
Agreement, the Issuer has created a Belgian law pledge over the Class P OAT Strips, held by
the Custodian on behalf of the Issuer for the benefit of the Class P Combination Noteholders.
(b)
Application of Proceeds upon Enforcement
The Trust Deed provides that the net proceeds of realisation of, or enforcement with respect to
the security over the Collateral constituted by the Trust Deed, shall be applied in accordance
with the Priorities of Payment set out in Condition 3(c) (Pre-Enforcement Priority of Payments)
provided that the net proceeds of realisation of the Class P OAT Strips shall be applied solely
in discharging the Issuer's obligations to the Class P Combination Noteholders.
(c)
Limited Recourse
The obligations of the Issuer to pay amounts due and payable to the Noteholders in respect of
the Notes and to the other Secured Parties at any time shall be limited to the proceeds
available at such time to make such payment in accordance with the Priorities of Payment. If
the net proceeds of realisation of the security constituted by the Trust Deed, upon enforcement
thereof in accordance with Condition 11 (Enforcement) and the provisions of the Trust Deed,
are less than the aggregate amount payable in such circumstances by the Issuer to the
Noteholders in respect of the Notes and to the other Secured Parties (such negative amount
being referred to herein as a "shortfall"), the obligations of the Issuer in respect of the Notes of
each Class and its obligations to the other Secured Parties in such circumstances will be
limited to such net proceeds, which shall be applied in accordance with the Priorities of
Payment. In such circumstances, the other assets of the Issuer will not be available for
payment of such shortfall which shall be borne by the Class A Noteholders, the Class B
Noteholders, the Class C Noteholders, the Class D Noteholders, the Class E Noteholders, the
Class F Subordinated Noteholders, the Class P Combination Noteholders, the Trustee and the
other Secured Parties in accordance with the Priorities of Payment (applied in reverse order).
The rights of the Secured Parties to receive any further amounts in respect of such obligations
shall be extinguished and none of the Noteholders of any Class or the other Secured Parties
may take any further action to recover such amounts. None of the Noteholders of any Class,
the Trustee or the other Secured Parties (nor any other person acting on behalf of any of them)
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shall be entitled at any time to institute against the Issuer, or join in any institution against the
Issuer of, any bankruptcy, reorganisation, arrangement, insolvency, winding-up, examinership
or liquidation proceedings or for the appointment of a liquidator, administrator, examiner or
similar official, or other proceedings under any applicable bankruptcy or similar law in
connection with any obligations of the Issuer relating to the Notes of any Class, the Trust Deed
or otherwise owed to the Secured Parties, save for lodging a claim in the liquidation of the
Issuer which is initiated by another party or taking proceedings to obtain a declaration or
judgment as to the obligations of the Issuer.
The Components shall be limited recourse obligations of the Issuer to the extent of the Classes
of Notes to which they relate and each Class of Combination Notes shall be limited recourse
obligations of the Issuer to the extent of their respective Components.
For the avoidance of doubt, the Class F Subordinated Component of the Class P Combination
Notes shall be a limited recourse obligation of the Issuer to the extent of the Class F
Subordinated Component; the proceeds of the Class P OAT Strips collateralising the Class P
OAT Security Component of the Class P Combination Notes shall be pledged by the Issuer as
security for the obligations of the Issuer to the holders of the Class P Combination Notes and
any and all proceeds thereof shall be accounted for separately from the proceeds of other
Collateral and shall not be applied in accordance with the Priorities of Payment but shall be
distributed both before and after enforcement of the security in discharge of the Issuer's
obligation under the Class P OAT Security Component of the Class P Combination Notes
according to the proportion which the Class P OAT Security Component of the Class P
Combination Notes held by any Class P Combination Noteholder at such time bears to the
aggregate amount of all Class P OAT Security Component of all Class P Combination Notes.
None of the Trustee, the Managing Director, the Initial Purchaser, the Investment Manager, the
Collateral Administrator, any Derivative Counterparty, the Principal Paying Agent, the Registrar
or the Custodian has any obligation to any Noteholder of any Class for payment of any amount
by the Issuer in respect of the Notes of any Class.
(d)
Acquisition and Sale of Portfolio
The Investment Manager is required to manage the Portfolio and is required to act in specific
circumstances in relation to the Portfolio on behalf of the Issuer pursuant to the terms of, and
subject to the parameters set out in, the Investment Management Agreement and subject to the
supervision and control of the Issuer. The duties of the Investment Manager with respect to the
Portfolio include (amongst others):
(i)
(ii)
(iii)
(iv)
the purchase of Collateral Debt Obligations on or prior to the Issue Date and during the
Initial Investment Period;
the investment of amounts standing to the credit of the Accounts in Eligible Investments;
the sale of certain of the Collateral Debt Obligations and the reinvestment of Principal
Proceeds received in Substitute Collateral Debt Obligations in accordance with the
criteria set out in the Investment Management Agreement; and
its currency hedging strategy in respect of the Portfolio.
The Investment Manager is required to monitor the Collateral Debt Obligations with a view to
seeking to determine whether any Collateral Debt Obligation has converted into, or been
exchanged for, an Exchanged Equity Security or become a Credit Improved Obligation,
Defaulted Obligation or Credit Impaired Obligation, and if it fails to do so, no Noteholder shall
have any recourse against any of the Issuer, the Managing Director, the Investment Manager,
the Collateral Administrator, any Derivative Counterparty, the Custodian, the Principal Paying
Agent, the Registrar, the Initial Purchaser, or the Trustee for any loss suffered as a result of
such failure unless, in the case of the Investment Manager, it carries out acts constituting bad
faith, wilful misconduct or gross negligence in the performance of its obligations.
Under the Investment Management Agreement, the Issuer, the Trustee acting on the direction
of certain Classes of Noteholders have certain rights in respect of the removal of the
Investment Manager and appointment of a replacement Investment Manager.
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(e)
Exercise of Rights in Respect of the Portfolio
Pursuant to the Investment Management Agreement, the Issuer authorises the Investment
Manager, prior to enforcement of the security over the Collateral and subject to the overall
direction and control of the Issuer, to exercise all rights and remedies of the Issuer in its
capacity as a holder of, or person beneficially entitled to, the Portfolio. In particular, the
Investment Manager is authorised, subject to any specific direction given by the Issuer, to
attend and vote at any meeting of holders of, or other persons interested or participating in, or
entitled to the rights or benefits (or a part thereof) under, the Portfolio and to give any consent,
waiver, indulgence, time or notification, make any declaration or agree any composition,
compounding or other similar arrangement with respect to any Portfolio forming part of the
obligations.
(f)
Information Regarding the Collateral
The Issuer shall procure that a copy of each Monthly Report and Payment Date Report is
mailed upon publication thereof by pre-paid first class post (or is delivered in any other manner
approved by the Trustee, including by electronic transmission), within two Business Days of
such publication (to the address specified in each of the requests referred to below which
address may be an e-mail address) to each Noteholder of each Class upon request in writing
therefor together with a Class F Subordinated Noteholder Report to, and upon written request
from, any Class F Subordinated Noteholder and that copies of each such Report are sent to the
Trustee, the Initial Purchaser, and each Rating Agency within two Business Days of publication
thereof.
5. Covenants of and Restrictions on the Issuer
(a)
Covenants of the Issuer
Unless otherwise provided and as more fully described in the Trust Deed, the Issuer covenants
for so long as any Note remains Outstanding to the Trustee on behalf of the holders of such
Outstanding Notes that it will:
(i)
take such steps as are reasonable to enforce all its rights:
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
under the Trust Deed;
in respect of the Collateral;
under the Agency Agreement;
under the Investment Management Agreement;
under the Management Agreement;
under the Collateral Acquisition Agreements;
under any Derivative Agreement;
under the Euroclear Pledge Agreement (if applicable);
under the Class A1 Note Purchase Agreement;
under the Class P OAT Strips Pledge Agreement; and
under the Class F Subordinated Note Purchase Agreement;
(ii)
(iii)
(iv)
(v)
comply with its obligations under the Notes, the Trust Deed, the Agency Agreement, the
Investment Management Agreement, each Credit Short Obligation, each Offsetting
Credit Default Swap and each other Transaction Document to which it is a party;
keep proper books of account;
at all times maintain its tax residence in The Netherlands and shall not establish a
branch or agency outside of The Netherlands;
pay its debts generally as they fall due;
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(vi)
(vii)
do all such things as are necessary to maintain its corporate existence; and
use its best endeavours to obtain and maintain a listing of the Outstanding Notes on the
Irish Stock Exchange. If, however, it is unable to do so, having used such endeavours,
or if the maintenance of such listing is agreed by the Trustee to be unduly onerous and
the Trustee is satisfied that the interests of the holders of the Outstanding Notes would
not thereby be materially prejudiced, the Issuer will instead use all reasonable
endeavours promptly to obtain and thereafter to maintain a listing for such Notes on
such other stock exchange(s) as it may (with the approval of the Trustee) decide or
failing such decision as the Trustee may reasonably determine;
(A)
(B)
supply such information to the Rating Agencies as they may reasonably request;
and
take all reasonable steps to ensure that its "centre of main interest" (as that term
is defined in Article 3(i) of Council Regulation (EC) No. 1346/2000 on Insolvency
Proceedings) is and remains at all times in The Netherlands.
(b)
Restrictions on the Issuer
As more fully described in the Trust Deed, for so long as any of the Notes remain Outstanding,
save as contemplated in the Transaction Documents, the Issuer covenants to the Trustee on
behalf of the holders of such Outstanding Notes that (to the extent applicable) it will not, without
the prior written consent of the Trustee:
(i)
(ii)
(iii)
sell, factor, discount, transfer, assign, lend or otherwise dispose of any of its right, title or
interest in or to the Collateral, other than in accordance with the Investment
Management Agreement, nor will it create or permit to be outstanding any mortgage,
pledge, lien, charge, encumbrance or other security interest over the Collateral except in
accordance with the Trust Deed, these Conditions, the Euroclear Pledge Agreement
and/or the Class P OAT Strips Pledge Agreement;
sell, factor, discount, transfer, assign, lend or otherwise dispose of, nor create or permit
to be outstanding any mortgage, pledge, lien, charge, encumbrance or other security
interest over, any of its other property or assets or any part thereof or interest therein
other than in accordance with the Trust Deed, the Euroclear Pledge Agreement, the
Class P OAT Strips Pledge Agreement and these Conditions;
engage in any business other than:
(A)
(B)
(C)
(D)
acquiring and holding any property, assets or rights that are capable of being
effectively charged and/or assigned in favour of the Trustee or that are capable
of being held on trust by the Issuer in favour of the Trustee under the Trust Deed,
the Euroclear Pledge Agreement and/or the Class P OAT Strips Pledge
Agreement;
issuing and performing its obligations under the Notes;
entering into, exercising its rights and performing its obligations under or
enforcing its rights under the Trust Deed, the Agency Agreement, the Investment
Management Agreement, each Derivative Transaction and each other
Transaction Document to which it is a party, as applicable; and
performing any act incidental to or necessary in connection with any of the
above;
(iv)
(v)
(vi)
amend any term or condition of the Notes of any Class (save in accordance with these
Conditions and the Trust Deed);
agree to any amendment to any provision of, or grant any waiver or consent under the
Trust Deed, the Agency Agreement, the Investment Management Agreement, the
Management Agreement, or any other Transaction Document to which it is a party other
than in accordance with these Conditions and the Transaction Documents;
incur any indebtedness for borrowed money, other than in respect of:
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(A)
(B)
the Notes, or any document entered into in connection with the Notes or the sale
thereof; or
as otherwise permitted pursuant to the Trust Deed;
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
amend its constitutional documents;
have any subsidiaries or establish any offices, branches or other "permanent
establishments" (as that term is used in Article 2(h) of Council Regulation (EC) No.
1346/2000 on Insolvency Proceedings) outside The Netherlands;
have any employees (for the avoidance of doubt the Managing Director of the Issuer
does not constitute employees);
enter into any reconstruction, amalgamation, merger or consolidation;
convey or transfer all or a substantial part of its properties or assets (in one or a series
of transactions) to any person, otherwise than as contemplated in these Conditions;
issue any shares (other than such shares as are in issue as at the Issue Date) nor
redeem or purchase any of its issued share capital;
enter into any material agreement or contract with any Person (other than an agreement
on customary market terms, which terms do not contain the provisions required below
including any Underlying Instruments between the Issuer and agent banks) unless such
contract or agreement contains "limited recourse" and "non-petition" provisions and
such Person agrees that, prior to the date that is two years and one day after all the
related obligations of the Issuer have been paid in full (or, if longer, the applicable
preference period under applicable insolvency law), such Person shall not take any
action or institute any proceeding against the Issuer under any insolvency law
applicable to the Issuer or which would reasonably be likely to cause the Issuer to be
subject to or seek protection of, any such insolvency law; provided that such Person
shall be permitted to become a party to and to participate in any proceeding or action
under any such insolvency law that is initiated by any other Person other than one of its
Affiliates;
otherwise than as contemplated in the Transaction Documents, release from or
terminate the appointment of the Custodian or the Account Bank under the Agency
Agreement, the Euroclear Pledge Agreement or the Class P OAT Strips Pledge
Agreement, the Investment Manager or the Collateral Administrator under the
Investment Management Agreement or any Derivative Counterparty under any
Derivative Agreement or the guarantor under any Derivative Agreement (including, in
each case, any transactions entered into thereunder) or, in each case, from any
executory obligation thereunder; or
enter into any lease in respect of, or own, premises.
6. Interest
(a)
Payment Dates
(i)
Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes
Each Class A1 Drawing in respect of the Class A1 Notes will bear interest from the
related Class A1 Drawing Date on the principal amount outstanding of such Class A1
Drawing during each Interest Accrual Period in respect of such Class A1 Drawing. Each
Class A2 Note, Class A3 Note, Class B Note, Class C Note, Class D Note and Class E
Note will bear interest from (and including) the Issue Date.
In respect of Class A1 Drawings, such interest will be payable on the Business Day
following the last day of the related Interest Accrual Period and in respect of each Class
A2 Note, Class A3 Note, Class B Note, Class C Note, Class D Note and Class E Note,
such interest will be payable semi-annually (or, in the case of interest accrued during
the initial Interest Accrual Period, for the period from (and including) the Issue Date to
(but excluding) the Payment Date falling on or about 15 February 2008) in arrear on
each Payment Date.
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The Class A1 Notes will also be entitled to receive the Class A1 Commitment Fee on
each Payment Date during the Class A1 Available Commitment Period (or, if the Class
A1 Available Commitment Period ends on a date other than a Payment Date, the next
Payment Date) in respect of the daily weighted average of the Class A1 Available
Commitment calculated in respect of the period from and including the Issue Date (in
respect of the first such period) or a Payment Date (in respect of each subsequent
period) to but excluding the next Payment Date (each a "Class A1 Note Commitment
Accrual Period").
(ii)
Class F Subordinated Notes Payments of interest will be made on the Class F
Subordinated Notes to the extent funds are available in accordance with paragraph
(DD) and (EE)(i) of the Interest Proceeds Priority of Payments and paragraph (E) and
(F)(ii) of the Principal Proceeds Priority of Payments on each Payment Date.
Notwithstanding any other provisions of the Conditions of the Notes or the Trust Deed,
all references herein and therein to the Class F Subordinated Notes being redeemed in
full or at their Principal Amount Outstanding shall be deemed to be amended to the
extent required to ensure that a minimum of €1 principal amount of the Class F
Subordinated Notes remains Outstanding at all times and any amounts which are to be
applied in redemption of the Class F Subordinated Notes pursuant hereto which are in
excess of the Principal Amount Outstanding thereof minus €1, shall constitute interest
payable in respect of such Notes and shall not be applied in redemption of the Principal
Amount Outstanding thereof, provided always however that such €1 principal shall no
longer remain Outstanding and the Class P Combination Notes shall be redeemed in full
on the date on which all of the Collateral securing the Notes has been realised and is to
be finally distributed to the Noteholders.
(b)
Interest Accrual
(i)
(ii)
Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes
Each Class A Note, Class B Note, Class C Note, Class D Note and Class E Note will
cease to bear interest from the due date for redemption unless, upon due presentation,
payment of principal is improperly withheld or refused. In such event, it shall continue to
bear interest in accordance with this Condition 6 (Interest) (both before and after
judgment) until whichever is the earlier of (A) on which all sums due in respect of such
Note up to that day are received by or on behalf of the relevant Noteholder and (B) the
day seven days after the Trustee or the Principal Paying Agent has notified the
Noteholders of such Class of Notes in accordance with Condition 16 (Notices) of receipt
of all sums due in respect of all the Notes of such Class up to that seventh day (except
to the extent that there is failure in the subsequent payment to the relevant holders
under these Conditions).
Class F Subordinated Notes Payments on the Class F Subordinated Notes will cease
to be payable in respect of each Class F Subordinated Note upon the date that all of the
Collateral has been realised and no Interest Proceeds or Principal Proceeds or
Collateral Enhancement Obligation Proceeds remain available for distribution in
accordance with the Priorities of Payment.
(c)
Deferral of Interest
(i)
Deferred Interest For so long as any of the Class A Notes remain Outstanding, the
Issuer shall, and shall only be obliged to, pay any Interest Amount payable in respect of
the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes in full
on any Payment Date and, for so long as any Class B Notes remain outstanding, the
Issuer shall, and shall only be obliged to, pay any Interest Amount payable in respect of
the Class C Notes, the Class D Notes and the Class E Notes, and, for so long as any of
the Class C Notes remain outstanding, the Issuer shall, and shall only be obliged to, pay
any Interest Amount payable in respect of the Class D Notes and the Class E Notes,
and, for so long as any of the Class D Notes remain outstanding, the Issuer shall, and
shall only be obliged to, pay any Interest Amount payable in respect of the Class E
Notes, in each case to the extent that there are Interest Proceeds or Principal Proceeds
available for payment thereof in accordance with the Priorities of Payment.
In the case of the Class B Notes, the Class C Notes, the Class D Notes or the Class E
Notes, for so long as any of the Class A Notes remain Outstanding, an amount of
interest equal to any shortfall in payment of the Interest Amount which would, but for the
first paragraph of this Condition 6(c)(i) otherwise be due and payable in respect of any
of such Classes of Notes on any Payment Date (each such amount being referred to as
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"Deferred Interest") shall be deferred and shall, with effect from and including such
Payment Date, be added to the Principal Amount Outstanding of the Class B Notes, the
Class C Notes, the Class D Notes or the Class E Notes and the principal amount of
each such Note shall be increased by the amount of its pro rata share of such Deferred
Interest, which shall itself bear interest in accordance with these Conditions of the Notes
from such date. Failure to pay such Deferred Interest to the holders of the Class B
Notes, the Class C Notes, the Class D Notes or the Class E Notes, as applicable, will
not be an Event of Default. All references in these conditions of the Notes to principal
shall, for the avoidance of doubt, include Deferred Interest, due and payable on the first
Payment Date on which funds are available to be used for such purposes in accordance
with the Priorities of Payment. Interest will cease to accrue on each Note, or in the case
of a partial repayment, on such part, from the date of repayment or the respective
Stated Maturity unless payment of Principal is improperly withheld or unless default is
otherwise made with respect to such payments of Principal. To the extent lawful and
enforceable, interest on Deferred Interest in respect of the Class B Notes, the Class C
Notes, the Class D Notes or the Class E Notes shall accrue at the Interest Amount for
such Class until paid as provided herein.
(ii)
Non-payment of Interest Non-payment of interest on the Class A Notes or, following
redemption in full of the Class A Notes, non-payment of interest on the Class B Notes
and, following redemption in full of the Class B Notes, non-payment of interest on the
Class C Notes and, following redemption in full of the Class C Notes, non-payment of
interest on the Class D Notes and, following redemption in full of the Class D Notes,
non-payment of interest on the Class E Notes shall constitute an Event of Default
provided that such non-payment of interest continues for a period of at least five
Business Days.
(d)
Payment of Deferred Interest
Deferred Interest in respect of any Class B Note, Class C Note, Class D Note or Class E Note
shall only become payable by the Issuer in accordance with the Priorities of Payment, to the
extent that Interest Proceeds are available to make such payment in accordance with the
Priorities of Payment (and, if applicable, the Note Payment Sequence).
(e)
Interest on the Class A2 Notes, Class A3 Notes, Class B Notes, Class C Notes, Class D
Notes, Class E Notes and Class F Subordinated Notes
(A)
Floating Rate of Interest:
Subject as provided in paragraph (B) below, the rate of interest from time to time
in respect of the Class A2 Notes (the "Class A2 Floating Rate of Interest"), the
Class A3 Notes (the "Class A3 Floating Rate of Interest"), the Class B Notes
(the "Class B Floating Rate of Interest"), in respect of the Class C Notes (the
"Class C Floating Rate of Interest"), in respect of the Class D Notes (the
"Class D Floating Rate of Interest") and in respect of the Class E Notes (the
"Class E Floating Rate of Interest"), will be determined by the Calculation
Agent on the following basis:
(1) On the second Business Day before the beginning of each Accrual Period
(each, an "Interest Determination Date"), the Calculation Agent will
determine the offered rate for six-month Euro deposits (or, in the case of
the first Accrual Period, the linear interpolation of seven-month Euro
deposits and eight-month Euro deposits based on the length of the first
Accrual Period, the arithmetic mean, rounded to four decimal places with
the mid-point rounded up) as at 11.00 a.m. (Brussels time) on the Interest
Determination Date in question. Such offered rate will be that which
appears on the display designated as page 248 on the Telerate Monitor
(or such other page or service as may replace it for the purpose of
displaying EURIBOR rates). The Class A2 Floating Rate of Interest, the
Class A3 Floating Rate of Interest, the Class B Floating Rate of Interest,
the Class C Floating Rate of Interest, the Class D Floating Rate of
Interest and the Class E Floating Rate of Interest for such Accrual Period
shall be the aggregate of the Applicable Margin (as defined in this
Condition below) and the rate which so appears, all as determined by the
Calculation Agent.
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(2) If the offered rate so appearing is replaced by the corresponding rates of
more than one bank then paragraph (1) shall be applied, with any
necessary consequential changes, to the arithmetic mean (rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point
(with 0.000005 being rounded upwards)) of the rates (being at least two)
which so appear, as determined by the Calculation Agent. If for any other
reason such offered rate does not so appear, or if the relevant page is
unavailable, the Calculation Agent will request each of four major banks in
the Euro-zone interbank market acting in each case through its principal
Euro-zone (as defined in this Condition below) office (the "Reference
Banks") to provide the Calculation Agent with its offered quotation to
leading banks for Euro deposits in the Euro-zone interbank market for a
period of six months (or, in the case of the first Accrual Period, the linear
interpolation of seven-month Euro deposits and eight-month Euro
deposits based on the length of the first Accrual Period, the arithmetic
mean, rounded to four decimal places with the mid-point rounded up) as
at 11.00 a.m. (Brussels time) on the Interest Determination Date in
question. The Class A2 Floating Rate of Interest, the Class A3 Floating
Rate of Interest, the Class B Floating Rate of Interest, the Class C
Floating Rate of Interest, the Class D Floating Rate of Interest and the
Class E Floating Rate of Interest for such Accrual Period shall be the
aggregate of the Applicable Margin (if any) and the arithmetic mean, in
each case, (rounded, if necessary, to the nearest one hundredthousandth
of a percentage point (with 0.000005 being rounded
upwards)) of such quotations (or of such of them, being at least two, as
are so provided), all as determined by the Calculation Agent.
(3) If on any Interest Determination Date one only or none of the Reference
Banks provides such quotation, the Class A2 Floating Rate of Interest, the
Class A3 Floating Rate of Interest, the Class B Floating Rate of Interest,
the Class C Floating Rate of Interest, the Class D Floating Rate of
Interest, the Class E Floating Rate of Interest, respectively, for the next
Accrual Period shall be the Class A2 Floating Rate of Interest, the Class
A3 Floating Rate of Interest, the Class B Floating Rate of Interest, the
Class C Floating Rate of Interest, the Class D Floating Rate of Interest
and the Class E Floating Rate of Interest, in each case in effect as at the
immediately preceding Accrual Period.
(4) Where:
"Applicable Margin" means:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
in the case of the Class A2 Notes: 0.21 per cent. per annum (the
"Class A2 Margin");
in the case of the Class A3 Notes: 0.31 per cent. per annum (the
"Class A3 Margin");
in the case of the Class B Notes: 0.45 per cent. per annum (the
"Class B Margin");
in the case of the Class C Notes: 0.75 per cent. per annum (the
"Class C Margin");
in the case of the Class D Notes: 1.75 per cent. per annum (the
"Class D Margin"); and
in the case of the Class E Notes: 4.25 per cent. per annum (the
"Class E Margin").
(B)
Determination of Floating Rate of Interest and Calculation of Interest
Amount on Floating Rate Notes:
The Calculation Agent will, as soon as practicable after 11.00 am (Brussels time)
on each Interest Determination Date, but in no event later than the second
Business Day after such date, determine the Class A2 Floating Rate of Interest,
Class A3 Floating Rate of Interest, Class B Floating Rate of Interest, Class C
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Floating Rate of Interest, Class D Floating Rate of Interest and the Class E
Floating Rate of Interest and calculate the interest amount payable in respect of
original principal amounts of Class A2 Notes, Class A3 Notes, Class B Notes,
Class C Notes, Class D Notes and Class E Notes equal to the Authorised
Integral Amount for the relevant Accrual Period. The amount of interest (the
"Floating Interest Amount") payable in respect of each Authorised Integral
Amount applicable to any such Notes shall be calculated by applying the Class
A2 Floating Rate of Interest in the case of Class A2 Notes, the Class A3 Floating
Rate of Interest in the case of Class A3 Notes, the Class B Floating Rate of
Interest in the case of the Class B Notes, the Class C Floating Rate of Interest in
the case of the Class C Notes, the Class D Floating Rate of Interest in the case
of the Class D Notes and the Class E Floating Rate of Interest in the case of the
Class E Notes, respectively, to an amount equal to the Principal Amount
Outstanding of such Class of Notes as at the Determination Date falling
immediately prior to the end of such Accrual Period, multiplying the product by
the actual number of days in the Accrual Period concerned, divided by 360 and
rounding the resultant figure to the nearest €0.01 (€0.005 being rounded
upwards) and multiplying the product thereof by a percentage equal to such
Authorised Integral Amount, as applicable, divided by the aggregate principal
amount of such Class of Notes on the Issue Date.
(C)
Reference Banks and Calculation Agent:
The Issuer will procure that, so long as any Class A2 Note, Class A3 Note, Class
B Note, Class C Note, Class D Note or Class E Note remains Outstanding:
(1) a Calculation Agent shall be appointed and maintained for the purposes
of determining the interest rate and interest amount payable in respect of
each Class A2 Note, Class A3 Note, Class B Note, Class C Note, Class D
Note and Class E Note; and
(2) in the event that the Class A2 Floating Rate of Interest, the Class A3
Floating Rate of Interest, Class B Floating Rate of Interest, Class C
Floating Rate of Interest, Class D Floating Rate of Interest and the Class
E Floating Rate of Interest is to be calculated by Reference Banks
pursuant to paragraph (2) of Condition 6(e)(A) (Floating Rate of Interest),
that the number of Reference Banks required pursuant to such Condition
are appointed.
If the Calculation Agent is unable or unwilling to continue to act as the
Calculation Agent for the purpose of calculating interest hereunder or fails duly to
establish the Floating Rate of Interest for any Accrual Period, or to calculate the
Floating Interest Amount on any Class of Floating Rate Notes, the Issuer shall
(with the prior approval of the Trustee) appoint another leading bank to act as
such in its place. The Calculation Agent may not resign its duties without a
successor having been so appointed.
(f)
Interest on the Class F Subordinated Notes
The Calculation Agent will on each Determination Date calculate the Interest Proceeds payable
to the extent of available funds in respect of an original principal amount of Class F
Subordinated Notes equal to the Authorised Integral Amount applicable thereto for the relevant
Accrual Period. The Interest Proceeds payable on each Payment Date in respect of an original
principal amount of Class F Subordinated Notes equal to the Authorised Integral Amount
applicable thereto shall be calculated by multiplying the amount of Interest Proceeds to be
applied on the Class F Subordinated Notes on the applicable Payment Date pursuant to
paragraphs (DD) and (EE)(i) of the Interest Proceeds Priority of Payments and paragraphs (E)
and (F)(ii) of the Principal Proceeds Priority of Payments by fractions equal to the amount of
such Authorised Integral Amount divided by the aggregate original principal amount of the
Class F Subordinated Notes.
(g)
Interest on the Combination Notes
Interest shall accrue in respect of each Combination Note on the same terms as are applicable
to a principal amount of each Class of Notes which is equal to the principal amount of each
Component of the relevant Class of Combination Note corresponding thereto as if such Notes
had been, and remained, issued and Outstanding at all times; provided, however, that,
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notwithstanding the terms and conditions applicable to the payment of interest on such Classes
of Notes, the aggregate amount of all principal and interest payable in respect of the
Combination Notes on any Payment Date shall be applied on such Payment Date as follows:
(i)
in respect of the Class P Combination Notes, the aggregate amount of all principal and
interest payable thereon shall be applied on such date as follows:
(A)
(B)
(C)
first, in payment, on a pro rata basis, of an amount of interest in respect of the
Class P Combination Notes (the "Class P Combination Notes Coupon
Interest") equal to the Permitted Class P Combination Coupon payable in
respect thereof multiplied by the Principal Amount Outstanding of the Class P
Combination Notes during the Accrual Period ending immediately prior to such
Payment Date multiplied by the actual number of days in the Accrual Period
concerned divided by 360 with the resultant figure being rounded to the nearest
€0.01 (€0.005 being rounded upwards) and with the amount payable in respect
of each Minimum Denomination or Authorised Integral Amount being determined
by the Calculation Agent on a pro rata basis. To the extent that there are
insufficient proceeds available for payment of the Class P Combination Notes
Coupon Interest or proportion thereof (as the case may be) due and payable on
any Payment Date in respect of the Class P Combination Notes, an amount of
interest equal to any shortfall in payment of such Interest Amount due and
payable on such Payment Date shall not be deferred. An interest amount equal
to such shortfall will be extinguished on such Payment Date and the affected
Class P Combination Noteholder will have no claim against the Issuer in respect
thereof;
secondly, subject to paragraph (iii) below, in redemption of the Principal Amount
Outstanding of the Class P Combination Notes (on a pro rata basis); and
thereafter, to the extent that any amounts of principal and interest distributable in
respect of the Classes of Notes corresponding to the Components of which the
Class P Combination Notes are comprised are remaining, in payment on a pro
rata basis of interest on such Class P Combination Notes (in respect of such
Class P Combination Notes, "Class P Residual Interest");
(ii)
(iii)
(iv)
Interest shall accrue in respect of each Class P Combination Note in an amount equal to
all principal and interest payable in respect of a principal amount of Class F
Subordinated Notes which is equal to the principal amount of the Class F Subordinated
Component of such Class P Combination Notes, provided that the redemption proceeds
of the Class P OAT Strips shall be applied in redemption of the Principal Amount
Outstanding of the Class P Combination Notes in accordance with Condition 7(j)
(Redemption of Combination Notes).
notwithstanding any other provisions of the Conditions of the Notes or the Trust Deed,
all references herein and therein to any Class of the Combination Notes being
redeemed in full or at their Principal Amount Outstanding shall be deemed to be
amended to the extent required to ensure that a minimum of €1 principal amount of
each such Class of Notes remains Outstanding at all times and any amounts which are
to be applied in redemption of such Notes pursuant hereto which are in excess of the
Principal Amount Outstanding thereof minus €1, shall constitute interest on the Class P
Combination Notes payable in respect of such Notes and shall not be applied in
redemption of the Principal Amount Outstanding thereof, provided always however that
such a minimum of €1 shall no longer remain Outstanding and each such Class of
Notes shall be redeemed in full on the date on which all of the Collateral securing the
Notes has been realised and is to be finally distributed to the Noteholders.
notwithstanding any other provision of the Conditions of the Notes or the Trust Deed but
subject as provided in this Condition 6(g), any class of Combination Noteholders shall
be entitled, by way of Written Resolution signed by 100% of the Noteholders of such
class of Combination Notes, to vary the designation of the amounts payable to such
Noteholders on any Payment Date as between amounts payable on account of interest
and amounts payable on account of principal from the original designation of the same
on the Issue Date. The exercise of such reallocation right shall only be subject to
receipt by such class of Noteholders of prior written consent of the Issuer and receipt of
Rating Agency Confirmation. For the avoidance of doubt, the exercise of this right of
reallocation by a class of Combination Noteholders shall not require the consent of the
Trustee, the Investment Manager or any other parties to the Transaction Documents.
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However the Issuer shall provide Written Notice of the exercise of this right of
reallocation to the Trustee and the Principal Paying Agent by the Record Date relating
to the relevant Payment Date. Upon provision by the Issuer of its consent and receipt of
Rating Agency Confirmation, the reallocation specified in the Written Resolution shall
become effective and shall be implemented in respect of the amounts payable to such
Noteholders on the next following Payment Date. To the extent that the Issuer
determines it to be necessary, the parties to the Transaction Documents will enter into
any documentation or take any further action as may be reasonably required by the
Issuer to give effect to such Written Resolution. For the avoidance of doubt, the
aggregate amount of interest and principal payable to the Class P Combination
Noteholders following such reallocation will be the same as the amounts payable
thereto prior to such reallocation.
(h)
Publication of Floating Rates of Interest, Floating Interest Amounts for the Floating Rate
Notes and Deferred Interest
The Calculation Agent will cause the Class A2 Floating Rate of Interest, the Class A3 Floating
Rate of Interest, the Class B Floating Rate of Interest, the Class C Floating Rate of Interest, the
Class D Floating Rate of Interest and the Class E Floating Rate of Interest and the Floating
Interest Amounts payable in respect of each Class of Notes, the amount of any Deferred
Interest due but not paid on any Class of Notes for each Accrual Period and Payment Date and
the Principal Amount Outstanding of each Class of Notes as of the applicable Payment Date to
be notified to the Registrar, the Principal Paying Agent, the Transfer Agent, the Trustee, the
Investment Manager and, for so long as the Notes are listed on the Irish Stock Exchange, the
Irish Stock Exchange as soon as possible after their determination but in no event later than
the fourth Business Day thereafter, and the Registrar shall cause each such rate, amount and
date to be notified to the Noteholders of each Class in accordance with Condition 16 (Notices)
as soon as possible following notification to the Registrar but in no event later than the third
Business Day after such notification. The Interest Amounts for any Payment Date in respect of
the Notes of any Class so published may subsequently be amended (or appropriate alternative
arrangements made with the consent of the Trustee by way of adjustment) without notice in the
event of an extension or shortening of the Accrual Period. If any of the Notes become due and
payable under Condition 10 (Events of Default), interest shall nevertheless continue to be
calculated as previously by the Calculation Agent in accordance with this Condition but no
publication of the applicable Interest Amounts shall be made unless the Trustee so determines.
(i)
Determination or Calculation by Trustee
If the Calculation Agent does not at any time for any reason so calculate the Class A2 Floating
Rate of Interest, the Class A3 Floating Rate of Interest, the Class B Floating Rate of Interest,
the Class C Floating Rate of Interest, the Class D Floating Rate of Interest, or the Class E
Floating Rate of Interest, for an Accrual Period, the Trustee (or a person appointed by it for the
purpose) shall do so and such determination or calculation shall be deemed to have been
made by the Calculation Agent and shall be binding on the Noteholders. In doing so, the
Trustee, or such person appointed by it, shall apply the foregoing provisions of this Condition,
with any necessary consequential amendments, to the extent that, in its opinion, it can do so,
and in all other respects it shall do so in such manner as it shall deem fair and reasonable in all
the circumstances and shall be able to rely on such persons as it has appointed for such
purpose. The Trustee shall have no liability to any person in connection with any determination
or calculation (including with regard to the timelines thereof) it is required to make pursuant to
this Condition.
(j)
Notifications, etc. to be Final
All notifications, opinions, determinations, certificates, quotations and decisions given,
expressed, made or obtained for the purposes of the provisions of this Condition, whether by
the Reference Banks (or any of them), the Calculation Agent or the Trustee, will (in the
absence of manifest error) be binding on the Issuer, the Reference Banks, the Calculation
Agent, the Trustee, the Registrar, the Principal Paying Agent, the Transfer Agent, all
Noteholders and (in the absence as referred to above) no liability to the Issuer or the
Noteholders of any Class shall attach to the Reference Banks, the Calculation Agent or the
Trustee in connection with the exercise or non-exercise by them of their powers, duties and
discretions under this Condition.
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(k)
Interest on the Class A1 Notes
The relevant interest amount in respect of the Class A1 Note shall be calculated and shall be
payable in accordance with Condition 6 (Interest).
The rate of interest payable on a Euro Denominated Drawing for each Class A1 Note Interest
Period (the "Class A1 Euro Rate of Interest") shall be the rate in Euro per annum determined
by the Class A1 Note Agent to be the aggregate of:
(i)
(ii)
the applicable Euro Margin; and
Class A 1 EURIBOR.
The rate of interest payable on a Sterling Denominated Drawing for each Class A1 Note
Interest Period (the "Class A1 Sterling Rate of Interest") shall be the rate in Sterling per
annum determined by the Class A1 Note Agent to be the aggregate of:
(i)
(ii)
the applicable Sterling Margin; and
Class A1 LIBOR.
The rate of interest payable on a Dollar Denominated Drawing for each Class A1 Note Interest
Period (the "Class A1 Dollar Rate of Interest") shall be the rate in Dollars per annum
determined by the Class A1 Note Agent to be the aggregate of:
(i)
(ii)
the applicable Dollar Margin; and
Class A1 USD LIBOR.
The relevant interest amount in respect of the Class A1 Notes shall be calculated by the Class
A1 Note Agent applying (i) the relevant Class A1 Euro Rate of Interest and the applicable Class
A1 Day Count Fraction to an amount equal to each relevant Euro Denominated Drawing
outstanding during each relevant Class A1 Note Interest Period; and (ii) the relevant Class A1
Sterling Rate of Interest and the applicable Class A1 Day Count Fraction to an amount equal to
each relevant Sterling Denominated Drawing outstanding during each relevant Class A1 Note
Interest Period, and (iii) the relevant Class A1 Dollar Rate of Interest and the applicable Class
A1 Day Count Fraction to an amount equal to each relevant Dollar Denominated Drawing
outstanding during each relevant Class A1 Note Interest Period (the sum of all such amounts
so calculated, together, the "Class A1 Interest Amount") and the Class A1 Note Agent shall
also calculate the Class A1 Aggregate Interest Amount.
Such Class A1 Interest Amounts (if any) shall be payable on the Business Day following the
last day of the related Interest Accrual Period.
(l)
Certificate
The Class A1 Note Agent shall notify each of the Class A1 Noteholders, the Issuer and the
Investment Manager, the Collateral Administrator of the Class A1 Euro Rate of Interest and the
Class A1 Sterling Rate of Interest and the Class A1 Dollar Rate of Interest as soon as it is
determined under Condition 6(k) (Interest on the Class A1 Notes).
(m)
Failure of Reference Bank
If any Class A1 Reference Bank for any reason fails to notify to the Class A1 Note Agent the
rate referred to in the definitions of the Class A1 Euro Rate of Interest, the Class A1 Sterling
Rate of Interest and the Class A1 Dollar Rate of Interest, the rate of interest shall be
determined on the basis of the rates notified to the Class A1 Note Agent by the remaining
Class A1 Reference Banks or Class A1 Reference Bank and if no such rates are provided, then
the rates provided with respect to the previous Class A1 Note Interest Period shall be applied.
(n)
Notification of Class A1 Aggregate Interest Amount
The Class A1 Note Agent shall notify each Class A1 Noteholder, the Trustee, the Collateral
Administrator, the Investment Manager and the Issuer of the Class A1 Aggregate Interest
Amount due on a Payment Date at least two Business Days prior to such Payment Date.
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(o)
Notification of Class A1 Rate of Interest
The Class A1 Note Agent shall notify in writing the Class A1 Noteholders and the Issuer of the
rate of interest (as set out in Condition 6(k) (Interest on the Class A1 Notes) as soon as it is
determined.
(p)
Duration of Class A1 Note Interest Periods
If any Class A1 Note Interest Period would otherwise overrun the relevant Repayment Date it
shall be shortened so that it ends on the relevant Repayment Date.
(q)
Class A1 Commitment Fee
A fee (the "Class A1 Commitment Fee") will be payable in respect of the Class A1 Available
Commitment which shall accrue during each Class A1 Note Commitment Accrual Period and
be payable on each Payment Date during the Reinvestment Period. The Class A1 Note Agent
will determine the Class A1 Commitment Fee payable in respect of the Class A1 Notes for the
relevant Class A1 Note Commitment Accrual Period by applying (i) 0.18 per cent. per annum to
an amount equal to the daily weighted average of the Class A1 Available Commitment and (ii)
0.30 per cent. per annum to an amount equal to the daily weighted average of the Class A1
Allocated Amount with respect to unfunded liabilities of the Issuer under Synthetic Securities,
Revolving Securities and Delayed Drawdown Obligations during such Class A1 Note
Commitment Accrual Period multiplying the product thereof by the actual number of days in
such Class A1 Note Commitment Accrual Period divided by 360 and rounding the resultant
figure to the nearest 0.01 (0.005 being rounded upwards).
The Class A1 Notes will also be entitled to receive the Class A1 Commitment Fee in respect of
any Class A1 Available Commitment during the Class A1 Available Commitment Period
calculated in accordance with this Condition.
(r)
Notification of Interest Amount
The Class A1 Note Agent shall notify in writing the Class A1 Noteholders, the Collateral
Administrator, the Investment Manager and the Issuer of the Class A1 Aggregate Interest
Amount due following the end of an Interest Accrual Period or on a Payment Date (as
applicable) as soon as reasonably practicable following determination of such amount.
7. Redemption
(a)
Final Redemption
Save to the extent previously redeemed or purchased and cancelled, the Notes of each Class
will be redeemed on the Maturity Date of such Notes. In the case of a redemption pursuant to
this Condition, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes
and the Class E Notes will be redeemed at their Principal Amount Outstanding and the Class F
Subordinated Notes will be redeemed at the amount equal to their Pro Rata share of the
amounts of Principal Proceeds to be applied towards such redemption pursuant to paragraphs
(E) and (F)(ii) of the Principal Proceeds Priority of Payments. Notes may not be redeemed or
purchased other than in accordance with this Condition 7 (Redemption).
(b)
Redemption at the Option of the Class F Subordinated Noteholders
(i)
Redemption at the Option of the Class F Subordinated Noteholders Subject to the
provisions of Condition 7(b)(ii) (Terms and Conditions of Redemption at the Option of
the Class F Subordinated Noteholders), the Notes of each Class shall be redeemable
by the Issuer, in whole but not in part, at their applicable Redemption Prices, from the
proceeds of liquidation or realisation of the Collateral on:
(A)
(B)
(C)
any Payment Date falling on or after expiry of the Non-Call Period;
upon the occurrence of a Collateral Tax Event, on any Payment Date falling after
such occurrence; or
upon the occurrence of a Note Tax Event, on any Payment Date falling after
such occurrence,
in each case by the Class F Subordinated Noteholders acting independently by
Extraordinary Resolution which can be passed either at a duly convened meeting or by
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way of a Written Resolution (as evidenced by duly completed Redemption Notices, in
each case, in accordance with the procedures described in paragraph (ii) below) and
subject to the establishment of a reasonable reserve as determined by the Trustee
following consultation with the Investment Manager and Collateral Administrator for all
administrative and other fees and expenses payable in such circumstances under the
Priorities of Payment prior to the payment of principal on the Notes of each Class. The
Issuer shall, upon all conditions precedent having been satisfied, procure that notice of
such redemption shall be given to the Noteholders as soon as may be practicable prior
to the scheduled Redemption Date in accordance with Condition 16 (Notices). The
Trustee shall have no liability to any person in connection with the establishment of any
reserve made by it pursuant to this Condition.
(ii)
Terms and Conditions of Redemption at the Option of the Class F Subordinated
Noteholders Following receipt of notice from the Issuer or, as the case may be, from
the Principal Paying Agent of the passing of an Extraordinary Resolution of Class F
Subordinated Noteholders (including the holders of the Combination Notes, with respect
to the Class F Subordinated Component of the Combination Notes) in relation to the
exercise any right of optional redemption pursuant to this Condition, the Collateral
Administrator shall, as soon as practicable and in any event in time for the Investment
Manager to certify whether the Expected Net Proceeds are equal to or greater than the
Redemption Threshold Amount pursuant hereto (the "Redemption Determination
Date") calculate the Redemption Threshold Amount.
The Notes shall not be optionally redeemed pursuant to paragraph (i) above unless not
less than seven nor more than 15 Business Days before the scheduled Redemption
Date the Issuer, based on the certification of the Investment Manager, shall have
certified to the Trustee (which shall be entitled to rely on such certificate without further
enquiry) in a form satisfactory to the Trustee that the Expected Net Proceeds from either
(i) the entry into of a binding agreement or agreements with one or more financial
institutions (which term shall include, for the avoidance of doubt any entity or institution
which has issued or is to issue notes secured on a portfolio of collateral loan or debt
securities or which is a fund or other investment vehicle established for the purpose of
acquiring assets similar to the Portfolio) which (or whose guarantor under such
obligations) has a short-term senior unsecured credit rating from each of Moody’s and
S&P, respectively, of "P-1" and "A1" (or, if no such rating is available from Moody’s or
S&P, as the case may be, has a long-term senior unsecured credit rating from Moody’s
of "Aa2" or, as the case may be, S&P of "AA", or if neither such rating is available from
such Rating Agency, in respect of which Rating Agency Confirmation has been
received) with settlement dates on or prior to two Business Days immediately preceding
the scheduled Redemption Date and not more than 30 days after the date of entry into
any such agreement or agreements and/or (ii) the liquidation proceeds of the Portfolio
(calculated as provided below) which shall be held by or on behalf of the Issuer in
immediately available funds not later than two Business Days immediately preceding
the scheduled Redemption Date, will equal or exceed the applicable Redemption
Threshold Amount.
The "Expected Net Proceeds" resulting from any such proposed (i) entry into of a
binding agreement with a financial institution or (ii) liquidation of the Portfolio shall be
the sum of:
(A)
in respect of each Collateral Debt Obligation in the Portfolio, one of the following:
(1) in the case of entry into a binding agreement with a financial institution
satisfying the requirements described above, the purchase price payable
in respect thereof;
(2) otherwise, the percentage of the Market Value thereof set out in the
applicable column of the table below based upon the period of time
between the certification of such Expected Net Proceeds and the
expected date of sale of such Collateral Debt Obligation.
For purposes of this determination, the "Market Value" of the Collateral Debt
Obligations shall be the Investment Manager’s estimate thereof (expressed as a
Euro amount) based upon its reasonable commercial judgement;
(B)
the sum of the Balances of the Accounts (to the extent not payable to any entity
other than the Issuer); and
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Collateral Type
(C)
amounts receivable under any Interest Rate Hedge Agreement or any Asset
Swap Agreement or Offsetting Credit Default Swap or Credit Short Obligation
prior to the Redemption Date.
Number of Business Days Between
Certification and Expected Sale
1 to 2 3 to 5 6 to 30
Loans (other than loans with Market Value of less
than 90% of the Principal Balance thereof)
Bonds rated "B2" or higher by Moody’s and "B" or
higher by S&P (other than bonds with a Market
Value of less than 90% of the Principal Balance
thereof)
Loans with a Market Value of less than 90% of the
Principal Balance thereof
Bonds rated "B3" or lower by Moody’s and "B" or
lower by S&P and bonds rated "B2" or higher by
Moody’s and "B" or higher by S&P with a Market
Value of less than 90% of the Principal Balance
thereof)
93% 92% 88%
89% 85% 75%
80% 73% 60%
75% 65% 45%
(iii)
Mechanics of Redemption Following calculation by the Collateral Administrator of the
applicable Redemption Threshold Amount, the Collateral Administrator shall make such
other calculations as it is required to make pursuant to the Investment Management
Agreement and shall notify the Issuer, the Trustee, the Investment Manager and the
Registrar of such amounts.
Any exercise of a right of optional redemption pursuant to this Condition shall be
effected by delivery to a Transfer Agent by the requisite amount of Class F
Subordinated Noteholders of the Notes held thereby together with duly completed
Redemption Notices not more than 40 nor less than 20 Business Days prior to the
applicable Redemption Date. No Redemption Notice so delivered may be withdrawn
without the prior consent of the Issuer. To the extent that the Notes are in Definitive
Form the Registrar shall copy each Redemption Notice received to each of the Issuer,
the Trustee, the Collateral Administrator and the Investment Manager.
The Collateral Administrator shall notify the Issuer, the Trustee, the Investment
Manager, each Derivative Counterparty and the Registrar, whereupon the Registrar
shall notify the Noteholders, upon satisfaction of any of the conditions set out in
paragraph (ii) above and shall arrange for liquidation and/or realisation of the Portfolio
on behalf of the Issuer in accordance with the Investment Management Agreement. The
Issuer shall deposit, or cause to be deposited, the funds required for an optional
redemption of the Notes in accordance with this Condition 7(b) in the Payment Account
on or before the Business Day prior to the applicable Redemption Date. Principal
Proceeds and Interest Proceeds received in connection with such redemption shall be
payable in accordance with Condition 3(c) (Pre-Enforcement Priority of Payments),
applied as if the Reinvestment Period had expired.
(c)
Redemption upon Breach of Coverage Tests
(i)
Class A Notes
If either of the Class A Coverage Tests is not met on any Determination Date, Interest
Proceeds and thereafter Principal Proceeds will be applied in redemption of the Class A
Notes in accordance with the Note Payment Sequence on the related Payment Date in
accordance with and subject to the Priorities of Payment (including payment of all prior
ranking amounts) until such Class A Coverage Tests is satisfied if recalculated following
such redemption.
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(ii)
Class B Notes
If either of the Class B Coverage Tests is not met on any Determination Date, Interest
Proceeds and thereafter Principal Proceeds will be applied in redemption of the Class A
Notes and Class B Notes in accordance with the Note Payment Sequence, on the
related Payment Date until each such Coverage Test is satisfied if recalculated following
such redemption in accordance with and subject to the Priorities of Payment (including
payment of all prior ranking amounts) until each such Coverage Test is satisfied if
recalculated following such redemption.
(iii)
Class C Notes
If either of the Class C Coverage Tests is not met on any Determination Date, Interest
Proceeds and thereafter Principal Proceeds will be applied in redemption of the Class A
Notes, Class B Notes and Class C Notes in accordance with the Note Payment
Sequence, on the related Payment Date until each such Coverage Test is satisfied if
recalculated following such redemption in accordance with and subject to the Priorities
of Payment (including payment of all prior ranking amounts) until each such Coverage
Test is satisfied if recalculated following such redemption.
(iv)
Class D Notes
If either of the Class D Coverage Tests is not met on any Determination Date, Interest
Proceeds will be applied in redemption of the Class A Notes, the Class B Notes, the
Class C Notes and the Class D Notes in accordance with the Note Payment Sequence,
on the related Payment Date until each such Coverage Test is satisfied if recalculated
following such redemption in accordance with and subject to the Priorities of Payment
(including payment of all prior ranking amounts) until each such Coverage Test is
satisfied if recalculated following such redemption.
(v)
Class E Notes
If (i) following the Effective Date in the event that the Class E Par Value Test is not
satisfied on the related Determination Date, Interest Proceeds will be applied in
redemption of the Class E Notes to the extent necessary to cause the Class E Par
Value Test to be met if recalculated following such payment or (ii) the Class E Interest
Coverage Test is not satisfied on the related Determination Date, Interest Proceeds will
be applied in accordance with the Note Payment Sequence to the extent necessary to
cause the Class E Interest Coverage Test to be met if recalculated following such
redemption.
(d)
Special Redemption
Principal payments on the Notes shall be made in accordance with the Principal Proceeds
Priority of Payments at the sole and absolute discretion of the Investment Manager if, (i) at any
time during the Reinvestment Period, the Investment Manager has been unable, for a period of
20 consecutive Business Days, to identify additional Collateral Debt Obligations or Substitute
Collateral Debt Obligations that are deemed appropriate by the Investment Manager in its
discretion which meet the Eligibility Criteria or, to the extent applicable, the Reinvestment
Criteria, in sufficient amounts to permit the investment or reinvestment of all or a portion of the
funds then in the Principal Account that are to be invested in additional Collateral Debt
Obligations and has so notified the Trustee and (ii) following such principal payments on the
Notes there shall be no outstanding Class A1 Drawings at that time (a "Special Redemption").
On the first Payment Date following the Due Period in which such notice is given (a "Special
Redemption Date"), the funds in the (i) Euro Principal Account representing Euro Principal
Proceeds and/or (ii) the Sterling Principal Account representing Sterling Principal Proceeds
and/or (iii) the Dollar Principal Account representing Dollar Principal Proceeds in each case
which cannot be reinvested in additional Collateral Debt Obligations or Substitute Collateral
Debt Obligations (the "Special Redemption Amount") will be applied in accordance with
paragraph (B) of the Principal Proceeds Priority of Payments. Notice of payments pursuant to
this Condition 7(d) shall be given in accordance with Condition 16 (Notices) as soon as may be
practicable prior to the applicable Special Redemption Date to each Noteholder affected
thereby and to each Rating Agency. For the avoidance of doubt, the exercise of a Special
Redemption shall be at the sole and absolute discretion of the Investment Manager (acting on
behalf of the Issuer) and the Investment Manager shall be under no obligation to, or having any
responsibility for, any Noteholder or any other person for the exercise or non exercise (as
applicable) of such Special Redemption.
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(e)
Class A1 Repayments
Provided that the Class E Coverage Test is satisfied the Issuer may, at its own option, repay
any Euro Denominated Drawing, Sterling Denominated Drawing or Dollar Denominated
Drawing on any Business Day in accordance with the Class A1 Note Purchase Agreement
(such date a "Class A1 Drawing Repayment Date") from amounts standing to the credit of the
Principal Accounts or the Unused Proceeds Account. Any such repayment shall result in a
corresponding increase in the Class A1 Available Commitment save for a redemption pursuant
to Condition 7(c) (Redemption upon Breach of Coverage Tests), Condition 7(d) (Special
Redemption) and Condition 7(f) (Redemption upon Effective Date Rating Event) which
redemptions shall reduce the Class A1 Commitment. If the Issuer repays, at its own option,
any Euro Denominated Drawing, Sterling Denominated Drawing or Dollar Denominated
Drawing on a Business Day other than the Business Day following the last day of the related
Interest Accrual Period during the Reinvestment Period, the Break Cost attributable to a Class
A1 Noteholder shall be payable on the date upon which the relevant Euro Denominated
Drawing, Sterling Denominated Drawing or Dollar Denominated Drawing is repaid.
(f)
Redemption upon Effective Date Rating Event
In the event that as at the second Business Day prior to the Payment Date following the
Effective Date and any Payment Date thereafter, an Effective Date Rating Event has occurred
and is continuing, the Notes shall be redeemed on a Pro Rata basis in accordance with the
Note Payment Sequence on such Payment Date out of Interest Proceeds and thereafter out of
Principal Proceeds subject to the Priorities of Payment, in each case, until redeemed in full or,
if earlier, until the Rating Agencies confirm or affirm the Initial Ratings of the Notes. For the
avoidance of doubt, a reduction or withdrawal in the ratings assigned to any of the Notes at any
time other than as a result of the Effective Date requirements not being satisfied immediately
following the Effective Date will not cause a redemption thereof under this Condition 7(f). The
Investment Manager is under no obligation whatsoever to present a Rating Confirmation Plan
to the Rating Agencies and may, in its discretion, determine not to present such plan to the
Rating Agencies in favour of redemption of the Notes pursuant to this Condition 7(f).
(g)
Redemption Following Expiry of the Reinvestment Period
Following expiry of the Reinvestment Period, the Issuer shall, on each Payment Date occurring
thereafter, apply Principal Proceeds transferred to the Payment Accounts immediately prior to
the related Payment Date in redemption of the Notes at their applicable Redemption Prices in
accordance with the Priorities of Payment.
(h)
Redemption Following Breach of Reinvestment Diversion Test
During the Reinvestment Period, in the event that, after giving effect to the payment of all
amounts payable in respect of (A) through (T) (inclusive) of the Interest Proceeds Priority of
Payments on any Determination Date during such period, the Reinvestment Diversion Test has
not been met, then on the related Payment Date Interest Proceeds shall either, at the discretion
of the Investment Manager, acting on behalf of the Issuer, be paid to the relevant Principal
Account (as the case may be) for the acquisition of additional Collateral Debt Obligations or be
applied to the redemption of the Notes in accordance with the Note Payment Sequence in an
amount equal to the lesser of (1) 50 per cent. of all remaining Interest Proceeds available for
payment pursuant to paragraph (T) of the Interest Proceeds Priority of Payments and (2) the
amount which, after giving effect to the payment of all amounts payable in respect of (A)
through (T) of the Interest Proceeds Priority of Payments, would be sufficient to cause the
Reinvestment Diversion Test to be met.
(i)
Redemption
All Notes in respect of which any notice of redemption is given shall be redeemed on the
Redemption Date at their applicable Redemption Prices and to the extent specified in such
notice and in accordance with the requirements of this Condition.
The Redemption Price applicable to each Class A1 Note will be equal to 100 per cent. of the
Principal Amount Outstanding of such Class A1 Note, together with any related Break Cost (if
applicable) and any accrued but unpaid Interest Amount and, in the case of a redemption in
full, any Class A1 Commitment Fee on the Class A1 Notes to the date of redemption.
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(j)
Redemption of Combination Notes
The Class P Combination Notes will be redeemed by applying the aggregate of amounts of
principal and interest payable in respect of the Classes of Notes corresponding to the
Components of which such Combination Notes are comprised, on each Payment Date:
(i)
in respect of the Class P Combination Notes only;
(A)
(B)
(C)
first, in payment of any Class P Combination Notes Coupon Interest payable in
respect thereof on such Payment Date, to the extent that there are insufficient
Interest Proceeds available for payment of the Class P Combination Notes
Coupon Interest or proportion thereof (as the case may be) due and payable on
any Payment Date in respect of the Class P Combination Notes, an amount of
interest equal to any shortfall in payment of such Interest Amount due and
payable on such Payment Date shall not be deferred. An interest amount equal
to such shortfall will be extinguished on such Payment Date and the affected
Class P Combination Noteholder will have no claim against the Issuer in respect
thereof;
secondly, subject to paragraph (ii) below, in redemption of the Principal Amount
Outstanding of the Class P Combination Notes (on a pro rata basis); and
any amounts remaining following such application shall be applied in payment of
Class P Residual Interest.
(ii)
(iii)
notwithstanding any other provisions of the Conditions of the Notes or the Trust Deed,
all references herein and therein to any Class of the Combination Notes being
redeemed in full or at their Principal Amount Outstanding shall be deemed to be
amended to the extent required to ensure that a minimum of €1 principal amount of
each Class of Combination Notes remains Outstanding at all times and any amounts
which are to be applied in redemption of such Notes pursuant hereto which are in
excess of the Principal Amount Outstanding thereof minus €1, shall constitute interest
on the Class P Combination Notes, payable in respect of such Notes and shall not be
applied in redemption of the Principal Amount Outstanding thereof, provided always
however that such a minimum of €1 shall no longer remain Outstanding and each such
Class of Notes shall be redeemed in full on the date on which all of the Collateral
securing the Notes has been realised and is to be finally distributed to the Noteholders.
upon redemption in full of the Class F Subordinated Notes, any remaining Class P OAT
Strips shall upon request by the Class P Combination Noteholder either be (a)
distributed pro rata in kind to the Class P Combination Noteholders, or (b) realised by
the Custodian using the best bid price from three market makers in the OAT market
selected by the Custodian (net of any amounts expended by or payable by the
Custodian in connection with such sale) and the proceeds thereof distributed to the
Class P Combination Noteholders. For the avoidance of doubt delivery of the Class P
OAT Strips or distribution of the sale proceeds of the Class P OAT Strips, will be in full
and final redemption of the Class P Combination Notes.
(k)
Cancellation
All Notes (other than the Class A1 Notes) redeemed in full by the Issuer will be cancelled and
may not be reissued or resold.
(l)
Notice of Redemption
The Issuer shall procure that notice of any redemption in accordance with this Condition is
given to the Noteholders in accordance with Condition 16 (Notices) and promptly in writing to
the Rating Agencies.
(m)
Redemption of Class F Subordinated Notes
Notwithstanding any other provisions of the Conditions or the Trust Deed, all references herein
and therein to any of the Class F Subordinated Notes being redeemed in full or at their
Principal Amount Outstanding shall be deemed to be amended to the extent required to ensure
that €1 principal amount of the Class F Subordinated Notes remains Outstanding at all times
and any amounts which are to be applied in redemption of such Notes pursuant hereto which
are in excess of the Principal Amount Outstanding thereof minus €1, shall constitute interest
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payable in respect of such Notes and shall not be applied in redemption of the Principal
Amount Outstanding thereof; provided, always, however that such €1 shall no longer remain
outstanding and the Class F Subordinated Notes shall be redeemed in full on the date on which
all of the Collateral securing the Notes has been realised and is to be finally distributed to the
Noteholders.
8. Payments
(a)
Method of Payment
Method of Payment: Payments of principal upon final redemption in respect of each Note will
be made (i) in the case of the Global Certificates, to the holder thereof against presentation and
surrender thereof at the specified office of the Principal Paying Agent and (ii) in the case of
Definitive Certificates, to the holder (or to the first named of joint holders) of the Note appearing
on the Register against presentation and surrender (or, in the case of part payment only,
endorsement) of such Definitive Certificate representing such Note at the specified office of the
Registrar or any Paying Agent by Euro cheque drawn on a bank in Western Europe. Payments
of interest on each Note and, prior to redemption in full thereof, principal in respect of each
Note, will be made (i) in the case of the Global Certificates, to the holder thereof against
presentation and surrender thereof at the specified office of the Principal Paying Agent and (ii)
in the case of Definitive Certificates, to the holder (or to the first named of joint holders) of the
Note appearing on the Register at the close of business on the Record Date at his address
shown on the register on the Record Date. Payments in respect of a Global Certificate will be
made by wire transfer, in immediately available funds, on the due date to a Euro account
maintained by the payee with a branch of a bank in London. Payments in respect of Definitive
Certificates will be made by wire transfer, in immediately available funds, on the due date to a
Euro account maintained by the holder (or to the first named of joint holders) of the Note
appearing on the Register at the close of business on the fifteenth day before the relevant due
date (the "Record Date") with a branch of a bank in London. Upon application of the holder to
the specified office of the Principal Paying Agent or any Paying Agent not less than five
Business Days before the due date for any payment in respect of a Note, the payment may be
made (in the case of any final payment of principal against presentation and surrender (or, in
the case of part payment only of such final payment, endorsement) of such Note as provided
above) by wire transfer, in immediately available funds, on the due date to a Euro account
maintained by the payee with a bank in Western Europe.
(b)
Payments
All payments are subject in all cases to any applicable fiscal or other laws, regulations and
directives, but without prejudice to the provisions of Condition 9 (Taxation). No commission
shall be charged to the Noteholders.
(c)
Payments on Presentation Days
A holder shall be entitled to present a Note for payment only on a Presentation Date and shall
not, except as provided in Condition 6 (Interest), be entitled to any further interest or other
payment if a Presentation Date falls after the due date.
If a Note is presented for payment at a time when, as a result of differences in time zones it is
not practicable to transfer the relevant amount to an account as referred to above for value on
the relevant Presentation Date, the Issuer shall not be obliged so to do but shall be obliged to
transfer the relevant amount to the account for value on the first practicable date after the
Presentation Date.
(d)
Principal Paying Agent and Transfer Agent
The names of the initial Principal Paying Agent and Transfer Agent and their initial specified
offices are set out below. The Issuer reserves the right at any time, with the approval of the
Trustee, to vary or terminate the appointment of the Principal Paying Agent and any Transfer
Agent and appoint additional or other Agents, provided that it will maintain (i) a Principal Paying
Agent and (ii) Transfer Agent having specified offices in at least two major European cities
approved by the Trustee (including Dublin, for so long as the Notes of any Class are listed on
the Irish Stock Exchange and the rules of that exchange so require) and (iii) a transfer agent in
a European Union member state that will not be obliged to withhold or deduct tax pursuant to
Council Directive 2003/48/EC on Taxation of Savings Income in the Form of Interests
Payments and Related Matters, in each case, as approved by the Trustee and shall procure
that it shall at all times maintain a Custodian, Account Bank, Investment Manager and
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Collateral Administrator. Notice of any change in any Agent or their specified offices or in the
Investment Manager or Collateral Administrator will promptly be given to the Noteholders by
the Issuer in accordance with Condition 16 (Notices).
(e)
Payments on Combination Notes
On each date on which payments of principal, interest, redemption amounts or other payments
are to be made on any Class of Note that is represented by a Component, such payments shall
be allocated to the relevant Class of Combination Notes in the proportion that the principal
amount Outstanding of such Component bears to the Principal Amount Outstanding of the
related Class of Notes (including the related Component) and applied as provided pursuant to
Condition 6(g) (Interest on the Combination Notes) and 7(j) (Redemption of Combination
Notes). No other payments shall be made on a Combination Note.
9. Taxation
All payments of principal and interest in respect of the Notes shall be made free and clear of, and
without withholding or deduction for, any taxes, duties, assessments or governmental charges of
whatever nature imposed, levied, collected, withheld or assessed. For the avoidance of doubt, the
Issuer shall not be required to gross up any payments made to Noteholders of any Class and shall
withhold or deduct from any such payments any amounts on account of tax where so required by law or
any relevant taxing authority. Any such withholding or deduction shall not constitute an Event of Default
under Condition 10(a) (Events of Default).
Subject as provided below, if the Issuer satisfies the Trustee that it has or will on the occasion of the
next payment due in respect of the Notes of any Class become obliged by the laws of The Netherlands
to withhold or account for tax so that it would be unable to make payment of the full amount that would
otherwise be due but for the imposition of such tax, the Issuer (with the consent of the Trustee and save
as provided below) shall use all reasonable endeavours to arrange for the substitution of a company
incorporated in another jurisdiction approved by the Trustee as the principal obligor under the Notes of
such Class, or to change its tax residence to another jurisdiction approved by the Trustee, subject to
receipt by the Trustee of Rating Agency Confirmation in relation to such change.
Notwithstanding the above, if any taxes referred to in this Condition 9 (Taxation) arise:
(a)
(b)
(c)
(d)
due to any present or former connection of any Noteholder (or between a fiduciary, settlor,
beneficiary, member or shareholder of such Noteholder if such Noteholder is an estate, a trust,
a partnership or a corporation) with Ireland (including without limitation, such Noteholder (or
such fiduciary, settlor, beneficiary, member or shareholder) being or having been a citizen or
resident thereof or being or having been engaged in a trade or business or present therein or
having had a permanent establishment therein) otherwise than by reason only of the holding of
any Note or receiving principal or interest in respect thereof; or
by reason of the failure by the relevant Noteholder to comply with any applicable procedures
required to establish non-residence or other similar claim for exemption from such tax; or
in respect of a payment made or secured for the immediate benefit of an individual or a non
corporate entity pursuant to Council Directive 2003/48/EC on Taxation of Savings Income in
the Form of Interest Payments or any law implementing or complying with, or introduced in
order to conform to, such Directive, or any arrangements entered into between the Member
States and certain other third countries and territories in connection with the Directive; or
as a result of presentation for payment by or on behalf of a Noteholder who would have been
able to avoid such withholding or deduction by presenting the relevant Note to another Transfer
Agent in a Member State of the European Union,
the requirement to substitute the Issuer as a principal obligor and/or change its residence for
taxation purposes shall not apply.
10. Events of Default
(a)
Events of Default
The occurrence of any of the following events shall constitute an "Event of Default":
(i)
Non-payment of interest The Issuer fails to pay any interest in respect of any Class A
Notes, any Class A1 Commitment Fee or any Break Cost (if any) when the same
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ecomes due and payable or, following redemption and payment in full of the Class A
Notes (including any Class A1 Commitment Fee), the Issuer fails to pay any interest in
respect of any Class B Note when the same becomes due and payable or, following
redemption in full of the Class B Notes, the Issuer fails to pay any interest in respect of
any Class C Note when the same becomes due and payable or, following redemption
and payment in full of the Class C Notes, the Issuer fails to pay interest in respect of a
Class D Note when the same becomes due and payable or, following redemption and
payment in full of the Class D Notes, the Issuer fails to pay interest in respect of a Class
E Note when the same becomes due and payable (save, in each case, as the result of
any deduction therefrom or the imposition of withholding thereon in the circumstances
described in Condition 9 (Taxation)) and provided that any such failure to pay such
interest or any Class A1 Commitment Fee or any Break Cost in such circumstances
continues for a period of at least five Business Days;
For the avoidance of doubt, non-payment of any Class P Combination Notes Coupon
Interest shall not constitute an Event of Default.
(ii) Non-payment of principal The Issuer fails to pay any principal when the same
becomes due and payable on any Note on any Redemption Date;
(iii) Default under Priorities of Payment Other than a failure already referred to in
paragraphs (i) and (ii) above, the Issuer fails on any Payment Date to disburse amounts
available in the Payment Account in accordance with the Priorities of Payment, which
failure continues for a period of five days;
(iv)
(v)
Collateral Debt Obligations On any Measurement Date after the Initial Investment
Period, in the event that the Class A Par Value Ratio is less than 100 per cent.;
Breach of Other Obligations The Issuer does not perform or comply with any other of
its material covenants, warranties or other undertakings (or similar) under the Notes, the
Trust Deed, the Agency Agreement, the Investment Management Agreement, the Class
A1 Note Purchase Agreement, any Interest Rate Hedge Agreement or any Asset Swap
Agreement (other than a covenant, warranty or other agreement a default in the
performance or breach of which is dealt with elsewhere in this Condition 10(a) and other
than the failure to meet any Collateral Quality Test, Portfolio Profile Test or Coverage
Test), or any representation, warranty or statement of the Issuer made in the Trust
Deed, Investment Management Agreement or in any certificate or other writing delivered
pursuant thereto or in connection therewith ceases to be correct in all material respects
when the same shall have been made, and the continuation of such default, breach or
failure for a period of 30 days (or 15 days, in the case of any default, breach or failure of
representation or warranty in respect of the Collateral) after notice thereof shall have
been given by registered or certified mail or overnight courier, to the Issuer by the
Trustee specifying such default, breach or failure and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(vi) Insolvency Proceedings Proceedings are initiated against the Issuer under any
applicable liquidation, insolvency, bankruptcy, composition, reorganisation or other
similar laws (together, "Insolvency Law"), or a receiver, trustee, administrator,
custodian, conservator, liquidator or other similar official (a "Receiver") is appointed in
relation to the Issuer or in relation to the whole or any substantial part of the undertaking
or assets of the Issuer; or the Issuer is, or initiates or consents to judicial proceedings
relating to, itself under any applicable Insolvency Law, or seeks the appointment of a
Receiver, or makes a conveyance or assignment for the benefit of its creditors generally
or otherwise becomes subject to any reorganisation or amalgamation (other than on
terms previously approved in writing by the Trustee); or
(vii)
Illegality It is or will become unlawful for the Issuer to perform or comply with any one
or more of its obligations under the Notes.
(b)
Acceleration
(i)
If an Event of Default occurs and is continuing, the Trustee may, at its discretion and
shall, at the request of the Controlling Class acting independently by Ordinary
Resolution (subject to the Trustee being indemnified and/or secured to its satisfaction
against all liabilities, proceedings, claims, demands or otherwise to which it is or may
thereby become liable and all costs, charges and expenses which are or may be
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incurred by it in connection therewith), give notice to the Issuer that all the Notes are to
be immediately due and payable.
(ii)
Upon any such notice being given to the Issuer in accordance with paragraph (i) of this
Condition, all of the Notes shall immediately become due and payable at their applicable
Redemption Prices, provided that such notice shall not have any effect and the Notes
shall not become due and payable until the Trustee has made an Enforcement
Threshold Determination (as defined in Condition 11(b)(i)(A) (Enforcement) below) or
the conditions set out in Condition 11(b)(i)(B) (Enforcement) below have been satisfied.
(c)
Curing of Default
At any time after a notice of acceleration of maturity of the Notes has been given following the
occurrence of an Event of Default and prior to enforcement of the security pursuant to
Condition 11 (Enforcement), the Trustee, subject to receipt of consent from the Controlling
Class, may and if requested by the Controlling Class, shall, acting independently by Ordinary
Resolution (and subject, to the Trustee being indemnified and/or secured to its satisfaction
against all liabilities, proceedings, claims, demands or otherwise to which it is or may thereby
become liable and all costs, charges and expenses which are or may be incurred by it in
connection therewith) rescind and annul such notice of acceleration given under Condition
10(b)(i) above or acceleration under Condition 10(b)(ii) above and its consequences if:
(i)
the Issuer has paid or deposited with the Trustee a sum sufficient to pay:
(A)
(B)
(C)
(D)
(without taking into account the effect of such acceleration) all overdue payments
of interest and principal on the Notes, other than the Class F Subordinated Notes
including the Class A1 Commitment Fee and any Break Costs;
all due but unpaid taxes owing by the Issuer, as certified by an Authorised Officer
of the Issuer to the Trustee;
all unpaid Administrative Expenses and Trustee Fees and Expenses up to the
Senior Expense Cap;
all amounts due and payable under any Asset Swap Agreement, any Interest
Rate Hedge Agreement, any Credit Short Obligation and any Offsetting Credit
Default Swap; and
(ii)
the Trustee has determined that all Events of Default, other than the non-payment of the
interest in respect of, or principal of, the Notes or the non-payment of any Class A1
Commitment Fee or any Break Costs that have become due solely as a result of the
acceleration thereof under Condition 10(b) above due to such Events of Default, have
been cured or waived.
Any previous rescission and annulment of a notice of acceleration or acceleration pursuant to
this Condition 10(c) shall not prevent the subsequent acceleration of the Notes if the Trustee, at
its discretion or, as subsequently requested to accelerate the Notes in accordance with
Condition 10(b)(i) above, accelerates or upon subsequent acceleration in accordance with
Condition 10(b)(ii) above.
(d)
Restriction on Acceleration of Notes
No acceleration of the Notes shall be permitted pursuant to this Condition by any Class of
Noteholders, other than the Controlling Class as provided in Condition 10(b) (Acceleration).
(e)
Notification and Confirmation of No Default
The Issuer shall promptly notify the Trustee, the Investment Manager and the Rating Agencies
upon becoming aware of the occurrence of an Event of Default. The Trust Deed contains
provision for the Issuer to provide written confirmation to the Trustee and the Rating Agencies
on an annual basis or on request that no Event of Default has occurred and that no condition,
event or act has occurred which, with the lapse of time and/or the issue, making or giving of
any notice, certification, declaration and/or request and/or the taking of any similar action
and/or the fulfilment of any similar condition could constitute an Event of Default and that no
other matter which is required (pursuant thereto) to be brought to the Trustee’s attention has
occurred.
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(f)
Non-payment of distributions on Class P OAT Strips
If the Issuer fails to make any distributions with respect to the Class P OAT Security
Component, when the same becomes payable at its Stated Maturity a majority of the holders of
the Class P Combination Notes may declare the Class P OAT Security Component,
immediately payable by notice to the Issuer. The Class P OAT Strips shall then be delivered to
holders of the Class P OAT Security Component as a distribution in mind on a pro rata basis.
11. Enforcement
(a)
Security Becoming Enforceable
Subject as provided in Condition 11(b) (Enforcement) below, the security constituted under the
Trust Deed (and, if applicable, the Euroclear Pledge Agreement and the Class P OAT Strips
Pledge Agreement) over the Collateral and/or Class P OAT Strip Collateral (as the case may
be) shall become enforceable upon an acceleration of the maturity of any of the Notes pursuant
to Condition 10 (Events of Default).
(b)
Enforcement
At any time after the Notes become due and payable and the security under the Trust Deed
becomes enforceable, the Trustee may, at its discretion and shall (i) subject to Condition 4(c)
(Limited Recourse) if so directed by the Controlling Class acting independently by
Extraordinary Resolution institute such proceedings against the Issuer as it may think fit to
enforce the terms of the Trust Deed and the Notes and pursuant and subject to the terms of the
Trust Deed and the Notes, realise and/or otherwise liquidate or sell the Collateral (other than
the Class P OAT Strip Collateral) in whole or in part and/or take such action as may be
permitted under applicable laws against any Obligor in respect of the Collateral (other than the
Class P OAT Strip Collateral) and/or take any other action to enforce the security over the
Collateral (other than the Class P OAT Strip Collateral) or (ii) if so directed by the Class P
Combination Noteholders, acting by Ordinary Resolution institute such proceedings as it thinks
fit to realise and/or otherwise liquidate or sell the Class P OAT Strips in whole or in part and/or
take such action as may be permitted under applicable laws to enforce the security over the
Class P OAT Strips (such action, "Enforcement Action", which term includes any other action
which the Trustee may deem to fall within such definition), in each case without any liability as
to the consequence of any action and without having regard (save to the extent provided in
Condition 14(e) (Entitlement of the Trustee and Conflicts of Interest)) to the effect of such
action on individual Noteholders of such Class or any other Secured Party provided however
that:
(i)
no such Enforcement Action may be taken by the Trustee unless:
(A)
(B)
it determines that the anticipated proceeds realised from such Enforcement
Action (after deducting any reasonable expenses incurred in connection
therewith) would be sufficient to discharge in full all amounts due and payable in
respect of all Classes of Notes other than the Class F Subordinated Notes
(including, without limitation, Deferred Interest on the Class B Notes, Class C
Notes, Class D Notes and the Class E Notes) and all amounts payable in priority
thereto pursuant to the Priorities of Payment (such determination being an
"Enforcement Threshold Determination") and such determination shall be
subject to approval of the Controlling Class, acting independently by
Extraordinary Resolution, and the Investment Manager consenting thereto; or
consent to the taking of Enforcement Action is received from:
(1) the Controlling Class; and
(2) each Class of Notes (other than the Class F Subordinated Notes) where
the Par Value Ratio, applicable to the Class of Notes ranking immediately
senior to such Class of Notes, is greater than 100 per cent.,
in each case acting independently by an Extraordinary Resolution of such Class;
(ii)
the Trustee shall not be bound to institute any such proceedings or take any such other
action unless it is directed by the Controlling Class acting independently by
Extraordinary Resolution at such time and, in each case, the Trustee is indemnified
and/or secured to its satisfaction against all liabilities, proceedings, claims and demands
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to which it is or may thereby become liable and all costs, charges and expenses which
are or may be incurred by it in connection therewith. Following redemption and payment
in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes
and the Class E Notes, the Trustee shall (provided it is indemnified and/or secured to its
satisfaction against all liabilities, proceedings, claims and demands to which it may
thereby become liable and all costs, charges and expenses which may be incurred by it
in connection therewith), if so directed, act upon the directions of the Class F
Subordinated Notes acting independently by Extraordinary Resolution; and
(iii)
the Trustee shall determine the aggregate proceeds that may be realised pursuant to
any Enforcement Action in accordance with paragraph (i) above by reference to the
provisions set out in the definition of "Expected Net Proceeds" in Condition 7(b)(ii)
(Terms and Conditions of Redemption at the Option of the Class F Subordinated
Noteholders) for the purpose of determining the proceeds realisable from liquidation of
the Portfolio. The Trustee may rely on the opinion of an independent investment
banking firm of international reputation in making such determination or on the opinion
of any other expert as it may in its discretion deem appropriate and the Issuer shall pay
for any fees or expenses reasonably and properly incurred in connection therewith.
The Trustee shall notify the Noteholders, the Issuer, the Agents, the Investment Manager, the
Collateral Administrator and the Rating Agencies in the event that it makes an Enforcement
Threshold Determination at any time. The net proceeds of enforcement of the security over the
Collateral (save in respect of any amounts received in respect of Class P OAT Strip Collateral,
which shall be paid to the Class P Combination Noteholders, shall be credited to the Payment
Account or such other account as the Trustee may direct and shall be distributed in accordance
with the Post-Enforcement Priority of Payments.
(c)
Post-Enforcement Priority of Payments
The net proceeds of enforcement of the security over the Collateral (other than any amounts
received in respect of the Class P OAT Strip Collateral) shall be credited to the Payment
Account or such other account as the Trustee may direct and shall be distributed in accordance
with the following priority of payments (the "Post Enforcement Priority of Payments"):
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
to the payment of any unpaid Financed Amount;
to the payment of accrued and unpaid Trustee Fees and Expenses;
to the payment on a pro rata and pari passu basis of Administrative Expenses in relation
to items (a) and (d) of the definition thereof up to an amount equal to the Senior
Expenses Cap;
to the payment to the Investment Manager of (i) the Senior Investment Management
Fee due and payable on such Payment Date and (ii) thereafter, to the payment of any
unpaid Senior Investment Management Fee together with, in each case any VAT
thereon payable by the Investment Manager (save to the extent the Investment
Manager is liable or required to account to any applicable taxing authority in respect
thereof);
to the payment on a pro rata basis of any Derivative Counterparty Termination
Payments due to any Derivative Counterparty other than Defaulted Derivative Issuer
Termination Payments;
to the payment on a pro rata and pari passu basis of: (A) all amounts of interest and
principal in respect of the Class A1 Notes (B) any Class A1 Commitment Fees due and
payable on such Payment Date (C) any Break Cost due and payable in respect of the
Class A1 Notes and (D) all amounts of interest and principal on the Class A2 Notes in
respect of the Class A2 Notes;
to the payment of all amounts of interest and principal in respect of the Class A3 Notes;
to the payment on a pro rata basis of all amounts of interest and principal in respect of
the Class B Notes;
to the payment on a pro rata basis of all amounts of interest and principal in respect of
the Class C Notes;
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(J)
(K)
(L)
(M)
(N)
(O)
(P)
to the payment on a pro rata basis of all amounts of interest and principal in respect of
the Class D Notes;
to the payment on a pro rata basis of all amounts of interest and principal in respect of
the Class E Notes;
to the payment on a pro rata and pari passu basis of Administrative Expenses in relation
to each item referred to in (C) not paid by reason of the Senior Expenses Cap (if any), in
relation to each item thereof;
to the payment of any Defaulted Derivative Issuer Termination Payments due to any
Derivative Counterparty;
to the payment to the Investment Manager of (i) the Subordinated Investment
Management Fee and (ii) thereafter, to the payment of any unpaid Subordinated
Investment Management Fee together with, in each case any VAT thereon payable by
the Investment Manager (save to the extent the Investment Manager is liable or
required to account to any applicable taxing authority in respect thereof);
to the payment to the Incentive Investment Management Fee together with, in each
case any VAT thereon payable by the Investment Manager (save to the extent the
Investment Manager is liable or required to account to any applicable taxing authority in
respect thereof); and
any remaining Interest Proceeds and Principal Proceeds to the payment to the Class F
Subordinated Noteholders on a pro rata and pari passu basis.
(d)
Only Trustee to Act
Only the Trustee may pursue the remedies available under the Trust Deed to enforce the rights
of the Noteholders or of any of the other Secured Parties under the Trust Deed and the Notes
and no Noteholder or other Secured Party may proceed directly against the Issuer or any of its
assets unless the Trustee, having become bound to proceed in accordance with the terms of
the Trust Deed, fails or neglects to do so within a reasonable period of time (taking into account
the Trustee's obligations as a trustee) following the instance of the obligation to proceed having
arisen and such failure or neglect is continuing. After realisation of the security which has
become enforceable and distribution of the net proceeds in accordance with the Priorities of
Payment, or, in the case of proceeds realised from the Class P OAT Strip Collateral,
distribution to the Class P Combination Noteholders, no Noteholder or other Secured Party
may take any further steps against the Issuer to recover any sum still unpaid in respect of the
Notes or the Issuer’s obligations to such Secured Party and all claims against the Issuer to
recover any sum still unpaid in respect of the Notes or the Issuer’s obligations to such Secured
Party and all claims against the Issuer in respect of such sums unpaid shall be extinguished. In
particular, none of the Trustee, any Noteholder or any other Secured Party shall be entitled in
respect thereof to petition or take any other step for the winding-up of, or the appointment of an
examiner to, the Issuer except to the extent permitted under the Trust Deed.
(e)
Purchase of Collateral by Noteholders
Upon any sale of any part of the Collateral following the occurrence of an Event of Default,
whether made under the power of sale under the Trust Deed or by virtue of judicial
proceedings, any Noteholder may (but shall not be obliged to) bid for and purchase the
Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain,
possess or dispose of such property in its or their own absolute right without accountability. In
addition, any purchaser in any such sale which is a Noteholder may deliver Notes held by it in
place of payment of the purchase price for such Collateral or Class P OAT Strip Collateral
where the amount payable to such Noteholder in respect of such Notes pursuant to the
Priorities of Payment out of the net proceeds of such sale is equal to or exceeds the purchase
moneys so payable.
12. Prescription
Claims in respect of principal and interest payable on redemption in full of the relevant Notes will
become void unless presentation for payment is made as required by Condition 7 (Redemption) within a
period of five years, in the case of interest, and ten years, in the case of principal, from the appropriate
Relevant Date.
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13. Replacement of Notes
If any Note is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of
any Transfer Agent, subject in each case to all applicable laws and Irish Stock Exchange requirements,
upon payment by the claimant of the expenses incurred in connection with such replacement and on
such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that
the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Notes
must be surrendered before replacements will be issued.
14. Meetings of Noteholders, Modification, Waiver and Substitution
(a)
Provisions in Trust Deed
The Trust Deed contains provisions for convening meetings of the Noteholders (or of passing
Written Resolutions) to consider matters affecting the interests of the Noteholders, including
without limitation, modifying or waiving certain of the provisions of these Conditions and the
substitution of the Issuer in certain circumstances. The provisions in this Condition are
descriptive of the detailed provisions of the Trust Deed.
(b)
Decisions and Meetings of Noteholders
(i)
General Decisions may be taken by Noteholders by way of Ordinary Resolution or
Extraordinary Resolution, in each case, either acting together or, to the extent specified
in any applicable Transaction Document, as a Class of Noteholders acting
independently. In the case of the Class A1 Noteholders, votes shall be determined by
reference to the aggregate of the Principal Amount Outstanding of the Class A1 Notes
and the Class A1 Available Commitment, which has not been cancelled at such time.
Such Resolutions can be effected either at a duly convened meeting of the applicable
Noteholders or by the applicable Noteholders resolving in writing, in each case, in at
least the minimum percentages specified in the table "Minimum Percentage Voting
Requirements" below. Meetings of the Noteholders may be convened by the Issuer, the
Trustee or by one or more Noteholders holding not less than ten per cent. in original
principal amount of the Notes Outstanding of a particular Class, subject to certain
conditions including minimum notice periods.
The Trustee may, in its discretion, determine that any proposed Ordinary Resolution or
Extraordinary Resolution affects only the holders of one or more Classes of Notes, in
which event the required quorum and minimum percentage voting requirements of such
Ordinary Resolution or Extraordinary Resolution may be determined by reference only
to the holders of that Class or Classes of Notes and not the holders of any other Notes
as set forth in the tables below.
(ii)
Quorum The quorum required for any meeting convened to consider an Ordinary
Resolution or Extraordinary Resolution, in each case, of all the Noteholders or of a
specified Class of Noteholders, or at any adjourned meeting to consider such a
Resolution, shall be as set out in the relevant column and row corresponding to the type
of resolution in the table "Quorum Requirements" below. The holder of each Global
Note will be treated as being two persons for the purposes of any quorum requirements
of, or the right to demand a poll at, a meeting of Noteholders and, at any such meeting,
as having one vote in respect of each €1,000 of original principal amount of Notes
outstanding for which the relevant Global Note may be exchanged.
Quorum Requirements
Type
Resolution
of
Any meeting other than a
meeting adjourned for want
of quorum
Meeting previously
adjourned for want of
quorum
Extraordinary
Resolution of all
Noteholders (or
a certain Class
or Classes only)
Two or more persons holding
or representing not less than
50% of (i) the aggregate
Principal Amount Outstanding
of each Class of Notes (or the
relevant Class or Classes only,
if applicable) and (ii) in respect
of the Class A1 Notes, the
aggregate of the Principal
Two or more persons holding or
representing any Notes of each
Class of Notes regardless of (i)
the aggregate Principal Amount
Outstanding of each Class of
Notes (or of the relevant Class
or Classes only, if applicable)
and (ii) in respect of the Class
A1 Notes, the aggregate of the
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Ordinary
Resolution of all
Noteholders (or
a certain Class
or Classes only)
Amount Outstanding of the
Class A1 Notes and the Class
A1 Available Commitment
Two or more persons holding
or representing not less than
ten per cent. of (i) the
aggregate Principal Amount
Outstanding of each Class of
Notes (or the relevant Class or
Classes only, if applicable) and
(ii) in respect of the Class A1
Notes, the aggregate of the
Principal Amount Outstanding
of the Class A1 Notes and the
Class A1 Available
Commitment
Principal Amount Outstanding
of the Class A1 Notes and the
Class A1 Available
Commitment so held or
represented
Two or more persons holding or
representing any Notes of each
Class regardless of (i) the
aggregate Principal Amount
Outstanding of each Class of
Notes (or of the relevant Class
or Classes only, if applicable)
and (ii) in respect of the Class
A1 Notes, the aggregate of the
Principal Amount Outstanding
of the Class A1 Notes and the
Class A1 Available
Commitment so held or
represented
The Trust Deed does not contain any provision for higher quorums in any
circumstances.
(iii) Minimum Voting Rights Set out in the table "Minimum Percentage Voting
Requirements" below are the minimum percentages required to pass the Resolutions
specified in such table which, (A) in the event that such Resolution is being considered
at a duly convened quorate meeting of Noteholders, shall be determined by reference to
the percentage which the aggregate original principal amount of Notes held or
represented by any person or persons entitled to vote any applicable Notes who votes
or vote in favour of such Resolution represents of the aggregate original principal
amount of all applicable Notes which are represented at such meeting and are entitled
to be voted or, (B) in the case of any Written Resolution, shall be determined by
reference to the percentage which the aggregate original principal amount of the Notes
entitled to be voted in respect of such Resolution which are voted in favour thereof
represent of the aggregate original principal amount of all the Notes entitled to vote in
respect of such Written Resolution.
Minimum Percentage Voting Requirements
Type of Resolution
Extraordinary Resolution of all Noteholders (or of a
certain Class or Classes only)
Ordinary Resolution of all Noteholders (or of a
certain Class or Classes only)
Minimum percentage
66% of (i) the aggregate original principal
amount of Notes of each Class (or of a certain
Class or Classes only) and (ii) in respect of the
Class A1 Notes, the aggregate of the Principal
Amount Outstanding of the Class A1 Notes and
the Class A1 Available Commitment
A clear majority of the (i) aggregate original
principal amount of Notes of each Class (or of a
certain Class or Classes only) and (ii) in respect of
the Class A1 Notes, the aggregate of the Principal
Amount Outstanding of the Class A1 Notes and
the Class A1 Available Commitment
(iv)
(v)
Written Resolutions Any Written Resolution may be contained in one document or in
several documents in like form each signed by or on behalf of one or more of the
relevant Noteholders and the date of such Written Resolution shall be the date on which
the latest such document is signed.
All Resolutions Binding Any Resolution of the Noteholders duly passed shall be
binding on all Noteholders (regardless of Class and regardless of whether or not a
Noteholder was present at the meeting at which such Resolution was passed and
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including, in each case, the Components of a Combination Note corresponding to any
Notes).f
(vi) Extraordinary Resolution Without prejudice to Condition 14(c) (Modification and
Waiver) below, any Resolution to sanction any of the following items will be required to
be passed by an Extraordinary Resolution but in each case, subject to anything else
contemplated in the Trust Deed, the Investment Management Agreement or the relevant
Transaction Document, as applicable):
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
the exchange or substitution for the Notes of a Class, or the conversion of the
Notes of a Class into, shares, bonds or other obligations or securities of the
Issuer or any other entity;
the modification of any provision relating to the timing and/or circumstances of
redemption of the Notes of a Class at maturity or otherwise (including the
circumstances in which the maturity of such Notes may be accelerated);
the modification of any of the provisions of the Trust Deed which would directly
and adversely affect the calculation of the amount of any payment of interest or
principal on any Note;
the adjustment of the outstanding principal amount of the Notes Outstanding of
the relevant Class;
a change in the currency of payment of the Notes of a Class;
any change in the Priorities of Payment;
the modification of the provisions concerning the quorum required at any meeting
of Noteholders or the minimum percentage required to pass an Extraordinary
Resolution or any other provision of these Conditions which requires the written
consent of the holders of a requisite principal amount of the Notes of any Class
Outstanding;
any modification of any Transaction Document having a material adverse effect
on the security over the Collateral constituted by the Trust Deed;
any item requiring approval by Extraordinary Resolution pursuant to these
Conditions or any Transaction Document;
any modification of this Condition 14(b); and
to approve the modification of the Eligibility Criteria, except as contemplated by
these Conditions and the Trust Deed,
provided that, if any of the matters set out in paragraphs (A) to (K) (inclusive)above
affect:
(1) the amendment to any date fixed for payment of principal or of interest on
the Class A Notes;
(2) the modification of the timing and/or determination of the amount of
interest or other amounts payable in respect of the Class A Notes from
time to time, including the Class A1 Commitment Fee, and any Break
Cost;
(3) a change in the currency of payment of the Class A Notes, or any other
amounts payable under the Priorities of Payment in respect of the Class A
Notes;
(4) any change in the Priorities of Payment or in the calculation or
determination of any amounts payable thereunder in respect of the Class
A Notes which materially affects the Class A Noteholder; or
(5) any change in the definition of Controlling Class,
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then in addition to such Extraordinary Resolution the written consent of the Class A1
Noteholders (such consent not to be unreasonably withheld or delayed) shall also be
required.
For the avoidance of doubt, matters affecting the interests of a Class shall only be
considered by and voted upon at a meeting of Noteholders of that relevant Class
subject to the Trustee's discretion in 14(b)(i) (General) above.
(c)
Modification and Waiver
The Trust Deed and the Investment Management Agreement both provide that, without the
consent of the Noteholders, and without any requirement for the Trustee to consult the
Noteholders concerning such amendments to the extent they fall within the paragraphs below,
the Issuer may amend, modify, supplement and/or waive the relevant provisions of the Trust
Deed and/or the Investment Management Agreement and/or any other Transaction Documents
(subject to the consent of the other parties thereto) (as applicable), subject to the prior written
consent of the Trustee, for any of the following purposes:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
to add to the covenants of the Issuer or the Trustee for the benefit of the Noteholders or
to surrender any right or power in the Trust Deed or the Investment Management
Agreement (as applicable) conferred upon the Issuer;
to charge, convey, transfer, assign, mortgage or pledge any property to or with the
Trustee;
to correct or amplify the description of any property at any time subject to the security of
the Trust Deed (including the Euroclear Pledge Agreement and/or the Class P OAT
Strips Pledge Agreement), or to better assure, convey and confirm unto the Trustee any
property subject or required to be subject to the security of the Trust Deed (and
including, without limitation, any and all actions necessary or desirable as a result of
changes in law or regulations) or subject to the security of the Trust Deed (including the
Euroclear Pledge Agreement and/or the Class P OAT Strips Pledge Agreement) any
additional property;
to evidence and provide for the acceptance of appointment under the Trust Deed by a
successor Trustee subject to and in accordance with the terms of the Trust Deed and to
add to or change any of the provisions of the Trust Deed as shall be necessary to
facilitate the administration of the trusts under the Trust Deed by more than one
Trustee, pursuant to the requirements of the relevant provisions of the Trust Deed;
to modify the restrictions on and procedures for resales and other transfers of Notes to
reflect any changes in applicable law or regulation (or the interpretation thereof) or to
enable the Issuer to rely upon any exemption from registration under the Securities Act
or the Investment Company Act or applicable Irish banking or securities laws or to
remove restrictions on resale and transfer to the extent not required thereunder or
otherwise to make any such modifications the restrictions on and procedures for resales
and other transfers of Notes as shall be necessary or advisable;
to make such changes as shall be necessary or advisable in order for the Notes to be
(or to remain) listed on the Irish Stock Exchange or any other exchange;
save as contemplated pursuant to Condition 14(d) (Substitution) below, to take any
action advisable to prevent the Issuer from becoming subject to withholding or other
taxes, fees or assessments;
to take any action advisable to prevent the Issuer from being treated as engaged in a
United States trade or business or otherwise be subject to United States federal, state
or local income tax on a net income basis;
to enter into any additional agreements not expressly prohibited by the Trust Deed or
the Investment Management Agreement (as applicable);
to evidence any waiver by any Rating Agency as to any requirement (or condition in the
Trust Deed or Investment Management Agreement (as applicable)), of such Rating
Agency, subject to receipt of Rating Agency Confirmation;
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(xi)
(xii)
(xiii)
(xiv)
to modify the calculation of any of the Collateral Quality Tests (including amending the
S&P Test Matrices and the Moody's Test Matrices), the Portfolio Profile Tests or the
Coverage Tests subject to receipt of Rating Agency Confirmation;
to make any other modification of any of the provisions of the Trust Deed, the
Investment Management Agreement or any other Transaction Document which, in the
opinion of the Trustee, is of a formal, minor or technical nature or is made to correct a
manifest error or cure any ambiguity;
to make any other modification (save as otherwise provided in the Trust Deed, the
Investment Management Agreement or the relevant Transaction Document), and/or give
any waiver or authorisation of any breach or proposed breach, of any of the provisions
of the Trust Deed or any other Transaction Document which is, in the opinion of the
Trustee, not materially prejudicial to the interests of the Noteholders of any Class; and
subject to Rating Agency Confirmation, to accommodate, modify or amend existing
and/or Replacement Derivative Agreements.
Any such modification, authorisation or waiver shall be binding on all Noteholders and shall be
notified to the Rating Agencies and to the Noteholders as soon as practicable in accordance
with Condition 16 (Notices), provided that under no circumstances shall the Trustee be required
to give its consent to any such modification, authorisation or waiver on less than 21 days’
notice and the Trustee shall be entitled to obtain such advice in connection with giving such
consent as it sees fit. Any such fees and/or charges incurred by the Trustee in connection with
such advice shall be for the account of the Issuer upon approval by the Investment Manager.
(d)
Substitution
The Trust Deed contains provisions permitting the Trustee to agree, subject to such
amendment of the Trust Deed and such other conditions as the Trustee may require (without
the consent of the Noteholders of any Class), to the substitution of any other company in place
of the Issuer, or of any previous substituted company, as principal debtor under the Trust Deed
and the Notes of each Class, if required for taxation purposes. In the case of such a
substitution the Trustee may agree, without the consent of the Noteholders, but subject to
receipt by the Trustee of Rating Agency Confirmation (subject to receipt of such information
and/or opinions as the Rating Agency may require), to a change of the law governing the Notes
and/or the Trust Deed, provided that such change would not in the opinion of the Trustee be
materially prejudicial to the interests of the Noteholders of any Class. Any substitution agreed
by the Trustee pursuant to this paragraph(d) shall be binding on the Noteholders, and shall be
notified to the Noteholders as soon as practicable in accordance with Condition 16 (Notices).
The Trustee may, subject to the satisfaction of certain conditions, including receipt by the
Trustee of Rating Agency Confirmation, agree to a change in the place of residence of the
Issuer for taxation purposes without the consent of the Noteholders of any Class, provided the
Issuer does all such things as the Trustee may require in order that such change in the place of
residence of the Issuer for taxation purposes is fully effective and complies with such other
requirements which are in the interests of the Noteholders as it may direct.
The Issuer shall procure that, so long as the Notes are listed on the Irish Stock Exchange, any
material amendments or modifications to the Conditions, Trust Deed or such other conditions
made pursuant to this Condition 14 shall be notified to the Irish Stock Exchange.
(e)
Entitlement of the Trustee and Conflicts of Interest
In connection with the exercise of its trusts, powers, duties and discretions (including but not
limited to those referred to in this Condition) the Trustee shall have regard to the interests of
each Class of Noteholders as a Class and shall not have regard to the consequences of such
exercise for individual Noteholders of such Class and the Trustee shall not be entitled to
require, nor shall any Noteholder be entitled to claim, from the Issuer, the Trustee or any other
person any indemnification or payment in respect of any tax consequence of any such exercise
upon individual Noteholders except to the extent already provided for in Condition 9 (Taxation).
The Trust Deed provides that in the event of any conflict of interest between the holders of the
Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes
and the Class F Subordinated Notes, the interests of the holders of the Controlling Class
(which in the case of the Class A Notes, shall include the Class A1 Notes, the Class A2 Notes
and the Class A3 Notes) will prevail. If the holders of the Controlling Class do not have an
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interest in the outcome of the conflict, the Trustee shall give priority to the interests of (i) the
Class A Noteholders over the Class B Noteholders, the Class C Noteholders, the Class D
Noteholders, the Class E Noteholders and the Class F Subordinated Noteholders, (ii) the Class
B Noteholders over the Class C Noteholders, the Class D Noteholders, the Class E
Noteholders and the Class F Subordinated Noteholders, (iii) the Class C Noteholders over the
interests of the Class D Noteholders, the Class E Noteholders and the Class F Subordinated
Noteholders, (iv) the Class D Noteholders over the interests of the Class E Noteholders and the
Class F Subordinated Noteholders and (v) the Class E Noteholders over the interests of the
Class F Subordinated Noteholders. In the event that the Trustee shall receive conflicting or
inconsistent requests from two or more groups of holders of the Controlling Class (or another
Class given priority as described in this paragraph), each representing less than the majority by
original principal amount of the Controlling Class (or other Class given priority as described in
this paragraph), the Trustee shall give priority to the group which holds the greater original
principal amount of Notes of such Class. The Trust Deed provides further that the Trustee will
act upon the directions of the holders of the Controlling Class (or other Class given priority as
described in this paragraph) in such circumstances, and shall not be obliged to consider the
interests of and is exempted from any liability to the holders of any other Class of Notes.
For this purpose, the holders of any Class of Combination Notes shall not be deemed to have
an interest, except to the extent of each of the Components of the relevant Class of
Combination Notes.
In addition, the Trust Deed provides that in the event of any conflict of interest between the
Noteholders and any other Secured Party, the interests of the Noteholders will prevail.
15. Indemnification of the Trustee
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from
responsibility in certain circumstances, including provisions relieving it from instituting proceedings to
enforce repayment or to enforce the security constituted by or pursuant to the Trust Deed, unless
indemnified and/or secured to its satisfaction. The Trustee is entitled to enter into business transactions
with the Issuer and any entity related to the Issuer without accounting for any profit. The Trustee is
exempted from any liability in respect of any loss or theft of the Collateral from any obligation to insure,
or to monitor the provisions of any insurance arrangements in respect of, the Collateral (for the
avoidance of doubt, under the Trust Deed the Trustee is under no such obligation) and from any claim
arising from the fact that the Collateral is held by the Custodian or is otherwise held in safe custody by a
bank or other custodian. The Trustee shall not be responsible for the performance by the Custodian of
any of its duties under the Agency Agreement or for the performance by the Investment Manager of any
of its duties under the Investment Management Agreement, for the performance by the Collateral
Administrator of its duties under the Investment Management Agreement or for the performance by any
other person appointed by the Issuer in relation to the Notes. The Trustee shall not have any
responsibility for the administration, management or operation of the Collateral including acting upon
any request by the Investment Manager to release any of the Collateral from time to time.
The Trust Deed contains provisions for the retirement of the Trustee and the removal of the Trustee by
Extraordinary Resolution of the Controlling Class, but no such retirement or removal shall become
effective until a successor trustee is appointed.
16. Notices
Notices to Noteholders will be valid if posted to the address of such Noteholder appearing in the
Register at the time of publication of such notice by pre-paid, first class mail (or any other manner
approved by the Trustee which may be by electronic transmission) and (for so long as the Notes are
listed on the Irish Stock Exchange and the rules of the Irish Stock Exchange so require) shall be sent to
the Company Announcements Office of the Irish Stock Exchange. Any such notice shall be deemed to
have been given three days (in the case of inland mail) or seven days (in the case of overseas mail)
after the date of despatch thereof to the Noteholders.
The Trustee shall be at liberty to sanction some other method of giving notice to the Noteholders or a
category of them if, in its opinion, such other method is reasonable having regard to market practice
then prevailing and to the rules of the stock exchange on which the Notes are then listed and provided
that notice of such other method is given to the Noteholders in such manner as the Trustee shall
require.
All notices regarding Notes will be valid if published as described above.
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17. Combination Notes
Except as otherwise expressly provided in these Terms and Conditions, the Components of each Class
of Combination Note will be treated as Notes of the Classes corresponding to such Components for the
purposes of requests, demands, authorisations, directions, notices, consents, waivers or other actions.
The holders of each Class of Combination Notes shall be entitled to vote in respect of each Class of
Notes corresponding to a Component of such Combination Notes, in the proportion that the principal
amount of such Component bears to the principal amount of the related Class of Notes (taken together
with the aggregate principal amount of all Components which correspond to such Class of Notes).
18. Third Party Rights
No person shall have any right to enforce any term or condition of the Note under the Contracts (Rights
of Third Parties) Act 1999.
19. Governing Law
(a)
Governing Law
The Master Trust Terms, as incorporated into and/or supplemented by and/or amended by the
Issue Deed and the Notes of each Class are governed by and shall be construed in
accordance with English law.
(b)
Jurisdiction
The courts of England are to have jurisdiction to settle any disputes which may arise out of or in
connection with the Notes, and accordingly any legal action or proceedings arising out of or in
connection with the Notes ("Proceedings") may be brought in such courts. The Issuer has in
the Trust Deed irrevocably submitted to the jurisdiction of such courts and waives any objection
to Proceedings in any such courts whether on the ground of venue or on the ground that the
Proceedings have been brought in an inconvenient forum. This submission is made for the
benefit of each of the Noteholders and the Trustee and shall not limit the right of any of them to
take Proceedings in any other court of competent jurisdiction nor shall the taking of
Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other
jurisdiction (whether concurrently or not).
(c)
Agent for Service of Process
The Issuer appoints Law Debenture Corporate Services Limited of 5 th Floor, 100 Wood Street,
London EC2V 7EX as its agent in England to receive service of process in any Proceedings in
England based on any of the Notes. If for any reason the Issuer does not have such agent in
England, it will promptly appoint a substitute process agent and notify the Trustee and the
Noteholders of such appointment. Nothing herein shall affect the right to service of process in
any other manner permitted by law.
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USE OF PROCEEDS
The estimated net proceeds of the issue of the Notes including additional proceeds available to the
Issuer on the Issue Date by way of additional Class A1 Drawings under the Class A1 Notes after
payment of certain fees and expenses paid on the Issue Date are expected to be approximately €304
million, £22 million and $27 million. Proceeds from the issue of the Notes will be used by the Issuer to
pay all amounts due and payable in connection with the acquisition of certain Collateral Debt Obligations
purchased by the Issuer, or which the Issuer has committed to purchase, including the repayment (to
the extent required on the Issue Date) of any amounts borrowed by the Issuer (together with any interest
thereon) in order to finance the acquisition thereof and the costs of entering into hedging arrangements
(if any), in the amount of approximately €202 million, £19 million and $26 million.
The remaining proceeds of issue of the Notes shall be paid into the Unused Proceeds Accounts. On or
after the Issue Date the Balance standing to the credit of the Unused Proceeds Principal Account may
be applied, at the discretion of the Issuer or the Investment Manager, in payment of, inter alia, certain
fees, costs and expenses incurred in connection with the issue of the Notes including those associated
with the entry into any Interest Rate Hedge Transaction and any Asset Swap Transaction and any
Currency Hedge Transaction on or prior to the Issue Date.
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FORM OF THE NOTES
References below to Notes and to the Regulation S Global Certificates and the Rule 144A Global
Certificates (together, the "Global Certificates") and the Definitive Certificates representing such Notes
are to each respective Class of Notes (with each Class P Combination Notes each constituting a
separate "Class" for such purposes), except as otherwise indicated. The Notes will be issued pursuant
to the Trust Deed.
Initial Issue of Notes
The Regulation S Notes of each Class (other than Class A1 Notes and the AI Notes) will be represented
on issue by a Regulation S Global Certificate deposited on their issue date with and registered in the
name of BT Globenet Nominees Limited as nominee for the common depositary on behalf of Euroclear
and Clearstream, Luxembourg (each, a "Regulation S Global Certificate"). Beneficial interests in a
Regulation S Global Certificate may be held only through Euroclear or Clearstream, Luxembourg at any
time. See "Book-Entry Interests". Beneficial interests in a Regulation S Global Certificate may not be
held by or on behalf of a U.S. Person (as defined in Regulation S under the Securities Act) at any time.
By acquisition of a beneficial interest in a Regulation S Global Certificate, the purchaser thereof will be
deemed to represent, among other things, that it is not a U.S. Person, and that, if in the future it
determines to transfer such beneficial interest, it will transfer such interest only to a person whom the
seller reasonably believes (a) in the case of a purchaser who takes delivery in the form of an interest in
a Regulation S Global Certificate, to be a non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 of Regulation S, (b) in the case of a purchaser who takes delivery in the form of an
interest in a Rule 144A Global Certificate, to be a U.S. Person that is a QIB/QP who takes delivery in the
form of an interest in a Rule 144A Global Certificate and (c) otherwise in accordance with the Trust
Deed and applicable securities laws. See "Transfer Restrictions".
The Rule 144A Notes of each Class (other than Class A1 Notes and the AI Notes) will be represented
by a Rule 144A Global Certificate deposited on their issue date with the common depositary for, and
registered in the name of Deutsche Bank Trust Company Americas as custodian for Cede & Co. as
nominee of DTC (each a "Rule 144A Global Certificate"). A beneficial interest in a Rule 144A Global
Certificate may only be held through DTC at any time. See "Book-Entry Interests". By acquisition of a
beneficial interest in a Rule 144A Global Certificate, the purchaser thereof will be deemed to represent,
amongst other things, that it is a QIB and a QP for the purposes of Section 3(c)(7) of the Investment
Company Act and that, if in the future it determines to transfer such beneficial interest, it will transfer
such interest only to a person whom the seller reasonably believes (a) in the case of a purchaser who
takes delivery in the form of an interest in a Regulation S Global Certificate, to be a non-U.S. Person in
an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, (b) in the case of a
purchaser who takes delivery in the form of an interest in a Rule 144A Global Certificate, to be a U.S.
Person that is a QIB/QP who takes delivery in the form of an interest in a Rule 144A Global Certificate,
and (c) otherwise in accordance with the Trust Deed and applicable securities laws.
The AI Notes sold to U.S. Persons that are institutional "accredited investors" within the meaning of
Sections 5.01(a), 1, 2, 3, 7 or 8 of Regulation D under the Securities Act which are also QPs (the
"Definitive Certificates") will be represented on issue by definitive note certificates in fully registered
form without interest coupons or principal receipts, and registered in the name of the owner thereof or its
nominee. The AI Notes will be subject to certain restrictions on transfer as set forth under "Transfer
Restrictions".
Interests in Global Certificates and Definitive Certificates related thereto will be subject to certain
restrictions on transfer set forth therein and in the Trust Deed and as set forth in Rule 144A and the
Investment Company Act and the Notes will bear the applicable legends regarding the restrictions set
forth under "Transfer Restrictions". In the case of each Class of Notes, an interest in a Regulation S
Global Certificate may be transferred to a person who takes delivery in the form of an interest in a Rule
144A Global Certificate in denominations greater than or equal to the Authorised Denominations
applicable to interests in such Rule 144A Global Certificate only upon receipt by the Transfer Agent of a
written certification (in the form provided in the Trust Deed) to the effect that the transferor reasonably
believes that the transferee is a QIB within the meaning of Rule 144A who is also a QP for purposes of
Section 3(c)(7) of the Investment Company Act and that such transaction is in accordance with any
applicable securities laws of any state of the United States or any other jurisdiction. In the case of each
Class of Notes, an interest in the Rule 144A Global Certificates may be transferred to a person who
takes delivery in the form of an interest in a Regulation S Global Certificate only upon receipt by the
Transfer Agent of a written certification (in the form provided in the Trust Deed) from the transferor to the
effect that the transfer is being made to a non-U.S. Person and in accordance with Regulation S under
the Securities Act.
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Any interest in a Regulation S Global Certificate that is transferred to a person who takes delivery in the
form of an interest in a Rule 144A Global Certificate will, upon transfer, cease to be an interest in such
Regulation S Global Certificate and become an interest in the Rule 144A Global Certificate, and,
accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to
beneficial interests in a Rule 144A Global Certificate for as long as it remains such an interest. Any
beneficial interest in a Rule 144A Global Certificate that is transferred to a person who takes delivery in
the form of an interest in a Regulation S Global Certificate will, upon transfer, cease to be an interest in
a Rule 144A Global Certificate and become an interest in the Regulation S Global Certificate and,
accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to
beneficial interests in a Regulation S Global Certificate for so long as it remains such an interest. No
service charge will be made for any registration of transfer or exchange of Notes, but the Transfer Agent
may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Except in the limited circumstances described below, owners of beneficial interests in Global Certificates
will not be entitled to receive physical delivery of certificated Notes. The Notes are not issuable in bearer
form.
Class A1 Definitive Certificates
The Class A1 Notes initially sold or transferred in the United States to U.S. persons in reliance on Rule
144A of the Securities Act will be issued in the form of definitive physical certificates in fully registered
form only (each a "Class A1 Rule 144A Definitive Certificate"). The Class A1 Rule 144A Definitive
Certificates will be offered in the United States only to persons who are both (i) Qualified Institutional
Buyers in reliance on the exemption from registration provided by Section 4(2) of the Securities Act and
(ii) Qualified Purchasers. Transfers of Class A1 Rule 144A Definitive Certificates may only be effected
by delivery to the Trustee and the Issuer of the required written certifications from the proposed
transferee regarding compliance with applicable transfer restrictions. See "Transfer Restrictions".
The Trust Deed permits the Issuer to demand that the holder of a Class A1 Rule 144A Definitive
Certificate who is determined not to have been either (i) a non U.S. person or (ii) a QIB/QP at the time of
acquisition of such Class A1 Rule 144A Definitive Certificate, as applicable or any interest therein sell
such Note to a subsequent holder permitted under the Trust Deed and, if the holder does not comply
with such demand within 20 Business Days thereof, the Issuer may sell such holder's interest in the
Class A1 Rule 144A Definitive Certificate, on such terms as the Issuer may accept.
The Class A1 Notes initially sold to persons who are not U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act will be issued in the form of definitive physical
certificates in fully registered form only (each a "Class A1 Regulation S Definitive Certificate").
Transfers of Class A1 Regulation S Definitive Certificates may be effected by delivery to the Trustee and
the Issuer of the required written certifications from the proposed transferee regarding compliance with
applicable transfer restrictions. See "Transfer Restrictions".
The Class A1 Rule 144A Definitive Certificates and the Class A1 Regulation S Definitive Certificates are
herein referred to as the "Class A1 Definitive Certificates".
Subject to the restrictions on transfer set forth in the Trust Deed and the Class A1 Definitive Certificates,
holders of the Class A1 Definitive Certificates may transfer or exchange such Class A1 Notes in whole
or in part (in an aggregate principal amount equal to any authorised denomination) by surrendering such
Class A1 Notes at the specified office of the Transfer Agent, together with an executed instrument of
assignment and an investor certificate substantially in the form set out in the Trust Deed. In exchange
for any Class A1 Definitive Certificates properly presented for transfer with all necessary accompanying
documentation, the Transfer Agent will, within five Business Days of such request if made at the
specified office of the Transfer Agent, or within 10 Business Days if made at the office of a transfer
agent, deliver at the specified office of the Transfer Agent, to the transferee or send by first class mail at
the risk of the transferee to such address as the transferee may request, a Definitive Class A1 Note for a
like aggregate principal amount of Class A1 Notes as may be requested. The presentation for transfer of
any Class A1 Definitive Certificates will not be valid unless made at the specified office of the Transfer
Agent by the registered holder in person or by a duly authorised attorney in fact. The holder of a Class
A1 Note will not be required to bear the costs and expenses of effecting any transfer or registration of
transfer, except that the relevant holder will be required to bear (i) the expenses of delivery by other than
regular mail (if any) and (ii) if the Issuer so requires, the payment of a sum sufficient to cover any duty,
stamp tax or governmental charge or insurance charges that may be imposed in relation thereto.
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Amendments to Terms and Conditions
Each Global Certificate contains provisions that apply to the Notes that they represent, some of which
modify the effect of the Conditions in definitive form (See "Conditions of the Notes"). The following is a
summary of those provisions:
• Payments
Payments of principal and interest in respect of Notes represented by a Global Certificate will
be made against presentation and, if no further payment falls to be made in respect of the
relevant Notes, surrender of such Global Certificate to or to the order of the Principal Paying
Agent or such other Agent as shall have been notified to the relevant Noteholders for such
purpose. On each occasion on which a payment of interest (unless the Notes represented
thereby do not bear interest) or principal is made in respect of the relevant Global Certificate,
the Registrar shall note the same in the Register and cause the aggregate principal amount of
the Notes represented by a Global Certificate to be decreased accordingly.
• Notices
So long as any Notes are represented by a Global Certificate and such Global Certificate is
held on behalf of a clearing system, notices to Noteholders may be given by delivery of the
relevant notice to that clearing system for communication by it to entitled account holders in
substitution for delivery thereof as required by the Conditions provided that such notice is also
made to the Company Announcement Office of the Irish Stock Exchange for so long as such
Notes are listed on the Irish Stock Exchange and the rules of the Irish Stock Exchange so
require. Any such notice shall be deemed to have been given on the date of delivery to such
clearing system.
• Prescription
Claims against the Issuer in respect of principal and interest on the Notes while the Notes are
represented by a Global Certificate will become void unless presented for payment within a
period of ten years (in the case of principal) and five years (in the case of interest) from the
date on which any payment first becomes due.
• Meetings
The holder of each Global Certificate will be treated as being two persons for the purposes of
any quorum requirements of, or the right to demand a poll at, a meeting of Noteholders and, at
any such meeting, as having one vote in respect of each €1,000 of original principal amount of
Notes for which the relevant Global Certificate may be exchanged.
• Trustee's Powers
In considering the interests of Noteholders while the Global Certificates are held on behalf of a
clearing system, the Trustee may have regard to any information provided to it by such clearing
system or its operator as to the identity (either individually or by category) of its account holders
with entitlements to each Global Certificate and may consider such interests as if such account
holders were the holders of any Global Certificate.
• Cancellation
Cancellation of any Note required by the Conditions to be cancelled will be effected by
reduction in the principal amount of the Notes on the Register, with a corresponding notation
made on the applicable Global Certificate.
• Class F Subordinated Noteholders' Optional Redemption
The Class F Subordinated Noteholders'option in Condition 7(b)(i) (Redemption at the Option of
the Class F Subordinated Noteholders) may be exercised by the holder of any Global
Certificate representing Class F Subordinated Notes giving notice to the Registrar of the
principal amount of Class F Subordinated Notes in respect of which the option is exercised and
presenting such certificate for endorsement of exercise within the time limit specified in
Condition 7(b)(ii) (Terms and Conditions of Redemption at the Option of the Class F
Subordinated Noteholders).
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Exchange of Global Certificates for Definitive Certificates
Exchange
Each Global Certificate will be exchangeable, free of charge to the holder, on or after its Definitive
Exchange Date (as defined below), in whole but not in part, for Definitive Certificates if the Rule 144A
Global Certificate is held (directly or indirectly) on behalf of DTC, or in the case of the Regulation S
Global Certificate, Euroclear, Clearstream, Luxembourg or an alternative clearing system and any such
clearing system is closed for business for a continuous period of 14 days (other than by reason of
holiday, statutory or otherwise) or announces its intention to permanently cease business or does in fact
do so.
The Registrar will not register the transfer of, or exchange of interests in, a Global Certificate for
Definitive Certificates for a period of 15 calendar days before the date for any payment of principal or
interest in respect of the Notes.
If only one of the Global Certificates (the "Exchanged Global Certificate") becomes exchangeable for
Definitive Certificates in accordance with the above paragraphs, transfers of Notes may not take place
between, on the one hand, persons holding Definitive Certificates issued in exchange for beneficial
interests in the Exchanged Global Certificate and, on the other hand, persons wishing to purchase
beneficial interests in the other Global Certificate.
"Definitive Exchange Date" means a day falling not less than 30 days after that on which the notice
requiring exchange is given and on which banks are open for business in the city in which the specified
office of the Registrar is located and in the cities in which DTC or the relevant alternative clearing
system are located.
Delivery
In such circumstances, the relevant Global Certificate shall be exchanged in full for Definitive
Certificates and the Issuer will, at the cost of the Issuer (but against such indemnity as the Registrar or
any relevant Transfer Agent may require in respect of any tax or other duty of whatever nature which
may be levied or imposed in connection with such exchange), cause sufficient Definitive Certificates to
be executed and delivered to the Registrar or Transfer Agent for completion, authentication and
dispatch to the relevant Noteholders. A person having an interest in a Global Certificate must provide
the Registrar or Transfer Agent with (a) a written order containing instructions and such other
information as the Issuer and the Registrar or Transfer Agent may require to complete, execute and
deliver such Certificates and (b) in the case of the Rule 144A Global Certificate only, a fully completed,
signed certification substantially to the effect that the exchanging holder is not transferring its interest at
the time of such exchange or, in the case of simultaneous sale pursuant to Rule 144A, a certification
that the transfer is being made in compliance with the provisions of Rule 144A. Definitive Certificates
issued in exchange for a beneficial interest in the Rule 144A Global Certificate shall bear the legends
applicable to transfers pursuant to Rule 144A, as set out under "Transfer Restrictions" below.
Legends
The holder of a Definitive Certificate may transfer the Notes represented thereby in whole or in part in
the applicable Authorised Denomination by surrendering it at the specified office of the Registrar,
together with the completed form of transfer thereon. Upon specific request for removal of the legend
referred to under "Transfer Restrictions" below on a Definitive Certificate, the Issuer will deliver only
Definitive Certificates that bear such legend, or will refuse to remove such legend, as the case may be,
unless there is delivered to the Issuer and the Registrar such satisfactory evidence, which may include
an opinion of counsel, as may reasonably be required by the Issuer that neither the legend nor the
restrictions on transfer set out therein are required to ensure compliance with the provisions of the
Securities Act, the Investment Company Act or Rule 144A.
Exchange of Class P Combination Notes
So long as the Class P Combination Notes remain Outstanding, exchanges of Class P Combination
Notes, in whole or in part, for the Class P OAT Strips or Class F Subordinated Notes represented
thereby may be made, and shall only be made, as follows:
(a)
A holder of a beneficial interest in a Class P Combination Notes represented by a Regulation S
or Rule 144A Global Certificate may exchange such interest for interests in the Regulation S or
Rule 144A (as the case may be) Global Certificates of the Class F Subordinated Notes
represented by the Class F Subordinated Component of such Class P Combination Notes or
for interest in Class P OAT Strips represented by the Class P OAT Security Component of such
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Class P Combination Notes (each an "Exchange Class") by delivering to the Registrar
instructions to so exchange the interest. Upon receipt by the Issuer and the Registrar of (A)
such holder's interest in that Class P Combination Notes and (B) exchange instructions I a
certificate in the form specified in the Trust Deed given by the holder of such beneficial interest,
the Registrar shall cause the principal amount of the Rule 144A or Regulation S (as the case
may be) Global Certificate representing the Class P Combination Notes to be reduced by the
principal amount exchanged (and the holder's Euroclear or Clearstream, Luxembourg or DTC
account to be debited accordingly) and each Rule 144A or Regulation S (as the case may be)
Global Certificate representing the Class F Subordinated Notes issued in exchange for the
Class F Subordinated Component to be increased by the principal amount of the related Class
F Subordinated Component exchanged (and the holder's Euroclear or Clearstream,
Luxembourg or DTC account to be credited accordingly).
(b)
(c)
(d)
(e)
A holder of a beneficial interest in a Class P Combination Notes represented by a Definitive
Certificate may exchange such interest for interests in the Class F Subordinated Notes
representing the Class F Subordinated Component of such Class P Combination Notes or for
interests in Class P OAT Strips representing the Class P OAT Security Component of such
Class P Combination Notes (each an "Exchange Class" by delivering to the Registrar
instructions to so exchange the interest. Upon receipt by the Issuer and the Registrar of (A)
such holder's Definitive Certificate properly endorsed for such exchange and (B) exchange
instructions in a certificate in the form specified in the Trust Deed given by the holder of such
Definitive Certificate, the Registrar shall (A) cancel such Definitive Certificate, (B) authenticate
and deliver to the holder a Definitive Certificate of the Class F Subordinated Note of the
Exchange Class in the same principal amount as the Class F Subordinated Component of the
Definitive Certificate surrendered for exchange and notify the Investment Manager and the
Trustee to arrange delivery of Class P OAT Strips in the same principal amount as the Class P
OAT Security Component of the Definitive Note, registered in the same name as the Definitive
Certificate surrendered for exchange, and (C) record the transfer of the Class F Subordinated
Notes in the Register and record the transfer of Class P OAT Strips in its records.
Any exchange of an interest in a Class P Combination Notes for interests in Class F
Subordinated Notes constituting the Class F Subordinated Component of such Class P
Combination Notes as described above shall be subject to the interests in the Class F
Subordinated Notes being equal to the applicable Minimum Denomination and integral
multiples of the applicable Authorised Integral Amounts thereof.
If any exchange pursuant to paragraph (b) occurs prior to the Record Date for the first Payment
Date, the Registrar shall deliver to the related Noteholder a letter in the form specified in the
Trust Deed evidencing the right to receive the payment, if any. Such right shall not be
transferable, and the letter evidencing the right shall so state.
The Combination Notes are, for the purposes of transfer, a separate Class of Notes and the
Components are not separately transferable. A holder may exchange all or a portion of its
Combination Notes for proportional interests in the Classes of Notes to which the Components
of each Combination Note correspond, as described in Condition 2(i) (Exchange of Class P
Combination Notes).
Exchange of Class A1 Definitive Certificates
The Class A1 Definitive Certificates will be exchangeable for Class A1 Notes in global form in the
circumstances specified in Condition 2(j) (Exchange of Class A1 Notes).
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BOOK-ENTRY CLEARANCE PROCEDURES
The information set out below has been obtained from sources that the Issuer believes to be reliable,
but prospective investors are advised to make their own enquiries as to such procedures. In particular,
such information is subject to any change in or interpretation of the rules, regulations and procedures of
DTC, Euroclear or Clearstream, Luxembourg (together, the "Clearing Systems") currently in effect and
investors wishing to use the facilities of any of the Clearing Systems are therefore advised to confirm the
continued applicability of the rules, regulations and procedures of the relevant Clearing System. None
of the Issuer, the Trustee, the Initial Purchaser or any Agent party to the Agency Agreement (or any
Affiliate of any of the above, or any person by whom any of the above is controlled for the purposes of
the Securities Act), will have any responsibility for the performance by the Clearing Systems or their
respective direct or indirect participants or accountholders of their respective obligations under the rules
and procedures governing their operations or for the sufficiency for any purpose of the arrangements
described below.
For the purposes of this section of the Prospectus, references below to Notes and to Global Certificates
and the Definitive Certificates representing such Notes are to each respective Class of Notes except as
otherwise indicated.
1. Euroclear, Clearstream, Luxembourg and DTC
Custodial and depositary links have been established between Euroclear and Clearstream, Luxembourg
and DTC to facilitate the initial issue of the Notes and cross market transfers of the Notes associated
with secondary market trading. (See "Settlement and Transfer of Notes" below).
(a)
Euroclear and Clearstream, Luxembourg
Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the
clearance and settlement of securities transactions through electronic book entry transfer between their
respective accountholders. Indirect access to Euroclear and Clearstream, Luxembourg is available to
other institutions which clear through or maintain a custodial relationship with an accountholder of either
system. Euroclear and Clearstream, Luxembourg provide various services including safekeeping,
administration, clearance and settlement of internationally traded securities and securities lending and
borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in
several countries through established depositary and custodial relationships. Euroclear and
Clearstream, Luxembourg have established an electronic bridge between their two systems across
which their respective customers may settle trades with each other. Their customers are worldwide
financial institutions including underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations. Investors may hold their interests in such Global Certificates directly through
Euroclear or Clearstream, Luxembourg if they are accountholders ("Direct Participants") or indirectly
("Indirect Participants" and together with Direct Participants, "Participants") through organisations
which are accountholders therein.
(b)
DTC
DTC has advised the Issuer as follows: DTC is a limited purpose trust company organised under the
laws of the State of New York, a "banking organization" under the laws of the State of New York, a
member of the U.S. Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between Participants through electronic
computerised book entry changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organisations. Indirect access to DTC is available to
others, such as banks, securities brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a DTC direct participant, either directly or indirectly.
DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes only at
the direction of one or more Direct Participants and only in respect of such portion of the aggregate
principal amount of the relevant Rule 144A Global Certificates as to which such participant or
participants has or have given such direction. However, in the circumstances described under "Form of
the Notes — Exchange for Definitive Certificates" above, DTC will surrender the relevant Rule 144A
Global Certificates for exchange for individual Definitive Certificates (which will bear the legend
applicable to transfers pursuant to Rule 144A).
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2. Book Entry Ownership
(a)
Euroclear and Clearstream, Luxembourg
Each Regulation S Global Certificate will have an ISIN and a Common Code and will be registered in
the name of BT Globenet Nominees Limited as nominee for Deutsche Bank AG, London Branch as
common depositary on behalf of Euroclear and Clearstream, Luxembourg.
(b)
DTC
Each Rule 144A Global Certificate will have a CUSIP number and will be deposited with Deutsche Bank
Trust Company Americas of 1761 East St. Andrew Place, Santa Ana, California 92705, United States as
custodian (the "DTC Custodian") for and registered in the name of Cede & Co, as nominee of DTC.
The DTC Custodian and DTC will electronically record the principal amount of the Notes held within the
DTC System.
3. Relationship of Participants with Clearing Systems
Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the holder
of a Note represented by a Global Certificate must look solely to Euroclear, Clearstream, Luxembourg or
DTC (as the case may be) for his share of each payment made by the Issuer to the holder of such
Global Certificate and in relation to all other rights arising under the Global Certificate, subject to and in
accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or DTC
(as the case may be). The Issuer expects that, upon receipt of any payment in respect of Notes
represented by a Global Certificate, the common depository by whom such Note is held, or nominee in
whose name it is registered, will (save as provided below in respect of the Rule 144A Global
Certificates) immediately credit the relevant participants'or accountholders'accounts in the relevant
Clearing System with payments in amounts proportionate to their respective beneficial interests in the
principal amount of the relevant Global Certificate as shown in the records of the relevant Clearing
System or its nominee. The Issuer also expects that payments by Direct Participants in any Clearing
System to owners of beneficial interests in any Global Certificate held through such Direct Participants
in any Clearing System will be governed by standing instructions and customary practices. Save as
aforesaid, such persons shall have no claim directly against the Issuer in respect of payments due on
the Notes for so long as the Notes are represented by such Global Certificate and the obligations of the
Issuer will be discharged by payment to the registered holder, as the case may be, of such Global
Certificate in respect of each amount so paid. None of the Issuer, the Trustee or any Agent will have any
responsibility or liability for any aspect of the records relating to or payments made on account of
ownership interests in any Global Certificate or for maintaining, supervising or reviewing any records
relating to such ownership interests.
4. Settlement and Transfer of Notes
Subject to the rules and procedures of each applicable Clearing System, purchases of Notes held within
a Clearing System must be made by or through Direct Participants, which will receive a credit for such
Notes on the Clearing System's records. The ownership interest of each actual purchaser of each such
Note (the "Beneficial Owner") will in turn be recorded on the Direct Participant's and Indirect
Participant's records. Beneficial Owners will not receive written confirmation from any Clearing System
of their purchase, but Beneficial Owners are expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings, from the Direct Participant or Indirect
Participant through which such Beneficial Owner entered into the transaction. Transfers of ownership
interests in Notes held within the Clearing System will be effected by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in such Notes, unless and until, interests in any Global Certificate
held within a Clearing System is exchanged for Definitive Certificates.
No Clearing System has knowledge of the actual Beneficial Owners of the Notes held within such
Clearing Systems and their records will reflect only the identity of the Direct Participants to whose
accounts such Notes are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of
notices and other communications by the Clearing Systems to Direct Participants, by Direct Participants
to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory requirements as may be
in effect from time to time.
The laws of some states in the United States require that certain persons take physical delivery in
definitive form of securities. Consequently, the ability to transfer interests in a Global Certificate to such
persons may be limited. As DTC can only act on behalf of participants, who in turn act on behalf of
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indirect participants, the ability of a person having an interest in a Rule 144A Global Certificate to pledge
such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect of
such interest, may be affected by a lack of a physical certificate in respect of such interest.
Trading between Euroclear and/or Clearstream, Luxembourg Participants
Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream,
Luxembourg to purchasers of book-entry interests in the Notes held through Euroclear or Clearstream,
Luxembourg will be conducted in accordance with the normal rules and operating procedures of
Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to
conventional Eurobonds.
Trading between DTC Participants
Secondary market sales of book-entry interests in the Notes between DTC participants will occur in the
ordinary way in accordance with DTC rules and will be settled using the procedures applicable to United
States corporate debt obligations in DTC's Same-Day Funds Settlement ("SDFS") system in same-day
funds, if payment is effected in Dollars, or free of payment, if payment is not effected in Dollars. Where
payment is not effected in Dollars, separate payment arrangements outside DTC are required to be
made between the DTC participants.
Trading between DTC seller and Euroclear/Clearstream, Luxembourg purchaser
When book-entry interests in Notes are to be transferred from the account of a DTC participant holding
a beneficial interest in a Rule 144A Global Certificate to the account of a Euroclear or Clearstream,
Luxembourg accountholder wishing to purchase a beneficial interest in a Regulation S Global Certificate
(subject to the certification procedures provided in the Agency Agreement), the DTC participant will
deliver instructions for delivery to the relevant Euroclear or Clearstream, Luxembourg accountholder to
DTC by 12 noon, New York time, on the settlement date. Separate payment arrangements are required
to be made between the DTC participant and the relevant Euroclear or Clearstream, Luxembourg
participant. On the settlement date, the custodian of the Rule 144A Global Certificate will instruct the
Registrar to (i) decrease the amount of Notes registered in the name of the nominee of DTC and
evidenced by the Rule 144A Global Certificate of the relevant Class and (ii) increase the amount of
Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream,
Luxembourg and evidenced by the Regulation S Global Certificate. Book-entry interests will be delivered
free of payment to Euroclear or Clearstream, Luxembourg, as the case may be, for credit to the relevant
accountholder on the first business day following the settlement date.
Trading between Euroclear/Clearstream, Luxembourg seller and DTC purchaser
When book-entry interests in the Notes are to be transferred from the account of a Euroclear or
Clearstream, Luxembourg accountholder to the account of a DTC participant wishing to purchase a
beneficial interest in the Rule 144A Global Certificate (subject to the certification procedures provided in
the Agency Agreement), the Euroclear or Clearstream, Luxembourg participant must send to Euroclear
or Clearstream, Luxembourg delivery free of payment instructions by 7.45 p.m., Brussels or
Luxembourg time, one business day prior to the settlement date. Euroclear or Clearstream,
Luxembourg, as the case may be, will in turn transmit appropriate instructions to the common depository
for Euroclear and Clearstream, Luxembourg and the Registrar to arrange delivery to the DTC participant
on the settlement date. Separate payment arrangements are required to be made between the DTC
participant and the relevant Euroclear or Clearstream, Luxembourg accountholder, as the case may be.
On the settlement date, the common depository for Euroclear and Clearstream, Luxembourg will (a)
transmit appropriate instructions to the custodian of the Rule 144A Global Certificate who will in turn
deliver such book-entry interests in the Notes free of payment to the relevant account of the DTC
participant and (b) instruct the Registrar to (i) decrease the amount of Notes registered in the name of
the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by
the Regulation S Global Certificate and (ii) increase the amount of Notes registered in the name of the
nominee of DTC and evidenced by the Rule 144A Global Certificate.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of beneficial interests in Global Certificates among participants and
accountholders of DTC, Clearstream, Luxembourg and Euroclear, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be discontinued at any
time. None of the Issuer, the Trustee, the Custodian or any Agent will have any responsibility for the
performance by DTC, Clearstream, Luxembourg or Euroclear or their respective Direct or Indirect
Participants of their respective obligations under the rules and procedures governing their operations.
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Pre-issue Trades Settlement
It is expected that delivery of Notes will be made against payment therefor on the Issue Date thereof,
which could be more than three business days following the date of pricing. Under Rule 15c6-1 of the
U.S. Securities and Exchange Commission under the Exchange Act, trades in the United States
secondary market generally are required to settle within three business days ("T+3"), unless the parties
to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Notes in the
United States on the date of pricing or the next succeeding Business Days until three days prior to the
relevant Issue Date will be required, by virtue of the fact the Notes initially will settle beyond T+3, to
specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement.
Settlement procedures in other countries will vary. Purchasers of Notes may be affected by such local
settlement practices and purchasers of Notes who wish to trade Notes between the date of pricing and
the relevant Issue Date should consult their own adviser.
5. Currency of Payments in respect of the Rule 144A Notes
Subject to the following paragraph, while interests in the Rule 144A Notes are held by a nominee for
DTC, all payments in respect of such Rule 144A Notes will be made in Dollars. As determined by the
Exchange Agent under the terms of the Agency Agreement, the amount of Dollars payable in respect of
any particular payment under the Rule 144A Notes will be equal to the amount of Euros otherwise
payable exchanged into Dollars at the Euro/U.S. Dollar rate of exchange prevailing as at 11.00 a.m.
(New York City time) on the day which is two New York Business Days prior to the relevant payment
date, less any costs incurred by the Exchange Agent for such conversion (to be shared Pro Rata among
the holders of the Rule 144A Notes accepting U.S. Dollar payments in proportion to their respective
holdings), all as set out in more detail in the Agency Agreement.
Notwithstanding the above, the holder of an interest through DTC in a Rule 144A Note may make
application to DTC to have a payment or payments under such Rule 144A Notes made in Euros by
notifying the DTC participant through which its book entry interest in the Rule 144A Global Certificate is
held on or prior to the record date of (a) such investor’s election to receive payment in Euros, and (b)
wire transfer instructions to an account entitled to receive the relevant payment. Such DTC participant
must notify DTC of such election and wire transfer instructions on or prior to the third New York
Business Day after the record date for any payment of interest and on or prior to the twelfth New York
Business Day prior to the payment of principal. DTC will notify the Registrar of such election and wire
transfer instructions on or prior to the fifth New York Business Day after the record date for any payment
of interest and on or prior to the tenth New York Business Day prior to the payment of principal. If
complete instructions are received by the DTC participant and forwarded by the DTC participant to DTC
and by DTC to the Registrar on or prior to such date, such investor will receive payments in Euros,
otherwise only U.S. Dollar payments will be made by the Principal Paying Agent. All costs of such
payment by wire transfer will be borne by holders of book entry interests receiving such payments by
deduction from such payments.
In this paragraph "New York Business Day" means any day on which commercial banks and foreign
exchange markets settle payments in New York City.
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RATINGS OF THE NOTES
It is a condition of the issue and sale of the Notes, that the Notes (except for the Class F Subordinated
Notes) be issued with at least the following ratings: the Class A1 Notes: "AAA" from S&P and "Aaa" from
Moody’s; the Class A2 Notes: "AAA" from S&P and "Aaa" from Moody’s; the Class A3 Notes: "AAA"
from S&P and "Aaa" from Moody’s; the Class B Notes: "AA" from S&P and "Aa2" from Moody’s; the
Class C Notes: "A" from S&P and "A2" from Moody's; the Class D Notes: "BBB" from S&P and "Baa3"
from Moody's; the Class E Notes: "BB" from S&P and "Ba3" from Moody's; the Class P Combination
Notes: "Aaa" from Moody's. The Class F Subordinated Notes being offered hereby will not be rated.
The ratings assigned by S&P to the Class A Notes address the timely payment of interest and the
ultimate payment of principal. The ratings assigned by S&P to the Class B Notes, Class C Notes, Class
D Notes and Class E Notes address the ultimate payment of principal and interest. The ratings by
Moody’s addresses the expected loss posed to investors by the Maturity Date. The ratings assigned to
Class P Combination Notes by Moody's address the ultimate repayment of the Rated Balance in respect
of such Notes, as further described below.
S&P Ratings
S&P will rate the Notes in a manner similar to the manner in which it rates other structured issues. This
requires an analysis of the following:
(a)
(b)
(c)
the credit quality of the portfolio of Collateral Debt Obligations securing the Notes;
the cash flow used to pay liabilities and the priorities of these payments; and
legal considerations.
Based on these analyses, S&P determines the necessary level of credit enhancement needed to
achieve a desired rating. In this connection, the CDO Monitor Test is applied on and from the Effective
Date up to expiry of the Reinvestment Period.
S&P’s analysis includes the application of its proprietary default expectation computer model (the "S&P
CDO Monitor"), which is used to estimate the default rate S&P projects the Portfolio is likely to
experience and which will be provided to the Investment Manager on or before the Effective Date. The
S&P CDO Monitor calculates the cumulative default rate of a pool of Collateral Debt Obligations and
Eligible Investments consistent with a specified benchmark rating level based upon S&P’s proprietary
corporate debt default studies. The S&P CDO Monitor takes into consideration the rating of each
Obligor, the number of Obligors, the Obligor industry concentration and the remaining weighted average
maturity of each of the Collateral Debt Obligations included in the Portfolio. The risks posed by these
variables are accounted for by effectively adjusting the necessary default level needed to achieve a
desired rating. The higher the desired rating, the higher the level of defaults the Portfolio must withstand.
For example, the higher the Obligor industry concentration or the longer the weighted average maturity,
the higher the default level is assumed to be.
Credit enhancement to support a particular rating is then provided taking into account the results of the
S&P CDO Monitor, as well as other more qualitative considerations such as legal issues and
management capabilities. Credit enhancement is typically provided by a combination of overcollateralisation/subordination,
cash collateral/reserve account, excess spread/interest and amortisation.
A cash flow model (the "Transaction-Specific Cash Flow Model") prepared by the seller or adviser is
used to evaluate the portfolio and determine whether it can comfortably withstand the estimated level of
default while fully repaying the class of debt under consideration.
There can be no assurance that actual losses on the Collateral Debt Obligations will not exceed those
assumed in the application of the S&P CDO Monitor or that recovery rates and the timing of recovery
with respect thereto will not differ from those assumed in the Transaction-Specific Cash Flow Model.
None of S&P, the Issuer, the Investment Manager, the Collateral Administrator, the Trustee or the Initial
Purchaser makes any representation as to the expected rate of defaults on the Portfolio or as to the
expected timing of any defaults that may occur.
S&P’s ratings of the Notes will be established under various assumptions and scenario analyses. There
can be no assurance that actual defaults on the Collateral Debt Obligations will not exceed those
assumed by S&P in its analysis, or that recovery rates with respect thereto (and, consequently, loss
rates) will not differ from those assumed by S&P.
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Moody’s Ratings
The ratings assigned to the Notes by Moody’s are based upon its assessment of the probability that the
Collateral Debt Obligations will provide sufficient funds to pay each such Class of Notes, based largely
upon Moody’s statistical analysis of historical default rates on debt obligations with various ratings, the
asset and interest coverage required for the relevant Class of Notes (which is achieved through the
subordination of the Class F Subordinated Notes and, in the case of the Class A Notes, subordination of
the other Classes of Notes, in the case of the Class B Notes, subordination of the Class C Notes, the
Class D Notes, the Class E Notes and the Class F Subordinated Notes, in the case of the Class C
Notes, subordination of the Class D Notes, the Class E Notes and the Class F Subordinated Notes, in
the case of the Class D Notes, subordination of the Class E Notes and the Class F Subordinated Notes
and in the case of the Class E Notes, subordination of the Class F Subordinated Notes and, in each
case, the diversification requirements that the Collateral Debt Obligations are required to satisfy.
The ratings on the Class P Combination Notes address the ultimate repayment of the Rated Balance in
respect of such Notes.
"Rated Balance" means, in relation to the Combination Notes, the greater of (i) zero and (ii) the notional
balance representing the initial principal amount of such Class on the Issue Date, less the aggregate of
all payments (whether of interest or principal) made in respect of such Class on each Payment Date.
Moody’s ratings address the expected loss posed to investors by the Maturity Date. Moody’s analyses
the likelihood that each Collateral Debt Obligation will default, based on historical default rates for similar
debt obligations, the historical volatility of such default rates (which increases as securities with lower
ratings are added to the portfolio) and an additional default assumption to account for future fluctuations
in defaults. Moody’s then determines the level of credit protection necessary to achieve the expected
loss associated with the rating of the structured securities, taking into account the expected volatility of
the default rate of the portfolio based on the level of diversification by region, issuer and industry.
In addition to these quantitative tests, Moody’s ratings take into account qualitative features of a
transaction, including the experience of the Investment Manager, the legal structure and the risks
associated with such structure and other factors that they deem relevant.
In addition, a portion of the Collateral Debt Obligations may not be rated by Moody’s but will be assigned
a rating pursuant to the methodology described herein.
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THE ISSUER
General
The Issuer was incorporated on 20 April 2006 in The Netherlands as a private limited liability company
(Besloten vennootschap met Beperkte aansprakelijkheid) with unlimited duration, and is registered
under number 34246810 and under the name OCI Euro Fund I B.V.
The Issuer has not previously carried on any business or activities other than those incidental to its
incorporation, the acquisition of the Portfolio, the authorisation and issue of the Notes and activities
incidental to the exercise of its rights and compliance with its obligations under the Notes, the
Subscription Agreement, the Agency Agreement, the Trust Deed, the Investment Management
Agreement, the Management Agreement, each Asset Swap Agreement and the other documents and
agreements entered into in connection with the issue of the Notes and the purchase of the Portfolio.
The registered office of the Issuer is at Herengracht 450, 1017 CA Amsterdam, The Netherlands. The
authorised share capital of the Issuer is EUR 90,000 divided into 900 ordinary shares of EUR 100 each
(the "Issuer Shares"). The Issuer has issued 180 Issuer Shares all of which are fully paid. The Issuer
Shares are held directly by Stichting OCI Euro Fund. The telephone number of the Issuer at its
registered office is +31 (0)20 555 4466.
Corporate Purpose of the Issuer
The Issuer has been established as a special purpose vehicle for the purpose of issuing the Notes. The
principal activities of the Issuer are the issuance of financial instruments, the acquisition of financial
assets and the entering into of other legally binding arrangements.
Capitalisation
The following table sets out the capitalisation of the Issuer as at the date hereof, adjusted to reflect the
issue of the Notes:
Share Capital
Issued and fully paid 180 ordinary registered shares of €100 each €18,000
Indebtedness
Class A1 Notes €52,500,000
Class A2 Notes €145,000,000
Class A3 Notes €49,500,000
Class B Notes €21,000,000
Class C Notes €21,000,000
Class D Notes €19,000,000
Class E Notes €22,000,000
Class F Subordinated Notes €26,500,000
Total Capitalisation €356,518,000
Save as disclosed herein, there has been no significant change in the financial or trading position of the
Issuer, and no material adverse change in the financial position or prospects of the Issuer, since the
date of its incorporation. As at the date of this Prospectus, the Issuer has no borrowings or indebtedness
in the nature of borrowings (including loan capital issued or created but unissued), term loans, liabilities
under acceptances or acceptance credits, mortgages, charges or guarantees or other contingent
liabilities, other than disclosed as above.
Administration
Deutsche International Trust Company N.V. is the administrator of the Issuer. Its duties include the
provision of certain administrative, accounting and related services. The appointment of the
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administrator may be terminated forthwith if the administrator is unable to pay its debts as they fall due
or becomes subject to insolvency or other related proceedings. The administrator may retire upon 180
days’ written notice subject to the appointment of an alternative administrator on similar terms to the
existing administrator. The business address of the administrator is at Herengracht 450, 1017 CA,
Amsterdam, The Netherlands.
Managing Director
The Managing Director of the Issuer and its business occupations is as follows:
Managing Director
Deutsche International Trust Company N.V.
Principal outside activities
Administrator
The Managing Director will provide management, corporate and administrative services to the Issuer.
The business address of the Managing Director is Herengracht 450, 1017 CA, Amsterdam, The
Netherlands.
Holding Structure
The entire issued share capital of the Issuer is owned directly by Stichting OCI Euro Fund, a foundation
(stichting) established under the laws of The Netherlands having its registered office at Herengracht
450, 1017 CA, Amsterdam, The Netherlands (the "Foundation").
None of the Investment Manager, the Collateral Administrator, the Trustee or any company affiliated
with any of them, directly or indirectly, owns any of the share capital of the Issuer. Deutsche
International Trust Company N.V. is the sole director of the Foundation.
Pursuant to the terms of a management agreement dated on or about the Issue Date between the
Foundation and Deutsche International Trust Company N.V., measures will be put in place to limit and
regulate the control which the Foundation can exercise over the Issuer.
Business
Under the terms of the Trust Deed, the Issuer will not undertake any business other than the business
and activities in which it has already engaged (as set out above) and the issuance of Notes, the entry
into of other obligations and the entry into, and performance of, agreements and obligations relating to
such Notes and other obligations, in accordance with the Trust Deed, any Derivative Agreement and
any related agreements and will not have any subsidiaries nor declare any dividends without the
consent of the Trustee.
The Issuer has, and will have, no assets other than the Collateral.
Financial Statements
Since the date of the Issuer's incorporation no financial statements have been made up. Audited
financial statements will be prepared by the Issuer on an annual basis (financial year ending is 31
December). The first financial statements of the Issuer will be in respect of the period from incorporation
to 31 December 2007.
The Auditors of the Issuer are KPMG Accountants N.V. of Rijnzathe 14, 3454 PV De Meern who are
chartered accountants and are members of the Institute of Chartered Accountants in The Netherlands
(ICAI) and are qualified to practise as auditors in The Netherlands. KPMG Accountants N.V. were
appointed as auditors to the Issuer on 6 July 2007.
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THE INVESTMENT MANAGER
The information appearing herein has been prepared by the Investment Manager and has not been
independently verified by the Issuer or the Initial Purchaser. None of the Issuer or the Initial Purchaser
assume any responsibility for the accuracy, completeness or applicability of such information.
General
Octagon Credit Investors (UK) Ltd (the “Investment Manager”) will manage the Collateral Debt
Obligations and perform certain other reporting functions pursuant to the Investment Management
Agreement. The Investment Manager is a 100 per cent. owned subsidiary of Octagon Credit Investors,
LLC (“Octagon”) and is authorized and regulated by the Financial Services Authority ("FSA"). Octagon
will purchase up to Euro 2.6 million aggregate principal amount of the Class F Subordinated Notes on
the Issue Date. Octagon is not required to retain any of such Notes for any period of time.
Octagon and the Investment Manager currently manage approximately U.S.$3.9 billion in assets
comprised principally of bank loans and high yield bonds, for 12 active investment vehicles. Such
vehicles consist of seven arbitrage cash flow collateralised debt obligation vehicles ("CDOs") that invest
principally in U.S. assets, one loan trust that invests principally in U.S. assets subject to investment
parameters similar to those of an arbitrage cash flow CDO and that is currently being converted into a
new fund structure, one market value CDO that invests principally in U.S. assets, and one cashflow
CDO that is currently warehousing assets. The Investment Manager will manage assets owned by the
Issuer and is currently managing one other cashflow CDO that is warehousing assets similar to those
owned by the Issuer.
Octagon commenced activities in late 1994 as CHL High-Yield Advisors, a unit of Chemical Bank,
predecessor to JPMorgan Chase Bank, N.A. The unit was founded by James P. Ferguson, previously a
senior officer of Chemical Bank, and Andrew D. Gordon and was founded in order to build an asset
management business focused on loans and high-yield securities. In May of 1999, the unit was
reconstituted as Octagon Credit Investors, LLC, a Delaware limited liability company. Octagon is
managed by its Managing Members, who consist of James P. Ferguson, who is its Executive Managing
Member, and Andrew D. Gordon, and Michael B. Nechamkin. Octagon is majority owned by its
employees and minority-owned by certain other investors, including affiliates of JPMorgan Partners, the
global private equity investment affiliate and an indirect subsidiary of JPMorgan Chase, which affiliates
own approximately 18% of Octagon's equity. Octagon expects that JPMorgan Partners'ownership
interest is likely to decline over time and eventually be reduced to zero.
The Investment Manager was formed in 2006 as a private limited company incorporated in the UK and
named Octagon Credit Investors (UK) Ltd. James Ferguson and Patrick Steiner are the directors of the
Investment Manager. Its registered office is at No. 1 Liverpool Street, London, United Kingdom EC2M
7QD. Previously, Octagon invested in European assets directly or prior to 2004 through arrangements
with affiliates of JPMorgan Chase.
Biographies of Certain Key Individuals
Set forth below is information regarding certain persons who constitute certain key personnel of
Octagon, although such persons may not necessarily continue to be so employed during the entire term
of the Investment Management Agreement. See "Risk Factors — 4. Investment Manager" and "The
Investment Management Agreement — Termination of the Investment Management Agreement;
Resignation or Removal of the Investment Manager."
European Individuals
Patrick J. Steiner, Investment Manager. Mr. Steiner will serve as Investment Manager of Octagon's
European cash flow CDOs. He is a director of Octagon Credit Investors (UK) Ltd. Prior to joining
Octagon in June 2001, Mr Steiner was Director of JPMorgan Chase's European High Yield Research
Group, which he created in 1998. Mr. Steiner joined JPMorgan Chase from American Express/IDS'
investment department in Minneapolis where he covered the telecom, media and textile industries. Prior
to that, Mr. Steiner spent five years at a private equity boutique investing in international petrochemical
projects and U.S. domestic industrial companies, and three years as a corporate finance generalist at
Bankers Trust Company. Mr. Steiner holds a B.A. degree in Economics from Georgetown University,
and an M.B.A. degree from Columbia University. Mr. Steiner has received the Chartered Financial
Analyst (CFA) designation and holds the Investment Management Certificate (IMC).
Frederic Jourdren, Principal. Mr. Jourdren joined the Investment Manager in 2006 and follows
European credits in the consumer, retail media and healthcare sectors and participates in origination
activities involving sponsors and underwriters. Prior to joining Octagon, Mr. Jourdren spent two years at
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Intermediate Capital Managers Limited covering the consumer, retail, healthcare and media sectors.
Prior to that, Mr. Jourdren worked at ABN AMRO and JPMorgan Chase in their respective leverage
finance origination businesses in London. Previously, Mr. Jourdren was employed by Valeo in a
financial control function in Germany. Mr. Jourdren holds an M.B.A. degree from the University of South
Carolina and is a graduate of Ecole Superieure de Commerce de Clermont-Ferrand.
Vikram Lunavat, Associate. Mr. Lunavat joined the Investment Manager in 2006 and follows
European credits in the industrial manufacturing and capital goods sectors. Prior to joining Octagon, Mr.
Lunavat worked with Merrill Lynch Investment Managers in London as an Assistant Vice President,
where he covered the automotive, diversified industrial and basic resource sectors on the Investment
Grade Credit Research team for four years. Prior to that, Mr. Lunavat spent a year covering energy
related stocks the MLIM Natural Resources equity team. Mr. Lunavat holds a B.Eng. Engineering with
Business Finance degree from University College London (UK) and received the Chartered Financial
Analyst (CFA) designation in 2004. Mr. Lunavat also holds the Investment Management Certificate
(IMC).
Stephanie Iem, Analyst. Ms. Iem supports the investment team by researching and preparing writeups
for potential credit investments. Prior to joining Octagon, Ms Iem completed internships at Société
Généralé in Paris as a credit analyst in the Corporate and Investment Banking Group; at
PricewaterhouseCoopers in Paris as a financial auditor; at Siemens in Shanghai, China in financial
reporting, and at IBM in Paris in software sales. She holds a B.A. in International Management
specialising in Accounting and Finance from EPSCI in Paris, and a Masters degree in Strategy and
Management of International Business from ESSEC Business School in Paris.
Amber Nicole Ying, Collateral Administrator. Ms. Ying serves as a collateral administrator at the
Investment Manager where she is responsible for loan documentation and settlement, and other
administrative activities. Prior to joining Octagon, Ms. Ying worked as a Compliance Analyst Consultant
for JPMorgan Chase Bank, N.A. Ms. Ying holds a Juris Doctor from Indiana University School of Law -
Indianapolis and a B.A. in Psychology from the University of Michigan – Ann Arbor.
Key U.S. Individuals
James P. Ferguson, Executive Managing Member. Mr. Ferguson is the Executive Managing Member
of Octagon, which he founded in 1994, and is also a director of Octagon Credit Investors (UK) Ltd.
Previously, Mr. Ferguson was the Group Credit Officer for the Global Banking Division of Chemical
Bank. Prior to that, he held numerous relationship management positions at Manufacturers Hanover
Trust Co., most notably in acquisition finance. He holds a B.S.B.A. degree from Bucknell University.
Andrew Gordon, Senior Portfolio Manager. Mr. Gordon is a Managing Member of Octagon and
serves as the Senior Portfolio Manager of Octagon Investment Partners V. Ltd., Octagon Investment
Partners VI. Ltd., Octagon Investments Partners IX. Ltd., a loan trust, and a market value CDO. He
previously managed the loan and bond book for Octagon II. LLC, a market value CDO which has been
redeemed. Prior to joining Octagon, Mr. Gordon was a Managing Director of Chemical Securities, Inc.
and prior to that was a Vice President in the Acquisition Finance Division of Manufacturers Hanover
Trust. He graduated cum laude with a B.A. degree in Economics from Duke University.
Michael Nechamkin, Senior Portfolio Manager. Mr Nechamkin is a managing member of Octagon
and serves as the Senior Portfolio Manager of Octagon Investment Partners VII. Ltd., Octagon
Investment Partners VIII. Ltd., Octagon Investment Partners X. Ltd., and Hamlet II. Ltd. He previously
managed Octagon III and Octagon IV, two cash flow CLO's which have been redeemed. Prior to joining
Octagon, Mr. Nechamin was a Vice President and Senior Analyst in the High Yield Research Group at
BT Alex Brown. Prior to that he was the Convertible Securities Analyst at Mabon Securities and a
Financial Consultant at Merrill Lynch and Co. He holds a Bachelors and a Masters of Talmudic Law
from Ner Israel College and an M.B.A. degree from the University of Baltimore.
Brendan Miles, Principal. Mr. Miles joined Octagon in 2000. Mr. Miles'coverage areas included the
middle market, stressed and distressed issuers and issuers in the automobile, defense and aerospace
industries. Prior to joining Octagon, Mr. Miles was a Vice President and Director of Citigroup in New
York and Hong Kong where he specialised in leveraged finance, corporate debt restructuring and loan
syndications. Most recently, Mr. Miles was the head of distressed asset sales from Citibank's North
American Credit Card business where he managed a U.S. $15 billion portfolio of consumer loan chargeoffs.
Prior to joining Citigroup, Mr. Miles was a U.S. Army Officer. Mr. Miles holds an M.B.A. degree
from the Darden School of Business Administration, University of Virginia and a B.S. degree from the
United States Military Academy, West Point, NY.
Mark W. Bodie, Principal. Mr. Bodie joined Octagon in 1998. Mr. Bodie's coverage areas include the
services, metals and mining, power and utilities, and oil and gas industries. Prior to joining Octagon, Mr.
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Bodie worked in The Chase Manhattan Bank's Global Investment Banking Group. Prior to joining
Chase, Mr. Bodie worked as a Trading Assistant at Eaton Vance Management. Mr. Bodie holds a B.S.
degree and an M.S. degree in Finance from Boston College. Mr. Bodie received the Chartered
Financial Analyst (CFA) designation in 1998.
Matthew Lee, Principal. Mr. Lee joined Octagon in 1998. Mr. Lee's coverage areas include the
telecommunications, cable, satellite, broadcasting and publishing industries. Prior to joining Octagon,
Mr Lee worked in Chase Securities, Inc.'s Latin America Debt Capital Markets Group. Before joining
Chase, Mr. Lee worked at MetLife analysing Emerging Markets and Project Finance Debt. Mr. Lee
holds a B.A. degree in Economics International Relations and Psychology from the University of
Pennsylvania. Mr. Lee received the Chartered Financial Analyst (CFA) designation in 2000.
Gretchen M. Mohr, Principal. Ms. Mohr joined Octagon in 1999. Ms Mohr's coverage areas include
the gaming, lodging, real estate and home building, forest products, and packaging industries. Prior to
joining Octagon, Ms. Mohr attended Babson College from which she graduated summa cum laude and
holds a B.S. degree in Investments.
Lauren M. Basmadjian, Associate. Ms. Basmadjian joined Octagon in 2001. Ms Basmadjian's
coverage areas include the leisure and entertainment, retail, consumer products, food and beverage
and technology industries. Prior to joining Octagon, Ms Basmadjian worked in Chase Securities, Inc.'s
Acquisition Finance Group. Ms Basmadjian holds a B.S. degree in Finance and Economics from the
Stern School of Business at New York University, from which is graduated cum laude.
Thomas A. Connors, Chief Financial & Administrative Officer. Prior to joining Octagon, Mr.
Connors was a Vice President and the Product Controller for the mortgage and asset-backed securities
business at Lehman Brothers Inc., and he held other positions in the new products accounting and
financial reporting groups. Prior to that, Mr. Connors was a Senior Manager in the Audit and Executive
Office Divisions at KPMG LLP. Mr Connors holds a B.S. degree from St. Peter's College and is a
Certified Public Accountant (CPA).
Zhen Tao, Associate. Ms. Tao joined Octagon in 2006. Ms. Tao's coverage areas include the
chemical, healthcare and business services industries. Prior to joining Octagon, Ms. Tao covered
chemicals and cable/telecom for Trust Company of the West's CLO Group. Previous to that, Ms. Tao
was part of the high yield chemicals research team and leveraged finance origination team at Deutsche
Bank. Ms. Tao graduated magna cum laude and holds a B.S. degree in Finance and Information
Systems from the Wharton School at the University of Pennsylvania.
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THE PORTFOLIO
Terms used and not otherwise defined herein or in this Prospectus as specifically referenced herein
shall have the meaning given to them in Condition 1 (Definitions).
Introduction
Pursuant to the Investment Management Agreement, the Investment Manager is required to act as the
Issuer’s adviser with respect to the Portfolio, to act in specific circumstances in relation to the Collateral
on behalf of the Issuer and to carry out the duties and functions described below. In addition, the
Collateral Administrator is required to perform certain calculations in relation to the Collateral on behalf
of the Issuer in each case to the extent and in accordance with the information provided to it by the
Investment Manager pursuant to the Investment Management Agreement.
Acquisition of Collateral Debt Obligations
A portfolio of Senior Loans, High Yield Bonds, Structured Finance Obligations and Mezzanine
Obligations will be purchased by the Investment Manager on behalf of the Issuer during the Initial
Investment Period, the Reinvestment Period and thereafter. The Investment Manager anticipates that,
by the Issue Date, it will have committed to purchase on behalf of the Issuer Collateral Debt Obligations
the Aggregate Principal Balance of which equals approximately 70 per cent. of the "Target Par
Amount" (this being €350,000,000, and representing the Aggregate Principal Balance of Collateral Debt
Obligations purchased or committed to being purchased by the Issuer by the Effective Date, provided
that, for the purposes of determining the Aggregate Principal Balance as provided above, any
repayments or prepayments of any Collateral Debt Obligations subsequent to the date of acquisition
thereof shall be disregarded and the Principal Balance of a Collateral Debt Obligation which is a
Defaulted Obligation will be the lower of its S&P Collateral Value and Moody’s Collateral Value and on
the basis that the Sterling amount of any Sterling Collateral Debt Obligations and the Dollar amount of
any Dollar Collateral Debt Obligations be converted into Euro at the Initial Rate of Exchange). The
proceeds of the issue of the Notes remaining after payment of (a) the acquisition costs for the Collateral
Debt Obligations acquired by the Issuer on or prior to the Issue Date including the repayment (to the
extent required on the Issue Date) of any amounts borrowed by the Issuer (together with any interest
thereon) in order to finance the acquisition thereof and (b) certain fees, costs and expenses incurred in
connection with the issue of the Notes and anticipated to be payable by the Issuer following completion
of the issue of the Notes including those associated with any initial Asset Swap Transactions, Currency
Hedge Transactions or Interest Rate Hedge Transactions will be deposited in the Unused Proceeds
Account on the Issue Date. The Investment Manager shall use all commercially reasonable efforts to
purchase Collateral Debt Obligations out of the Balances standing to the credit of the Unused Proceeds
Accounts during the Initial Investment Period.
If, at any time during the Initial Investment Period, any one or more of the Ramp-Up Interim Targets are
not satisfied, then the Investment Manager on behalf of the Issuer, shall (a) within five Business Days of
the failure to satisfy such Ramp-Up Interim Target(s), notify Moody’s of such failure and (b) until such
time as each Ramp-Up Interim Target is satisfied, either (in its discretion): (i) upon each purchase or
sale of a Collateral Debt Obligation, maintain or improve each Ramp-Up Interim Target that was not so
satisfied and continue to satisfy each Ramp-Up Interim Target that was so satisfied; or (ii) prior to the
purchase of any Collateral Debt Obligation, present to Moody’s a plan which will cause the Portfolio to
satisfy the Ramp-Up Interim Targets. For the purposes of the foregoing, "Ramp-Up Interim Targets"
means, with respect to the Initial Investment Period, targets that are met if the Issuer has purchased (or
entered into commitments to purchase) Collateral Debt Obligations having a minimum Aggregate
Principal Balance which meets the levels set out in the Ramp-Up Interim Targets Table below and the
Moody’s Minimum Diversity Test, the Moody’s Maximum Weighted Average Rating Factor Test and the
Minimum Weighted Average Spread Test also meet the levels set out in the Ramp-Up Interim Targets
Table below:
Ramp-Up Interim Targets Table
Days from Issue
Date
Minimum
Diversity Score
Minimum
Weighted
Average Spread
Minimum
Aggregate
Principal
Balance
Moody’s
Maximum
Weighted
Average Rating
Factor
180 30 2.40% €297.5 million 2500
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Other than with respect to the Ramp-Up Interim Targets, the Issuer does not expect and is not required
to satisfy the Collateral Quality Tests, Portfolio Profile Tests and the Coverage Tests prior to the
Effective Date other than in respect of the Coverage Tests that are required to be satisfied as a
condition to the purchase of a Credit Short Obligation.
The Investment Manager, on behalf of the Issuer, may declare that the Initial Investment Period has
ended and the Effective Date has occurred prior to the expiry of 365 days from (but excluding) the Issue
Date in accordance with the Investment Management Agreement subject to the Effective Date
Requirements being satisfied.
Within 30 Business Days after the Effective Date, the independent accountants appointed by the Issuer
in accordance with the Investment Management Agreement shall issue a report confirming details of the
Aggregate Principal Balances of the Collateral Debt Obligations purchased or committed to be
purchased as at such date and the computations and results of the Portfolio Profile Tests, the Collateral
Quality Tests and the Coverage Tests by reference to such Collateral Debt Obligations, copies of which
shall be delivered to the Issuer, the Trustee, the Investment Manager, the Collateral Administrator and
the Rating Agencies (provided that, for the purposes of determining the Aggregate Principal Balance as
provided above, the Principal Balance of a Collateral Debt Obligation which is a Defaulted Obligation will
be the lower of its S&P Collateral Value and its Moody’s Collateral Value). The Investment Manager, on
behalf of the Issuer, shall promptly following receipt of such report request that each of the Rating
Agencies confirm or affirm the Initial Ratings of the Notes. In the event that (i) the Initial Ratings of the
Notes are reduced or withdrawn or (ii) either or both of the Rating Agencies notifies the Issuer or the
Investment Manager on behalf of the Issuer that such Rating Agency intends to reduce or withdraw its
Initial Ratings of the Notes then, in each case, all further purchases of Collateral Debt Obligations shall
cease unless the Investment Manager prepares and presents to the Rating Agencies a plan (a "Rating
Confirmation Plan") in respect of which Rating Agency Confirmation is received setting forth the timing
and manner of acquisition of additional Collateral Debt Obligations or any other intended action which
will attempt to cause confirmation or reinstatement of the Initial Ratings. The Investment Manager is
under no obligation whatsoever to present a Rating Confirmation Plan to the Rating Agencies and may,
in its discretion, determine not to present such plan in favour of redemption of the Notes as described in
the paragraph below and as provided pursuant to Condition 7(f) (Redemption upon Effective Date
Rating Event).
For so long as, in the above circumstances, no such Rating Confirmation Plan is presented to and
accepted by the Rating Agencies, an Effective Date Rating Event shall have occurred and be
continuing. In the event that an Effective Date Rating Event has occurred and is continuing on the
second Business Day prior to the Payment Date next following the Effective Date and any other
Payment Date thereafter, the Balances standing to the credit of the Unused Proceeds Account will be
transferred to the Payment Accounts and shall be applied as Principal Proceeds together with Interest
Proceeds and other Principal Proceeds in redemption of the Notes in accordance with the Priorities of
Payment to the extent required to cause the Initial Ratings assigned to the Notes to be confirmed. Upon
confirmation by each of the Rating Agencies of the Initial Ratings assigned to the Notes after the
Effective Date, the transaction will be "effective" and the Balances standing to the credit of the Unused
Proceeds Accounts (if any) shall, upon the direction of the Investment Manager (on behalf of the Issuer),
be transferred to the Interest Accounts and/or to the Principal Accounts, as applicable, for reinvestment
in Substitute Collateral Debt Obligations.
Eligibility Criteria
Each Collateral Debt Obligation, Synthetic Security, Credit Short Obligation and Offsetting Credit Default
Swap must, at the time of entering into a binding commitment to acquire such obligation by, or on behalf
of, the Issuer, satisfy the following "Eligibility Criteria" (save, in the case of each Synthetic Security,
Offsetting Credit Default Swap or Credit Short Obligation, for that set out in paragraphs (a), (b), (c), (d),
(e), (g), (h) and (s) which must be satisfied by the Reference Obligation to which it is linked:
(a)
(b)
it is a Senior Loan, High Yield Bond, Structured Finance Obligation or a Mezzanine Obligation
or, to the extent delivered to the Issuer in respect of a Defaulted Obligation or received by the
Issuer as a result of restructuring of the terms of a Collateral Debt Obligation in effect as of the
later of the Issue Date and the date of issuance thereof, a debt security;
it is:
(i)
(ii)
denominated in Euro; or
denominated in Sterling or Dollars and it is either:
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(1) purchased in accordance with paragraph (CC) of the Interest Proceeds Priority of
Payments, paragraph (C)(2) of the Principal Proceeds Priority of Payments or
paragraph (N) of Condition 3 (c)(iv) (FX Conversion); and/or
(2) hedged under an Asset Swap Transaction with a notional amount in the relevant
currency equal to the aggregate principal amount of such obligation and
otherwise complies with the requirements set out in respect of Non-Euro
Obligations in the Investment Management Agreement (as described below
under "Non-Euro Obligations"); or
(iii)
it is denominated in any currency other than Euro, Dollars or Sterling and, it is hedged
under an Asset Swap Transaction with a notional amount in the relevant currency equal
to the aggregate principal amount of such obligation and otherwise complies with the
requirements set out in respect of Non-Euro Obligations in the Investment Management
Agreement (as described below under "Non-Euro Obligations"); and
is not convertible into or payable in any other currency;
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
it is an obligation which requires the majority consent of the lenders thereunder for any change
in the principal repayment profile or interest payable, save for changes originally envisaged in
the applicable Underlying Instrument;
it is an obligation of an Obligor having a principal place of business or significant operations in
a Qualifying Country (as determined by the Investment Manager);
it is not a Defaulted Obligation, a Current Pay Obligation or a Credit Impaired Obligation;
it has not been called for, and is not subject to a pending redemption in full;
it is not the subject of an offer of exchange, conversion or tender by its issuer, for cash,
securities or any other type of consideration (other than for an obligation which satisfies the
Eligibility Criteria, the acquisition of which would also satisfy the Reinvestment Criteria);
it is capable of being sold, assigned or participated to the Issuer without any breach of
applicable selling restrictions or of any contractual provisions;
it is rated by S&P and Moody’s or is assigned or otherwise has an S&P Rating and a Moody’s
Rating and does not have an "r" or "t" subscript unless S&P otherwise consents in writing;
the Stated Maturity thereof falls prior to the Maturity Date of the Notes, save for obligations in
relation to which the Issuer has a Put Option with a Put Option Counterparty;
save in the case of Revolving Securities and Delayed Drawdown Obligations to the extent
undrawn and other than Purposely Deferring Obligations, it is an obligation that pays interest
no less frequently than annually and is not an obligation in respect of which interest payments
are scheduled to decrease (although interest payments may decrease due to unscheduled
events such as a decrease of the index relating to a Floating Rate Collateral Debt Obligation,
the change from a default rate of interest to a non-default rate, an improvement in the Obligor’s
financial condition or as a result of the satisfaction of contractual conditions set out in the
relevant documentation for such obligation);
other than with respect to Purposely Deferring Obligations it is an obligation which by its terms
provides for the current payment of interest;
it is not a Deferring Obligation;
save to the extent that it is a Mezzanine Obligation or a Purposely Deferring Obligation, it is not
an obligation that provides for the deferral and/or capitalisation of accrued interest thereon nor
for any other distribution in place of the current payment of accrued interest;
it is not an obligation pursuant to which future advances of principal may be required to be
made by the Issuer, save to the extent otherwise permitted pursuant to paragraph (o) of the
Portfolio Profile Tests;
it is not an obligation whose acquisition by the Issuer will cause the Issuer to be deemed to
have participated in a primary loan origination in the United States;
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(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
(aa)
it is not convertible into equity and is not Margin Stock as defined under Regulation U issued by
The Board of Governors of the Federal Reserve System;
it is not a lease (other than a Finance Lease);
it is not an obligation whose repayment is subject to substantial non-credit related risk or to the
non-occurrence of certain catastrophes or which is a catastrophe bond as determined by the
Investment Manager;
upon acquisition, both (i) the Collateral Debt Obligation is capable of being, and will be, the
subject of a first fixed charge or first priority security interest or other arrangement having
similar commercial effect in favour of the Trustee for the benefit of the Secured Parties
pursuant to the Trust Deed (or any deed or document supplemental thereto); and (ii) (subject to
(i) above) the Issuer (or the Investment Manager on behalf of the Issuer) has notified the
Trustee in the event that any Collateral Debt Obligation that is a bond is not held through
Euroclear and has taken such action as the Trustee may require to effect such security interest;
save to the extent otherwise permitted pursuant to paragraph (o) of the Portfolio Profile Tests, it
will not result in the imposition of any present or future, actual or contingent, monetary liabilities
or obligations of the Issuer other than those (i) which may arise at its option; or (ii) which are
fully collateralised (which collateralisation may be by way of deposit of an amount with a third
party and which must be in an amount which is not less than 100 per cent. of the Issuer's
unfunded principal payment obligations in respect thereof); or (iii) with respect to Participations
only, which are subject to limited recourse provisions similar to those set out in the Trust Deed;
or (iv) owed to the agent bank or other syndicate members in relation to the performance of its
duties under a syndicated Senior Loan, High Yield Bond, Structured Finance Obligation or
Mezzanine Obligation; or (v) which may arise as a result of an undertaking to participate in a
financial restructuring of a Senior Loan, High Yield Bond, Structured Finance Obligation or
Mezzanine Obligation and where the Issuer has no liability to make any additional payment in
relation to such financial restructuring and where such undertaking is contingent upon the
redemption in full of such Senior Loan, High Yield Bond, Structured Finance Obligation or
Mezzanine Obligation on or before the time by which the Issuer is obliged to enter into the
restructured Senior Loan, High Yield Bond, Structured Finance Obligation or Mezzanine
Obligation and where the restructured Senior Loan, High Yield Bond or Mezzanine Obligation
satisfies the Eligibility Criteria; or (vi) amounts payable in respect of Credit Short Obligations
and Offsetting Credit Default Swap Transactions;
is an obligation that will be considered to be in registered form for United States federal income
tax purposes or is held through a financial institution in a manner that would not cause a holder
to be subject to the denial of a deduction for any loss under section 165 of the United States
Internal Revenue Code of 1986, as amended;
it is not a Dutch Ineligible Security and it is not convertible into or exchangeable for a Dutch
Ineligible Security;
it is not a Project Finance Loan;
it is not a Bridge Loan;
it is an obligation that provides for repayment of principal at or prior to maturity or has a fixed
payment schedule; and
it is not an interest in or a participation in a letter of credit given in favour of an Obligor located
in the United States, including an interest that could arise because the Issuer would be
obligated to acquire a right to receive a reimbursement by such U.S. Obligor of any drawings
made in accordance with such letter of credit.
The subsequent failure of any Collateral Debt Obligation to satisfy any of the Eligibility Criteria shall not
prevent any obligation which would otherwise be a Collateral Debt Obligation from being a Collateral
Debt Obligation so long as such obligation satisfied the Eligibility Criteria when the Issuer or the
Investment Manager on behalf of the Issuer entered into a binding agreement to purchase such
obligation.
For these purposes:
a "Finance Lease" means a lease or other agreement entered into in connection with and evidencing a
transaction pursuant to which the obligations of the lessee to pay rent or other amounts on a triple net
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asis under any lease (or other agreement conveying the right to use) real or personal property, or a
combination thereof, are required to be classified and accounted for as a capital lease on a balance
sheet of such lessee under generally accepted accounting principles employed by such lessee; provided
that (i) such lease or other transaction provides for the unconditional obligation of the lessee to pay a
stated amount of principal no later than a stated maturity date, together with interest thereon, and the
payment of such obligation is not subject to any material non-credit related risk as determined by the
Investment Manager, (ii) the obligations of the lessee in respect of such lease or other transaction are
fully secured, directly or indirectly, by the property that is the subject of such lease, (iii) the interest held
in respect of such lease or other transaction is treated as debt for tax purposes and (iv) a Rating Agency
Confirmation must be obtained with respect to the acquisition of any such asset by the Issuer
a "Project Finance Loan" means a Collateral Debt Obligation which, in the reasonable business
judgement of the Collateral Manager, is a non-recourse or limited recourse loan obligation (or a
Participation therein) provided to an obligor (which may be one or more entities (including special
purpose entities)) in connection with the financing, design or construction of assets in return for
payments solely resulting from cash flows generated by these assets (including amounts paid as
remuneration for the usage of such assets, but excluding rights or other assets designed to assure the
servicing or timely distribution of such payments) such as:
(a)
(b)
sale proceeds of products such as electricity, water, gas, oil, mining, waste or similar products;
and
fees charged for the delivery of assets and/or provision of services to a central or local
government, a governmental agency or the general public in connection with sectors such as
prisons, hospitals, schools, government buildings, civil service accommodation, roads, public
transport or other similar infrastructure sectors;
a "Bridge Loan" means any debt obligation (i) that is incurred in connection with a merger, acquisition,
consolidation, sale of all or substantially all of the assets of a person, restructuring or similar transaction
and (ii) that, by its terms, is required to be repaid within one year of the incurrence thereof with proceeds
from additional borrowings or other refinancings (other than any additional borrowing or refinancing if
one or more financial institutions shall have provided the underlying borrower or other obligor of such
debt obligation with a binding written commitment to provide the same).
Management of the Portfolio
Overview
The Investment Manager acting on behalf of the Issuer is permitted, in certain circumstances and,
subject to certain requirements and subject to the overall policies, direction and control of the Issuer, to
sell Collateral Debt Obligations, Defaulted Obligations and Exchanged Equity Securities and to reinvest
the Sale Proceeds (other than accrued interest on such Collateral Debt Obligations included in Interest
Proceeds by the Investment Manager) thereof in Substitute Collateral Debt Obligations. The Collateral
Administrator (on behalf of the Issuer) shall determine and shall provide confirmation of whether certain
of the criteria which are required to be satisfied in connection with any such sale or reinvestment are
satisfied or, if any such criteria are not satisfied, shall notify the Issuer and the Investment Manager of
the reasons and the extent to which such criteria are not so satisfied, following request by the
Investment Manager, which request shall specify all necessary details of the Collateral Debt Obligation,
Defaulted Obligation or Exchanged Equity Security to be sold and the proposed Substitute Collateral
Debt Obligation to be purchased.
The Investment Manager acting on behalf of the Issuer will purchase the Collateral Debt Obligations
(including all Substitute Collateral Debt Obligations) taking into account the Eligibility Criteria and will
monitor the performance and credit quality of the Collateral Debt Obligations on an ongoing basis to the
extent practicable using sources of information reasonably available to it and provided that the
Investment Manager shall not be responsible for determining whether or not the terms of any individual
Collateral Debt Obligation have been observed.
Sale of Collateral Debt Obligations - Overview
Subject to no Event of Default having occurred which is continuing, the Investment Manager, may, as
more particularly described below, sell any Defaulted Obligation, Exchanged Equity Security, Credit
Impaired Obligation or Credit Improved Obligation held by or on behalf of the Issuer at any time. The
Investment Manager may, at any time during the Reinvestment Period, also sell any other Collateral
Debt Obligations in accordance with and subject to the Investment Management Agreement provided
that all such sales do not exceed 20 per cent. in any annual period as described below of the Aggregate
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Principal Balance of the Collateral Debt Obligations and the Balances standing to the credit of the
Principal Accounts and Unused Proceeds Accounts at the beginning of that period.
The Investment Manager shall also be required to sell Exchanged Equity Securities in certain
circumstances and within certain time limits as further described below.
During the Reinvestment Period, the Sale Proceeds (other than in respect of Collateral Enhancement
Obligation Proceeds and accrued interest on such Collateral Debt Obligations included in Interest
Proceeds by the Investment Manager) shall be applied by the Issuer to acquire Substitute Collateral
Debt Obligations in accordance with the Reinvestment Criteria and the Investment Management
Agreement, as applicable, or shall be applied by the Issuer in accordance with the Priorities of Payment
on the next succeeding Payment Date. After the Reinvestment Period, any Sale Proceeds (other than
those relating to Credit Improved Obligations, Credit Impaired Obligations and Unscheduled Principal
Proceeds, as more particularly described below) shall not be reinvested in Substitute Collateral Debt
Obligations, but shall be paid into the relevant Principal Account and shall be applied in accordance with
the Priorities of Payment on the next succeeding Payment Date.
Discretionary Reinvestment during the Reinvestment Period
During the Reinvestment Period only, the Investment Manager acting on behalf of the Issuer may
dispose of any Collateral Debt Obligation (other than a Credit Improved Obligation, a Credit Impaired
Obligation, a Defaulted Obligation or an Exchanged Equity Security which may only be sold in the
circumstances provided below) and reinvest the Sale Proceeds (other than Collateral Enhancement
Obligation Proceeds and accrued interest on such Collateral Debt Obligations included in Interest
Proceeds by the Investment Manager) thereof in Substitute Collateral Debt Obligations, such sale and
reinvestment being subject to:
(a)
(b)
(c)
to the Investment Manager’s knowledge, no Event of Default having occurred which is
continuing;
the Investment Manager certifying that in its reasonable business judgement that after giving
effect to such sale and purchase, the Reinvestment Criteria will be met;
the Collateral Administrator confirming that the Aggregate Principal Balance of Collateral Debt
Obligations sold in any year (with each year commencing on the Issue Date or, as the case
may be, an anniversary thereof, and ending in the next succeeding anniversary thereof) when
aggregated with the Aggregate Principal Balance of any Collateral Debt Obligations to be sold
(in each case excluding any Credit Improved Obligations, Credit Impaired Obligations or
Defaulted Obligations sold) does not exceed 20 per cent. of the Aggregate Collateral Balance,
measured as at the beginning of each such year;
(d) (i) the ratings by Moody’s of any of the Class A Notes and the Class B Notes having not
been reduced by Moody’s by at least one sub-category from the Initial Ratings, or
having not been withdrawn by Moody’s; or
(ii)
the ratings by Moody’s of any of the Class C Notes, the Class D Notes or the Class E
Notes having not been reduced by Moody’s by at least two sub-categories from the
Initial Ratings or having not been withdrawn by Moody’s; and
(e)
the Investment Manager using all commercially reasonable efforts to reinvest such Sale
Proceeds within 180 days of settlement of such sale, and in the event of a breach of any
Coverage Test on any Determination Date falling after such period such Sale Proceeds shall
be applied in redemption of the Notes in accordance with the Priorities of Payment to cure such
breach.
Terms and Conditions Applicable to the Sale of Credit Improved Obligations
Credit Improved Obligations may be sold at any time by the Investment Manager.
During the Reinvestment Period, the Investment Manager (on behalf of the Issuer) may either reinvest
the Sale Proceeds (other than in respect of Collateral Enhancement Obligation Proceeds and accrued
interest on such Collateral Debt Obligations included in Interest Proceeds by the Investment Manager)
thereof in Substitute Collateral Debt Obligations or procure that the net amount of such Sale Proceeds
are paid into the relevant Principal Account and designated for reinvestment pending such reinvestment.
Following the Reinvestment Period, the Issuer or the Investment Manager may (i) reinvest the Sale
Proceeds thereof in Substitute Collateral Debt Obligations or (ii) procure that Sale Proceeds thereof are
paid into the relevant Principal Account and designated for reinvestment in Substitute Collateral Debt
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Obligations or (iii) deposit the Sale Proceeds in the relevant Principal Accounts to be disbursed in
accordance with the Priorities of Payment on the first Payment Date following such sale.
Any sale of a Credit Improved Obligation shall be subject to:
(a)
(b)
to the Investment Manager’s knowledge, no Event of Default having occurred which is
continuing;
the Investment Manager certifying that it believes that in its reasonable business judgement;
(i)
(ii)
such obligation constitutes a Credit Improved Obligation; and
after giving effect to such sale and any purchase, the Reinvestment Criteria will be met;
(c)
(d)
during the Reinvestment Period the Investment Manager using all commercially reasonable
efforts to reinvest such Sale Proceeds within 180 days of settlement of such sale, and in the
event of a breach of any Coverage Test on any Determination Date falling after such period
such Sale Proceeds shall be applied in redemption of the Notes in accordance with the
Priorities of Payment to cure such breach; and
following the Reinvestment Period the Investment Manager using all commercially reasonable
efforts to reinvest such Sale Proceeds within 20 Business Days of settlement of such sale, and
in the event of a breach of any Coverage Test on any Determination Date falling after such
period such Sale Proceeds shall be applied in redemption of the Notes in accordance with the
Priorities of Payment to cure such breach.
Terms and Conditions Applicable to the Sale of Credit Impaired Obligations or Defaulted
Obligations
Credit Impaired Obligations or Defaulted Obligations may be sold at any time by the Investment
Manager subject to:
(a)
(b)
to the Investment Manager’s knowledge, no Event of Default having occurred which is
continuing;
the Investment Manager certifying that it believes, in its reasonable business judgement, that:
(i)
(ii)
such security is a Credit Impaired Obligation or a Defaulted Obligation; and
after giving effect to such sale and any subsequent purchase, the Reinvestment Criteria
will be met. Defaulted Obligations may still be sold if the Reinvestment Criteria is not
met, however, the resultant Sale Proceeds may not be reinvested;
(c)
(d)
during the Reinvestment Period, the Investment Manager using all commercially reasonable
efforts to reinvest such Sale Proceeds within 180 days of settlement of such sale, and in the
event of a breach of any Coverage Test on any Determination Date falling after such period
such Sale Proceeds shall be applied in redemption of the Notes in accordance with the
Priorities of Payment to cure such breach; or
following the Reinvestment Period, the Investment Manager using all commercially reasonable
efforts to reinvest the Sale Proceeds of any Credit Impaired Obligations within 20 Business
Days of settlement of such sale, and in the event of a breach of any Coverage Test on any
Determination Date falling after such period such Sale Proceeds shall be applied in redemption
of the Notes in accordance with the Priorities of Payment to cure such breach.
Terms and Conditions Applicable to the Sale of Exchanged Equity Securities
Any Exchanged Equity Security may be sold at any time following receipt thereof subject to:
(a)
(b)
to the Investment Manager’s knowledge, no Event of Default having occurred which is
continuing;
the Investment Manager certifying that it believes in its reasonable business judgement that:
(i)
such security is an Exchanged Equity Security; and
(ii)
to the extent that the Sale Proceeds thereof are to be reinvested in Substitute Collateral
Debt Obligations, after giving effect to such sale and reinvestment, the Reinvestment
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Criteria (determined for this purpose by reference to the proportion of the Principal
Balance of the relevant Defaulted Obligation or Collateral Debt Obligation, as the case
may be, that converted into, or was exchanged for, such Exchanged Equity Security)
will be met.
During the Reinvestment Period, the Investment Manager shall use all commercially reasonable efforts
to apply the Sale Proceeds of any such Defaulted Obligation or Exchanged Equity Security in the
acquisition of Substitute Collateral Debt Obligations prior to the end of the Due Period in which such
Sale Proceeds were received (and in the event of a breach of any Coverage Test on any Determination
Date falling after such period such Sale Proceeds shall be applied in redemption of the Notes in
accordance with the Priorities of Payment to cure such breach) subject always to satisfaction of the
Reinvestment Criteria (determined for this purpose by reference to the proportion of the Principal
Balance of the relevant Defaulted Obligation or Collateral Debt Obligation, as the case may be, that
converted into, or was exchanged for, such Exchanged Equity Security) following such sale and
purchase.
In addition, any Exchanged Equity Security that constitutes Margin Stock shall be sold as soon as
reasonably practicable following receipt thereof.
After the Reinvestment Period, such Sale Proceeds shall be deposited in the Euro Principal Account,
Sterling Principal Account and Dollar Principal Account, as applicable, and disbursed in accordance with
the Priorities of Payment on the Payment Date following such sale.
Unscheduled Principal Proceeds
The Investment Manager may reinvest Unscheduled Principal Proceeds received at any time, both
during and following expiry of the Reinvestment Period, subject to, to the Investment Manager’s
knowledge, no Event of Default having occurred that is continuing and shall use all commercially
reasonable efforts to apply Unscheduled Principal Proceeds in the acquisition of Substitute Collateral
Debt Obligations (and in the event of a breach of any Coverage Test on any Determination Date falling
after such period such Sale Proceeds shall be applied in redemption of the Notes in accordance with the
Priorities of Payment to cure such breach) satisfying the Reinvestment Criteria prior to the end of the
Due Period following the Due Period in which such Unscheduled Principal Proceeds were received.
After the expiry of the Reinvestment Period, any Unscheduled Principal Proceeds not reinvested prior to
the end of the Due Period in which such proceeds were received shall be paid into the Euro Principal
Account, Sterling Principal Account and Dollar Principal Account, as applicable, and disbursed in
accordance with the Priorities of Payment on the next following Payment Date.
Scheduled Principal Proceeds
During the Reinvestment Period, the Investment Manager shall use all commercially reasonable efforts
to apply Scheduled Principal Proceeds in the acquisition of one or more Substitute Collateral Debt
Obligations satisfying the Reinvestment Criteria prior to the end of the Due Period in which such
Scheduled Principal Proceeds were received (and in the event of a breach of any Coverage Test on any
Determination Date falling after such period such Sale Proceeds shall be applied in redemption of the
Notes in accordance with the Priorities of Payment to cure such breach) subject to, to the Investment
Manager’s knowledge, no Event of Default having occurred which is continuing.
After the expiry of the Reinvestment Period, any Scheduled Principal Proceeds shall be paid into the
Euro Principal Account, Sterling Principal Account or Dollar Principal Account, as applicable, and
disbursed in accordance with the Priorities of Payment.
Sale of Collateral Prior to Maturity Date
In the event of any redemption of the Notes in whole prior to the Maturity Date or upon receipt of
notification from the Trustee of the enforcement of the security over the Collateral, the Investment
Manager will (at the direction of the Trustee following the enforcement of such security), as far as
practicable, arrange for liquidation of the Collateral in order to procure that the proceeds thereof are in
immediately available funds by the Business Day prior to the applicable Redemption Date or date of
purchase and sell all or part of the Portfolio, as applicable, without regard to the limitations set out in the
Investment Management Agreement, subject always to any limitations or restrictions set out in the
Conditions and the Trust Deed.
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Reinvestment Criteria
"Reinvestment Criteria" means, during the Reinvestment Period, the criteria set out below under "During
the Reinvestment Period" and, following the expiry of the Reinvestment Period, the criteria set out below
under "Following the Expiry of the Reinvestment Period."
During the Reinvestment Period
During the Reinvestment Period, the Investment Manager shall use its commercially reasonable efforts
to reinvest all Euro Principal Proceeds, Sterling Principal Proceeds and Dollar Principal Proceeds in the
purchase of Substitute Collateral Debt Obligations satisfying the Eligibility Criteria provided that
immediately after each such purchase, or a binding commitment to purchase the criteria set out below
must be satisfied:
(a)
(b)
(c)
(d)
(e)
to the Investment Manager’s knowledge, no Event of Default has occurred that is continuing at
the time of such purchase or a binding commitment to purchase;
the Collateral Quality Tests are satisfied or, if any test was not satisfied it is no further from
being satisfied than immediately prior to the sale of such Collateral Debt Obligation, save that
this paragraph (b) shall not apply in respect of the CDO Monitor Test in the case of the
reinvestment of Sale Proceeds from Credit Impaired Obligations;
the Portfolio Profile Tests are satisfied or, if any such limitation is not satisfied, in the case of
each limitation (i) in respect of which an upper limit is applicable, the relevant concentration is
no greater, and (ii) in respect of which a lower limit is applicable, the relevant concentration is
no lesser, after giving effect to such reinvestment or a binding commitment to purchase than it
was immediately prior to the sale of such Collateral Debt Obligation;
in the case of any reinvestment of Principal Proceeds received in respect of any Defaulted
Obligation, the Coverage Tests are satisfied at the time of such purchase or commitment to
purchase;
in the case of any reinvestment of Principal Proceeds, other than Principal Proceeds referred to
in (d) above, if as calculated immediately upon the receipt of the Principal Proceeds being
reinvested, any Coverage Test was not satisfied, the coverage ratio relating to such test will be
at least as close to being satisfied after giving effect to such reinvestment as it was immediately
prior to the receipt of such Principal Proceeds; and
(f) (i) in the case of Collateral Debt Obligations purchased with the Sale Proceeds of a Credit
Impaired Obligation or Defaulted Obligation, immediately following such purchase or
commitment to purchase:
(A)
(B)
the Aggregate Principal Balance of all additional Collateral Debt Obligations
purchased or commitment to be purchased with such Sale Proceeds is at least
equal to the Sale Proceeds from such sale; or
the Aggregate Collateral Balance will be greater than the Target Par Amount;
and
(ii)
in the case of additional Collateral Debt Obligations purchased with the Sale Proceeds
of a Credit Improved Obligation, immediately following such purchase or binding
commitment to purchase, either:
(A)
(B)
the Aggregate Principal Balance of all additional Collateral Debt Obligations
purchased or commitment to be purchased with such Sale Proceeds is equal to
or greater than the Aggregate Principal Balance of the Collateral Debt
Obligations sold; or
the Aggregate Collateral Balance will be greater than the Target Par Amount.
Following the Expiry of the Reinvestment Period
Following the expiry of the Reinvestment Period, Unscheduled Principal Proceeds, and the Sale
Proceeds from the sale of Credit Improved Obligations and Credit Impaired Obligations, only, may be
reinvested by the Investment Manager in one or more Substitute Collateral Debt Obligations satisfying
the Eligibility Criteria, in each case provided that:
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(a)
(b)
(c)
(d)
(e)
(f)
to the Investment Manager’s knowledge, no Event of Default has occurred that is continuing at
the time of such reinvestment or a binding commitment to purchase;
the Aggregate Principal Balance of the Collateral Debt Obligations is maintained or increased
or, in the case of the sale and reinvestment of the Sale Proceeds of Credit Impaired
Obligations, the Aggregate Principal Balance of all additional Collateral Debt Obligations
purchased or commitment to be purchased with such Sale Proceeds is at least equal to the
Sale Proceeds from such sale;
the Collateral Quality Tests are satisfied or, if any test was not satisfied it is no further from
being satisfied than immediately prior to the sale of such Collateral Debt Obligation, save that
this paragraph (c) shall not apply in respect of the CDO Monitor Test in the case of the
reinvestment of Sale Proceeds from Credit Impaired Obligations;
the Portfolio Profile Tests are satisfied or, if any such limitation is not satisfied, in the case of
each limitation (i) in respect of which an upper limit is applicable, the relevant concentration is
no greater, and (ii) in respect of which a lower limit is applicable, the relevant concentration is
no lesser, after giving effect to such reinvestment or commitment to purchase than it was
immediately prior to the sale of such Collateral Debt Obligation;
the Coverage Tests and the Moody’s Maximum Weighted Average Rating Factor Test are
satisfied (both immediately before and immediately after such reinvestment or a binding
commitment to purchase);
neither of the following has occurred and is continuing:
(i)
(ii)
the ratings by Moody’s of any of the Class A Notes and the Class B Notes have been
reduced by Moody’s by one sub-category or more from the Initial Ratings or are
withdrawn by Moody’s; or
the ratings by Moody’s of any of the Class C Notes, the Class D Notes or the Class E
Notes have been reduced by Moody’s by two sub-categories or more from the Initial
Ratings or are withdrawn by Moody’s;
(g)
(h)
(i)
such Substitute Collateral Debt Obligation(s) have the same or a higher S&P Rating as the
Collateral Debt Obligation sold and the same or a shorter Stated Maturity;
no more than 5 per cent. of the Aggregate Collateral Balance are Collateral Debt Obligations
rated "Caa1" or lower by Moody's; and
the Class E Par Value Ratio is at least 103.6 per cent.
Following the expiry of the Reinvestment Period, any Unscheduled Principal Proceeds and any Sale
Proceeds from the sale of Credit Improved Obligations and Credit Impaired Obligations shall be paid
into the Euro Principal Account, Sterling Principal Account or Dollar Principal Account, as applicable,
and may be designated for reinvestment in Substitute Collateral Debt Obligations subject to the above at
the discretion of the Investment Manager up to the later of the end of the Due Period in which such
proceeds were received and 20 Business Days following settlement of such sale. To the extent no
longer so designated for reinvestment such proceeds shall be disbursed in accordance with the
Priorities of Payment on the next following Payment Date.
Reinvestment Diversion Test
During the Reinvestment Period, in the event that, after giving effect to the payment of all amounts
payable in respect of (A) through (T) (inclusive) of the Interest Proceeds Priority of Payments on any
Determination Date during such period, the Reinvestment Diversion Test has not been met, then on the
related Payment Date Interest Proceeds shall either, at the discretion of the Investment Manager, acting
on behalf of the Issuer, be paid to the relevant Principal Account for the acquisition of additional
Collateral Debt Obligations or be applied in redemption of the Notes in accordance with the Note
Payment Sequence in an amount equal to the lesser of (1) 50 per cent. of all remaining Interest
Proceeds available for payment pursuant to paragraph (U) of the Interest Proceeds Priority of Payments
and (2) the amount which, after giving effect to the payment of all amounts payable in respect of (A)
through (T) of the Interest Proceeds Priority of Payments, would be sufficient to cause the Reinvestment
Diversion Test to be met.
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Designation for Reinvestment and as Interest Proceeds
The Investment Manager will notify the Issuer and the Collateral Administrator in writing of the details of
all Sale Proceeds and other Principal Proceeds which it is permitted to and has designated for
reinvestment upon receipt thereof and will confirm the extent to which such amounts remain designated
for reinvestment on the next following Payment Date two Business Days prior to each Determination
Date, in which event such amounts shall not constitute Principal Proceeds which are to be paid into the
Payment Accounts and disbursed on such Payment Date in accordance with the Priorities of Payment,
save to the extent to which any time period specified for the reinvestment of that type of Principal
Proceeds, in the Investment Management Agreement (as detailed above) has expired.
In addition, the Investment Manager may direct that the proceeds of sale of any Collateral Debt
Obligation which represents accrued interest be designated as Interest Proceeds and paid into the
Interest Accounts save for (i) Purchased Accrued Interest and (ii) any such proceeds that represent
deferred interest accrued in respect of any Deferring Obligation.
Treatment of Principal Proceeds
For the purposes of calculating compliance with the Reinvestment Criteria, Portfolio Profile Tests and
Collateral Quality Tests, during the Reinvestment Period, upon the direction of the Investment Manager,
by notice to the Trustee and the Collateral Administrator, any Eligible Investment representing Principal
Proceeds received upon the maturity, redemption, sale or other disposition of a Collateral Debt
Obligation shall be deemed to have all of the characteristics of such Collateral Debt Obligation until such
Principal Proceeds are reinvested in a Substitute Collateral Debt Obligation. Such calculations shall be
based upon the Principal Balance of such Collateral Debt Obligation, except in the case of any
Defaulted Obligation or Credit Impaired Obligation, in which case the calculations will be based upon the
actual Principal Proceeds received on the disposition or sale of such Defaulted Obligation or Credit
Impaired Obligation.
Block Trades
The requirements described herein with respect to the Portfolio shall be deemed to be satisfied upon
any sale and/or purchase of Collateral Debt Obligations on any day, or at the election of the Investment
Manager during a period as specified by the Investment Manager which shall be not more than two
Business Days, in the event that such Collateral Debt Obligations satisfy such requirements in
aggregate rather than on an individual basis;
Eligible Investments
The Issuer or the Investment Manager (on behalf of the Issuer) may from time to time purchase Eligible
Investments out of the Balances standing to the credit of the Accounts other than the Payment
Accounts.
Collateral Enhancement Obligations
The Issuer or the Investment Manager may, from time to time subject to the final paragraph below,
purchase Collateral Enhancement Obligations independently or as part of a unit with the Collateral Debt
Obligations being so purchased.
All funds required in respect of the purchase price of any Collateral Enhancement Obligations, and all
funds required in respect of the exercise price of any rights or options thereunder, may only be paid out
of the balance standing to the credit of the Collateral Enhancement Account at the relevant time.
Pursuant to Condition 3(j)(x) (Collateral Enhancement Account), such Balance shall be comprised of all
Collateral Enhancement Obligation Proceeds received by the Issuer, together with other sums deposited
therein from time to time which will comprise interest payable in respect of the Class F Subordinated
Notes which the Investment Manager determines shall be paid into the Collateral Enhancement Account
pursuant to the Priorities of Payment rather than being paid to the Class F Subordinated Noteholders.
In addition, if the amount standing to the credit of the Collateral Enhancement Account at the relevant
time is not sufficient to fund a purchase or exercise (as applicable) of one or more Collateral
Enhancement Obligations, the Investment Manager may, at its discretion, arrange for the payment of
any such shortfall by any of (i) making an Investment Manager Advance, and/or (ii) requesting that funds
be paid out of the Interest Account to the Collateral Enhancement Account for this purpose on the terms
and subject to the limits set forth in Condition 3(j) (Payments to and from the Accounts).
Collateral Enhancement Obligations may be sold at any time. The Investment Manager has the
discretion to either (i) credit or (ii) transfer (pursuant to Condition 3(j)(x) (Collateral Enhancement
Account)) amounts representing Sale Proceeds in excess of the purchase price of any Collateral
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Enhancement Obligation that is sold, to the Principal Account to be applied as Principal Proceeds
pursuant to the Principal Proceeds Priority of Payments.
Collateral Enhancement Obligations and any income or return generated therefrom (that has not been
transferred to the Principal Accounts) is not taken into account for the purposes of determining
satisfaction of any of the Coverage Tests, Portfolio Profile Tests or Collateral Quality Tests.
Euro Principal Proceeds, Sterling Principal Proceeds and Dollar Principal Proceeds
The Investment Management Agreement shall provide that the Investment Manager may, on behalf of
the Issuer, only use Euro Principal Proceeds and Euro Denominated Drawings to acquire Euro
Collateral Debt Obligations, Sterling Principal Proceeds and Sterling Denominated Drawings to acquire
Sterling Collateral Debt Obligations, Dollar Principal Proceeds and Dollar Denominated Drawings to
acquire Dollar Denominated Collateral Debt Obligations, provided that (i) a Sterling Collateral Debt
Obligation may be acquired by the Investment Manager, on behalf of the Issuer, using Euro Principal
Proceeds or Dollar Principal Proceeds if such Sterling Collateral Debt Obligation is the subject of an
Asset Swap Transaction with a notional amount in the relevant currency equal to the aggregate principal
amount of such obligation or (ii) a Dollar Collateral Debt Obligation may be acquired by the Investment
Manager using Euro Principal Proceeds or Sterling Principal Proceeds if such Dollar Collateral Debt
Obligation is the subject of an Asset Swap Transaction with a notional amount in the relevant currency
equal to the aggregate amount of such obligation; or (iii) a Euro Collateral Debt Obligation may be
acquired by the Investment Manager using Dollar Principal Proceeds or Sterling Principal Proceeds if
such Euro Collateral Debt Obligation is the subject of an Asset Swap Transaction with a notional amount
in the relevant currency equal to the aggregate amount of such obligation.
Sterling and Dollar Collateral Debt Obligations
The Investment Manager, acting on behalf of the Issuer, may from time to time acquire Collateral Debt
Obligations which are denominated in Sterling or Dollars (each a "Sterling Collateral Debt Obligation"
or "Dollar Collateral Debt Obligation").
In determining the Coverage Tests and the Reinvestment Diversion Test the outstanding Sterling or
Dollar principal or interest amount in respect of a Sterling Collateral Debt Obligation (that is not the
subject of an Asset Swap Transaction) or Dollar Collateral Debt Obligation (that is not the subject of an
Asset Swap Transaction) will be converted into Euro at the Spot Rate.
In determining the Collateral Quality Tests and the Portfolio Profile Tests the outstanding Sterling or
Dollar principal or interest amount in respect of a Sterling Collateral Debt Obligation or Dollar Collateral
Debt Obligation will be converted into Euro at the Initial Exchange Rate.
Sterling Collateral Debt Obligations which are not Asset Swap Obligations may only be acquired by the
Issuer or the Investment Manager acting on its behalf out of:
(a)
(b)
(c)
(d)
(e)
the proceeds of any Sterling Denominated Drawing;
the proceeds any Euro Denominated Drawing converted into Sterling at the then prevailing
Spot Rate in an amount equal to (and not exceeding) any Sterling Funding Mismatch;
Interest Proceeds available for such purpose in accordance with paragraph (CC) of Condition
3(c)(i) (Application of Interest Proceeds) in an amount equal to (and not exceeding) any
Sterling Funding Mismatch;
Principal Proceeds available for such purpose in accordance with paragraph(C)(2) of Condition
3 (c)(ii) (Application of Principal Proceeds); or
Principal Proceeds available in accordance with paragraph (N) of Condition 3(c)(iv) (FX
Conversion).
Dollar Collateral Debt Obligations which are not Asset Swap Obligations may only be acquired by the
Issuer or the Investment Manager acting on its behalf out of:
(a)
(b)
the proceeds of any Dollar Denominated Drawing;
the proceeds any Euro Denominated Drawing converted into Dollar at the then prevailing Spot
Rate in an amount equal to (and not exceeding) any Dollar Funding Mismatch;
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(c)
(d)
(e)
Interest Proceeds available for such purpose in accordance with paragraph (CC) of Condition
3(c)(i) (Application of Interest Proceeds) in an amount equal to (and not exceeding) any Dollar
Funding Mismatch;
Principal Proceeds available for such purpose in accordance with paragraph(C)(2) of Condition
3 (c)(ii) (Application of Principal Proceeds); or
Principal Proceeds available in accordance with paragraph (N) of Condition 3(c)(iv) (FX
Conversion).
Sterling Drawings may not be used to fund the purchase of Collateral Debt Obligations denominated in
Euro or Dollars and Dollar Drawings may not be used to fund the purchase of Collateral Debt
Obligations denominated in Euro or Sterling whereas Euro Drawings may be converted into Sterling or
Dollars at the then prevailing Spot Rate and used to fund the purchase of Collateral Debt Obligations
which are denominated respectively in Sterling or Dollars in an amount equal to any related Currency
Funding Mismatch.
Synthetic Securities
The Issuer or the Investment Manager may from time to time acquire Collateral Debt Obligations which
are Synthetic Securities.
Characteristics of Synthetic Securities
A Synthetic Security is a security denominated in Euro, Sterling or Dollars (or in one of the predecessor
currencies of those EU Member States which have adopted the Euro as their common currency), which
may be a swap transaction, debt security or other investment purchased from or entered into by the
Issuer with a Synthetic Counterparty, the return on which is linked to the credit of a Reference Obligation
or to unlevered exposure to a portfolio of Reference Obligations but which may provide for a different
maturity, payment date, interest rate, credit exposure or other credit or non-credit related characteristics
than such Reference Obligation and excluding for the avoidance of doubt, any Offsetting Credit Default
Swap and any Credit Short Obligation.
The Synthetic Securities acquired by or on behalf of the Issuer may be one of the following:
(a)
(b)
(c)
an Uncollateralised CLN; or
a Collateralised Credit Default Swap; or
a credit linked note issued by a special purpose vehicle or trust which is secured on, or has
recourse to, collateral in a principal amount equal to the principal amount of such credit linked
note (a "Secured Credit Linked Note"),
in each case, principal payments in respect of which are linked to the credit of issuer, of a Reference
Obligation (the "Reference Entity") and the value of such Reference Obligation following the
occurrence of certain specified credit events in respect of such Reference Entity. The obligations
deliverable under a Synthetic Security defined as "Deliverable Obligations" therein shall satisfy the
Eligibility Criteria.
The entry into, or acquisition of, any Synthetic Security will, save in the case of Form-Approved
Synthetic Securities, be subject to receipt of Rating Agency Confirmation and, in all cases, subject to the
limits specified in the Bivariate Risk Table set out below (in respect of any such Rating Agency
Confirmation, Moody's shall notify the Issuer of the relevant Rating Factor and Recovery Rate in relation
thereto).
All references herein to the acquisition or purchase of Collateral Debt Obligations and Substitute
Collateral Debt Obligations shall include provision by, or on behalf of, the issuer of Synthetic Collateral
in respect of Synthetic Securities so purchased or acquired.
Synthetic Collateral
As part of the acquisition of or entry into any Synthetic Security which is a Collateralised Credit Default
Swap, the Issuer or the Investment Manager shall be required to provide Synthetic Collateral, the
principal amount of which is not less than 100 per cent. of the maximum liability of the Issuer under such
credit swap transaction, to the applicable Synthetic Counterparty which it will deposit in the Synthetic
Collateral Account as security for its payment obligations to the Synthetic Counterparty under such
Synthetic Security. Subject as provided below, the Issuer may purchase such Synthetic Collateral
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notwithstanding that it may not satisfy the Eligibility Criteria (provided that such Synthetic Collateral may
not include Margin Stock). For the purposes of the Investment Management Agreement, the purchase
price of any Collateral Debt Obligation that is a Synthetic Security shall include the principal amount of
any Synthetic Collateral required to be so posted. The Issuer shall grant a first security interest in such
Synthetic Collateral to the Trustee for the benefit of the Secured Parties subject to any rights and prior
security interest of any Synthetic Counterparty in such Synthetic Collateral. Synthetic Collateral (or any
amount received upon liquidation thereof) which ceases to be subject to the first priority security interest
of a Synthetic Counterparty upon expiration, redemption, termination or sale of a Synthetic Security shall
be deemed to constitute:
(a)
(b)
(c)
(d)
Sale Proceeds in the event that the Synthetic Security was sold, assigned or terminated at the
option of the Issuer or the Investment Manager, acting on its behalf; or
Unscheduled Principal Proceeds in the event that the Synthetic Security was subject to an
early termination other than by the Issuer or the Investment Manager, acting on its behalf; or
Scheduled Principal Proceeds in the event that the Synthetic Security expires at its scheduled
maturity; or
interest received on the Synthetic Collateral shall constitute Interest Proceeds and shall be
payable into the Interest Account.
Upon any release of Synthetic Collateral from the first priority security interest in favour of the applicable
Synthetic Counterparty upon termination or sale of such Synthetic Security or otherwise, such Synthetic
Collateral will (a) if in the form of cash, be deposited in the Principal Account or (b) if in the form of
securities:
(i)
(ii)
to the extent that it satisfies the Eligibility Criteria and its retention does not cause any of
the Portfolio Profile Tests to be in breach (or if in breach immediately prior thereto,
would not cause any such test to be in breach to a greater extent), at the discretion of
the Investment Manager, be retained and shall constitute a Collateral Debt Obligation;
or
in all other circumstances be sold as soon as reasonably practicable.
For the purposes of the Coverage Tests, the Collateral Quality Tests (other than the Moody’s Minimum
Diversity Test and the S&P Minimum Weighted Average Recovery Rate Test) and the Portfolio Profile
Tests, a Synthetic Security shall be included as a Collateral Debt Obligation having the relevant
characteristics of the Synthetic Security and not of the related Reference Obligation unless the
Investment Manager determines otherwise and receives Rating Agency Confirmation in respect of such
determination.
For the purposes of the Moody’s Minimum Diversity Test and the S&P Minimum Weighted Average
Recovery Rate Test, a Synthetic Security shall be included as a Collateral Debt Obligation having the
relevant characteristics of the related Reference Obligation (and the issuer of such Synthetic Security
shall be deemed to be the issuer of the related Reference Obligation for such purposes (but not for the
purpose of determining a Moody’s Rating of a Synthetic Security to be assigned by Moody’s pursuant to
the terms of the Investment Management Agreement)) and not of the Synthetic Security, unless the
Investment Manager determines otherwise and receives Rating Agency Confirmation in respect of such
determination.
The interest rate or coupon of a Collateralised Credit Default Swap shall be a fraction, expressed as a
percentage and annualised, the numerator of which is the current stated periodic payment of interest or
premium scheduled to be received by the Issuer from the related Synthetic Counterparty, together with
any interest accruing on any Synthetic Collateral (to the extent payable to the Issuer) and the
denominator of which is the aggregate of the notional balance of such Synthetic Security. The interest
rate or coupon payable on such Synthetic Collateral shall constitute the floating rate by reference to
which the coupon payable on such Synthetic Collateral is determined and the premium or interest
payable under the related credit default swap shall constitute the margin over such "floating rate".
Deliverable Obligations
In the event that any Deliverable Obligations are received, the Investment Manager:
(a)
may, to the extent that such obligations satisfy the Eligibility Criteria (save for any requirement
that such obligation must not be a Defaulted Obligation or Credit Impaired Obligation),
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designate such Deliverable Obligations as Collateral Debt Obligations in which event such
obligations shall constitute Defaulted Obligations; or
(b)
shall, in all other circumstances, sell or procure the sale thereof as soon as reasonably
practicable.
Credit Short Obligations
The Investment Manager acting on behalf of the Issuer may from time to time enter into a credit default
swap transaction with a Credit Short Obligation Counterparty having a stated notional amount under
which the Issuer is the purchaser of credit protection and with a term ending no later than the Maturity
Date; provided that:
(a)
(b)
(c)
the terms thereof provide for the Issuer to be able to elect for either (i) cash or physical
settlement on or after the occurrence of a credit event in relation to the relevant Reference
Obligation or (ii) if the Issuer elects for physical settlement at the date it enters into the Credit
Short Obligation, it credits an amount equal to the notional amount of such Credit Short
Obligation to the Collateral Enhancement Account to permit the purchase of the Deliverable
Obligations relating to the Credit Short Obligation if a credit event were to occur in relation to
the Reference Obligation, provided that (A) such amount credited to the Collateral
Enhancement Account shall not be used for any other purpose and (B) on the settlement date
of the Credit Short Obligation no more than such amount equal to the notional amount may be
used to purchase the Deliverable Obligations relating to such Credit Short Obligation;
the obligor of the Reference Obligation is organised in a Qualifying Country; and
Rating Agency Confirmation has been obtained, unless the proposed Credit Short Obligation is
a Form-Approved Credit Short Obligation.
The Issuer shall not acquire any Credit Short Obligation unless after giving effect to such acquisition, (i)
the Coverage Tests are satisfied, (ii) the Minimum Weighted Average Spread Test, the CDO Monitor
Test and the Moody's Maximum Weighted Average Rating Factor Test are satisfied and (iii) after the
following calculation (x) minus (y) is greater than zero, where (x) is:
(1) the current Weighted Average Spread minus the Minimum Weighted Average Spread
(2) multiplied by the Aggregate Principal Balance of all Collateral Debt Obligations
(3) multiplied by (1- the Class A Scenario Default Rate)
(4) multiplied by the Portfolio Weighted Average Life,
and (y) is the sum of all future premiums that will be due under any Credit Short Obligations after taking
into account the Credit Short Obligation due to be entered into.
After the occurrence of a credit event in relation to a Credit Short Obligation, the Investment Manager on
behalf of the Issuer may only elect for physical settlement if at the time of its election:
(a)
(b)
it has determined that the Issuer has deposited or that there are sufficient funds (for the
purpose of buying Deliverable Obligations) standing to the credit of either the Collateral
Enhancement Account or the Principal Account to fund the purchase of the relevant Deliverable
Obligations and that it will be able to obtain such Deliverable Obligations; or
the Interest Coverage Tests would be satisfied.
The Issuer may sell, assign or terminate a Credit Short Obligation on any Business Day. In the event
that the applicable Credit Short Obligation is terminated, any amount payable by the Issuer to the
applicable Credit Short Obligation Counterparty upon such termination shall be paid, at the discretion of
the Investment Manager (which shall not be called into question as a result of subsequent events) acting
on behalf of the Issuer, out of amounts standing to the Interest Account (provided that the Interest
Coverage Tests and the Collateral Quality Tests are satisfied) or pursuant to the Interest Proceeds
Priority of Payments and out of amounts pursuant to the Principal Proceeds Priority of Payment.
For the avoidance of doubt Credit Short Obligations do not include Offsetting Credit Default Swaps.
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Offsetting Credit Default Swap
The Investment Manager, acting on behalf of the Issuer, may from time to time enter into Offsetting
Credit Default Swap. An "Offsetting Credit Default Swap" is an unfunded credit default swap entered
into between the Issuer (as protection buyer) and an Offsetting Credit Default Swap Counterparty (as
protection seller), the Reference Obligation of which is a Collateral Debt Obligation owned by the Issuer
the effect of which hedges (in whole or in part) the Issuer's credit exposure under such Collateral Debt
Obligation.
The entry into, or acquisition of, any Offsetting Credit Default Swap will be subject to Rating Agency
Confirmation (save in relation to an Offsetting Credit Default Swap which is a Form-Approved Offsetting
Credit Default Swap), will be subject to the limits specified in the Bivariate Risk Table, and will be
subject to:
(a)
(b)
(c)
(d)
at the time such Offsetting Credit Default Swap is entered into, the Minimum Weighted Average
Spread Test will be satisfied;
the Offsetting Credit Default Swap having a notional amount less than or equal to (1) the
principal amount of the related Collateral Debt Obligation (other than a Collateral Debt
Obligation which is a Collateralised Credit Default Swap) that is a Reference Obligation or (2) in
the case of a Collateralised Credit Default Swap the notional amount of such Collateralised
Credit Default Swap;
the maturity of an Offsetting Credit Default Swap must be equal to or shorter than the maturity
of the related Collateral Debt Obligation that is the Reference Obligation and may not exceed
the Maturity Date of the Notes; and
the Offsetting Credit Default Swap containing limited recourse and non-petition provisions
similar to those set out in the Investment Management Agreement.
In the event of any sale, prepayment or repayment of any Collateral Debt Obligation which is the
Reference Obligation in respect of an Offsetting Credit Default Swap, if such sale, prepayment or
repayment would result in the Principal Balance of the related Collateral Debt Obligation being less than
the notional amount of the relevant Offsetting Credit Default Swap then, at the discretion of the
Investment Manager, (i) all or part, as applicable, of that Offsetting Credit Default Swap will be sold or
unwound so that its notional amount is less than or equal to the Principal Balance of the related
Collateral Debt Obligation or (ii) such excess notional amount shall be deemed to be a Credit Short
Obligation provided that following such sale, prepayment or repayment all the conditions applicable
under the Transaction Documents for the entering into of Credit Short Obligations would be satisfied.
For the avoidance of doubt, the notional amount of any Collateral Debt Obligation that is the subject of
an Offsetting CDS whose maturity and amortisation are equal to the Collateral Debt Obligation shall be
deemed to have an "AAA" credit rating by S&P an S&P Recovery Rate and a Moody's Recovery Rate of
100 per cent. (or such other S&P Recovery Rate as advised by S&P from time to time) and a Moody's
Rating Factor of 1.
Put Option
The Issuer may from time to time enter into a Put Option in respect of one or more long dated Collateral
Debt Obligations. Each Put Option must be with a Put Option Counterparty and must be on terms that
permit the Issuer to sell the specified long dated Collateral Debt Obligations at par on or prior to the
Maturity Date. The terms of each Put Option must have received Rating Agency Confirmation and will
be subject to the limits specified in the Bivariate Risk Table below. The sale of the Put Option or the
amount received upon exercise from a Put Option Counterparty will be considered as "Sale Proceeds".
Put Options may only be sold with the specified long dated Collateral Debt Obligations unless Rating
Agency Confirmation is received.
Revolving Securities and Delayed Drawdown Obligations
The Investment Manager, acting on behalf of the Issuer, may acquire Collateral Debt Obligations which
are Revolving Securities or Delayed Drawdown Obligations from time to time.
Such Revolving Securities and Delayed Drawdown Securities may only be acquired if they are capable
of being drawn in a single currency only, and are not payable in or convertible into another currency,
save to the extent Rating Agency Confirmation has been obtained.
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Each Revolving Security and Delayed Drawdown Obligation will, pursuant to its terms, require the Issuer
to make one or more future advances or other extensions of credit (including extensions of credit made
on an unfunded basis pursuant to which the Issuer may be required to reimburse the provider of a
guarantee or other ancillary facilities made available to the obligor thereof in the event of any default by
the obligor thereof in respect of its reimbursement obligations in connection therewith). Such Revolving
Securities and Delayed Drawdown Obligations may or may not provide that it may be repaid and
reborrowed from time to time by the Obligor thereunder. Upon acquisition of any Revolving Securities
and Delayed Drawdown Obligations, the Issuer shall either (i) deposit into the relevant Unfunded
Reserve Account and shall maintain from time to time in the relevant Unfunded Reserve Account
amounts equal to the aggregate Unfunded Amounts under each of the Revolving Securities and
Delayed Drawdown Obligations in the same currency or (ii) ensure that at all times the Class A1
Allocated Amount under the Class A1 Notes covers the full amount of such Unfunded Amounts of any
Revolving Securities and Delayed Drawdown Obligations. To the extent required, the Issuer, or the
Investment Manager acting on its behalf, may direct that amounts standing to the credit of the relevant
Unfunded Reserve Account be deposited with a third party from time to time as collateral for any
reimbursement or indemnification obligations owed by the Issuer to any other lender in connection with
a Revolving Security or a Delayed Drawdown Obligation and upon receipt of an Issuer Order (as defined
in the Investment Management Agreement) the Trustee shall release such amounts from the security
granted thereover pursuant to the Trust Deed.
The Issuer shall be required to enter into an Asset Swap Transaction in respect of each Delayed
Drawdown Obligation and each Revolving Security which is a Non-Euro Obligation. Each such Asset
Swap Transaction shall be entered into in respect of the full Principal Balance of such Delayed
Drawdown Obligation or Revolving Security (including any Unfunded Amount thereof) and the interim
payments payable thereunder shall, pursuant to the terms of such Asset Swap Transaction, be subject
to amendment on an ongoing basis to reflect changes in the amount of coupon and/or commitment fees
receivable by the Issuer in respect of such Delayed Drawdown Obligation or Revolving Security from
time to time as amounts are drawn down thereunder.
Margin Stock
The Investment Management Agreement requires that the Investment Manager, on behalf of the Issuer,
will sell any Collateral Debt Obligation, Exchanged Equity Security or Collateral Enhancement Obligation
which is or at any time becomes Margin Stock as soon as practicable following such event.
Non-Euro Obligations
The Investment Manager shall be authorised to purchase, on behalf of the Issuer, Non-Euro Obligations,
provided that:
(a)
in the case of any Non-Euro Obligation which is denominated in Sterling, it is either:
(i)
(ii)
purchased with Sterling proceeds from the Class A1 Notes and/or amounts standing to
the credit of the Sterling Principal Account; or
hedged under an Asset Swap Transaction with one or more Asset Swap Counterparty
satisfying the applicable Rating Requirement; or
(b)
in the case of any Non-Euro Obligation which is denominated in Dollars, it is either:
(i)
(ii)
purchased with Dollar proceeds from the Class A1 Notes and/or amounts standing to
the credit of the Dollar Principal Account; or
hedged under an Asset Swap Transaction with one or more Asset Swap Counterparty
satisfying the applicable Rating Requirement; or
(c)
in the case of any other Non-Euro Obligation, it is hedged under an Asset Swap Transaction
with one or more Asset Swap Counterparty satisfying the applicable Rating Requirement as
outlined above,
as described in more detail under "Hedging Arrangements" below.
Class A1 Drawings
The Investment Manager (acting on behalf of the Issuer) in accordance with the Investment
Management Agreement may deliver a "Class A1 Drawing Request" requesting a Class A1 Drawing
from the Class A1 Noteholders at any time.
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Each Class A1 Drawing is subject to the further conditions precedent that:
(i) the amount of such Class A1 Drawing is in a minimum denomination of €1,000,000, £500,000
or $1,000,000 in respect of a Class A1 Drawing and in each case, and in excess thereof in one
or more multiples of the Authorised Integral Amount or, if less, an amount equal to the Class A1
Available Commitment at that time;
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
the Class A1 Note Agent and the Trustee shall have received from the Investment Manager, on
behalf of the, Issuer (and the Capital Commitment Registrar shall, immediately upon such
receipt, have passed on to each Class A1 Noteholder) a Class A1 Drawing Request given in
accordance with and satisfying the conditions of paragraphs 3(a) and 3(b) of this schedule
specifying a proposed Class A1 Drawing Date which is a Business Day which is not less than
three Business Days after the date of such Class A1 Drawing Request;
both prior to and after giving effect to any such Class A1 Drawing, no Event of Default or
Potential Event of Default shall have occurred;
each of the Coverage Tests are at least satisfied or if not satisfied, the coverage ratio relating
to such test will be at least as close to being satisfied after giving effect to such Class A1
Drawing than it was immediately prior to such Class A1 Drawing;
in the last 12 months, the Class A1 Noteholder has funded no more than one Class A1 Drawing
per week excluding any Class A1 Drawing made on the Issue Date and excluding Class A1
Drawings made in respect of Revolving Security or Delayed Drawdown Obligation;
the Class A1 Note Purchase Agreement, the Class A1 Notes, the Trust Deed and the Issue
Deed are in full force and effect; and
the representation and warranties of the Issuer in the Class A1 Note Purchase Agreement are
true and correct as at the date of the relevant Class A1 Drawing Request and the Class A1
Drawing Date;
provided that in respect of a Class A1 Drawing the proceeds of which shall be credited to the Unfunded
Reserve Account pursuant to Condition 3 (j)(xi)(A) (Unfunded Reserve Accounts) and the Synthetic
Collateral Account pursuant to Condition 3(j)(vii)(A) (Synthetic Collateral Account) and the requirements
of paragraph (iv) above need not be satisfied.
Participations
The Issuer or the Investment Manager may from time to time acquire Collateral Debt Obligations from
Selling Institutions by way of Participation provided that at the time such Participation satisfies the limits
specified in the Bivariate Risk Table.
Each Participation entered into by the Issuer must be in accordance with the provisions of the
Investment Management Agreement, save to the extent that Rating Agency Confirmation is received in
respect of any amendment to the requirement set out therein.
Assignments
The Issuer or the Investment Manager may from time to time acquire Collateral Debt Obligations from
Selling Institutions by way of Assignment provided that at the time such Assignment is acquired the
Issuer or the Investment Manager acting on behalf of the Issuer shall have complied, to the extent within
their control, with any requirements relating to such Assignment set out in the relevant loan
documentation for such Collateral Debt Obligation (including, without limitation, with respect to the form
of such Assignment and obtaining the consent of any person specified in the relevant loan
documentation).
Bivariate Risk Table
The following is the bivariate risk table (the "Bivariate Risk Table") as referred to in "Synthetic
Securities", "Offsetting Credit Default Swaps" and "Participations" and "Put Option" above. For the
purposes of the limits specified in the Bivariate Risk Table, the individual third party credit exposure limit
shall be determined by reference to the sum of the Principal Balances of all Synthetic Securities,
Offsetting Credit Default Swaps, Put Options and Participations entered into by the Issuer with the same
counterparty, plus the portion of the Principal Balance of all Senior Loans, and Mezzanine Obligations in
respect of which Collateral has been deposited by the Issuer with the same entity as security for any
reimbursement of indemnification obligations to any other lender under such loans (such amount in
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espect of such entity the "Third Party Exposure") and the applicable percentage limits shall be
determined by reference to the lower of the Moody’s or S&P ratings applicable to such counterparty in
the case of the "Individual Third Party Credit Exposure Limit" specified below and the "Aggregate
Third Party Credit Exposure Limit" specified below shall be determined by reference to the aggregate of
Third Party Exposure of all such counterparties which have the same such rating or lower, as indicated
in the Bivariate Risk Table, provided that, in the case of any Participation, the ratings used shall be the
lowest of the ratings of any Counterparty under any sub-participation through which the Issuer derives
its interest in such Participation. The Investment Manager shall use commercially reasonable efforts to
determine whether a Participation entered into by the Issuer is entered into with the lender of record
under the applicable loan or whether there are intervening participants between the Issuer and such
lender of record. In the event that there are any such intervening participants, to the extent that the
Investment Manager is able to identify such intervening participants using commercially reasonable
efforts, each participant thereunder shall be treated as a separate Counterparty for the purposes of
determining the Third Party Exposure applicable to such Collateral Debt Obligation so that the Principal
Balance of such Collateral Debt Obligation shall be multiplied by the number of such intervening
participants.
Bivariate Risk Table
Long-Term Senior
Unsecured Debt
Rating of Selling
Institution/Synthetic
Counterparty*/
Offsetting Credit
Default Swap/Put
Option Counterparty
Long-Term Senior
Unsecured Debt
Rating of Selling
Institution/Synthetic
Counterparty*/
Offsetting Credit
Default Swap/Put
Option Counterparty
Individual Third Party
Credit Exposure
Limit**
Aggregate Third Party
Credit Exposure
Limit**
Moody's
S&P
Aaa AAA 20% 20%
Aa1 AA+ 10% 20%
Aa2 AA 10% 20%
Aa3 AA- 10% 15%
A1 A+ 5% 15%
A2 A 5% 10%
* Synthetic Counterparties of Uncollateralised CLNs only.
** As a percentage of the Aggregate Collateral Balance (excluding Defaulted Obligations).
For the avoidance of doubt, the aggregate of all Third Party Exposures may not exceed 20 per cent. of
the Aggregate Collateral Balance (excluding Defaulted Obligations)
Purchase of Collateral Debt Obligations
The Issuer or the Investment Manager, on behalf of the Issuer, may only enter into a contract for (as the
case may be) any subscription and/or sale and/or purchase of any Collateral Debt Obligation:
(a)
(b)
with a counterparty rated lower than (a) A2 by Moody or A by S&P in respect of its long-term
senior unsecured debt, or (b) P-1 by Moody’s or A1 by S&P in respect of its short-term senior
unsecured debt, if such contract has a settlement date which is no further from the date of entry
into such contract than the customary market settlement period at such time; and
which has a settlement date which is further from the date of entry into such contract than the
customary market settlement period, where both of the following conditions are met (A) the
applicable counterparty is rated no lower than (i) A2 by Moody and A by S&P in respect of its
long-term senior unsecured debt, and (ii) P-1 by Moody’s and A1 by S&P in respect of its shortterm
senior unsecured debt, and (B) the settlement date of such contract is within 30 days of
entry into such contract; or
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(c)
where neither paragraphs (a) nor (b) above apply provided (i) Rating Agency Confirmation in
respect of such contract has been obtained, and (ii) the settlement date of such contract is
within 30 days of entry into such contract.
Portfolio Profile Tests and Collateral Quality Tests
Measurement of Tests
The Portfolio Profile Tests and the Collateral Quality Tests will be used primarily as the criteria for
purchasing Collateral Debt Obligations. The Collateral Administrator will measure the Portfolio Profile
Tests and the Collateral Quality Tests on each Measurement Date.
The Portfolio Profile Tests and the Collateral Quality Tests must be satisfied after giving effect to the
purchase, or commitment to purchase, of any Substitute Collateral Debt Obligation after the Effective
Date or, if not satisfied prior to such purchase, or commitment to purchase, the relevant thresholds and
amounts calculated pursuant thereto must be maintained or improved after giving effect to such
purchase. See "Reinvestment Criteria" above.
Notwithstanding the foregoing, the failure of the Portfolio to meet the requirements of the Portfolio Profile
Tests at any time shall not prevent any obligation which would otherwise be a Collateral Debt Obligation
from being a Collateral Debt Obligation.
Portfolio Profile Tests
The Portfolio Profile Tests will consist of each of the following:
(a)
(b)
not less than 75 per cent. of the Aggregate Principal Balance shall consist of Senior Loans
(provided that, for the purposes of this paragraph, references to Senior Loans shall comprise
the aggregate of the Aggregate Principal Balance of the Senior Loans and the Balances
standing to the credit of the Principal Account and the Unused Proceeds Account, in each case
as at the relevant Measurement Date);
not more than 2.5 per cent. of the Aggregate Principal Balance shall consist of Senior Loans
which are obligations of any single Obligor, save that not more than 3.0 per cent. of the
Aggregate Principal Balance shall consist of Senior Loans of up to five single Obligors and not
more than 2.0 per cent. of the Aggregate Principal Balance shall consist of Mezzanine
Obligations which are obligations of any single Obligor;
(c) the Aggregate Principal Balance of Senior Loans which are senior unsecured loan obligations -
may not exceed €17,500,000;
(d)
(e)
not more than 1.5 per cent. of the Aggregate Principal Balance shall consist of High Yield
Bonds which are obligations of any single Obligor;
not more than 5 per cent. of the Aggregate Principal Balance shall consist of Collateral Debt
Obligations that pay or are scheduled to pay interest less frequently than semi-annually;
(f) the Aggregate Principal Balance of Non-Euro Obligations may not exceed €87,500,000;
(g)
(h)
not more than 5 per cent. of the Aggregate Principal Balance shall consist of Deferrable
Obligations other than Purposely Deferring Obligations;
not more than 10 per cent. of the Aggregate Principal Balance shall consist of Collateral Debt
Obligations with a Stated Maturity that is later than the Maturity Date;
(i) the Aggregate Principal Balance of Discount Obligations may not be more than €35,000,000;
(j)
the limits specified in the Bivariate Risk Table determined by reference to the Moody’s Ratings
and S&P Ratings of Selling Institutions, Synthetic Counterparties, Offsetting Credit Default
Swap Counterparties and Put Option Counterparties are satisfied;
(k) the Aggregate Principal Balance of Synthetic Securities may not exceed €52,500,000;
(l)
the aggregate notional amount under all Credit Short Obligations and Offsetting Credit Default
Swaps shall not exceed 5 per cent. of the Aggregate Collateral Balance;
(m) the Aggregate Principal Balance of High Yield Bonds may not be more than €26,250,000;
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189

(n)
(o)
(p)
(q)
(r)
(s)
not more than 5 per cent. of the Aggregate Principal Balance may consist of Structured
Finance Obligations;
the aggregate of the Aggregate Principal Balance of Unfunded Amounts and Funded Amounts
under Revolving Securities and the Aggregate Principal Balance of Unfunded Amounts under
Delayed Drawdown Obligations may not be more than €17,500,000;
not less than 95 per cent. of the Aggregate Collateral Balance will be Floating Rate Collateral
Debt Obligations;
not more than 5 per cent. of the Aggregate Collateral Balance may consist of Collateral Debt
Obligations with an S&P Rating of "CCC+" or lower or a Moody's Rating of "Caa1" or lower,
excluding Defaulted Obligations;
not more than 5 per cent. of the Aggregate Collateral Balance may consist of DIP Loans; and
not more than 1.5 per cent. of the Aggregate Principal Balance shall consist of Structured
Finance Obligations which are obligations of any single Obligor.
The percentage requirements applicable to different types of Collateral Debt Obligations specified in the
Portfolio Profile Tests shall be determined by reference to the Aggregate Principal Balance of such type
of Collateral Debt Obligations, excluding Defaulted Obligations.
Assets which are to constitute Collateral Debt Obligations in respect of which the Issuer has entered into
a binding commitment to purchase but which have not yet settled shall be included as Collateral Debt
Obligations in the calculation of the Portfolio Profile Tests at any time as if such acquisition has been
completed. Assets which do not yet constitute Collateral Debt Obligations but in respect of which an
allocation has been notified to the Investment Manager, and a binding commitment to purchase will be
entered into, shall be included as Collateral Debt Obligations in the calculation of the Portfolio Profile
Tests at any time as if such acquisition has been completed.
Collateral Quality Tests
The Collateral Quality Tests will consist of each of the following:
(a)
so long as any Notes rated by S&P are Outstanding:
(i)
(ii)
as of the Effective Date and until the end of the Reinvestment Period, the CDO Monitor
Test; and
the S&P Minimum Weighted Average Recovery Rate Test;
(b)
so long as any Notes rated by Moody’s are Outstanding:
(i)
(ii)
(iii)
the Moody’s Minimum Diversity Test;
the Moody’s Maximum Weighted Average Rating Factor Test; and
the Moody’s Minimum Weighted Average Recovery Rate Test; and
(c)
so long as any Notes are Outstanding:
(i)
(ii)
the Minimum Weighted Average Spread Test; and
the Maximum Weighted Average Maturity Test,
each as defined in the Investment Management Agreement.
S&P Test Matrix
Subject to the provisions below, on and after the Effective Date, the Investment Manager, acting on
behalf of the Issuer, will have the option to elect which of the cases (the "S&P Break-even Rate
Cases") set out in the matrix below (the "S&P Tests Matrix"), as amended from time to time, shall be
applicable for purposes of the S&P Minimum Weighted Average Recovery Rate Test and the Minimum
Weighted Average Spread Test and based on the selection of the Investment Manager (on behalf of the
Issuer), S&P will provide the Investment Manager (on behalf of the Issuer) on the Effective Date, and
from time to time thereafter until the end of the Reinvestment Period, with the applicable CDO Monitor in
connection with the CDO Monitor Test.
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190

For any given case:
(a)
(b)
(c)
the applicable recovery rates for performing the S&P Minimum Weighted Average Recovery
Rate Test will be in the applicable row and columns of the "S&P Tests Recovery Matrix" for the
applicable Recovery Scenario that is associated with the elected case as per the S&P Tests
Matrix.
the applicable row for determining the Minimum Weighted Average Spread will be the row in
which the elected case is set out.
the applicable table for determining the Minimum Weighted Average Additional PIK Interest will
be the table in which the elected case is set out.
On the Effective Date, the Investment Manager, acting on behalf of the Issuer, will be required to elect
which S&P Break-even Rate Case shall apply initially. Thereafter, on five Business Days’ notice to the
Issuer, the Trustee, the Collateral Administrator and S&P, the Investment Manager (on behalf of the
Issuer) may elect to have a different S&P Break-even Rate Case apply, provided that the S&P Minimum
Weighted Average Recovery Rate Test, the Minimum Weighted Average Spread Test and the Minimum
Weighted Average Additional PIK Interest applicable to the S&P Break-even Rate Case to which the
Investment Manager (on behalf of the Issuer) desires to change are satisfied (and, in relation to the
Minimum Weighted Average Spread Test and the Minimum Weighted Average Additional PIK Interest
taking into account the case that the Investment Manager (on behalf of the Issuer) has elected to apply
under the Moody’s Tests Matrix). In no event will the Issuer or the Investment Manager (on behalf of the
Issuer) be obliged to elect to have a different S&P Break-even Rate Case apply.
S&P Breakeven
Rate
Case
Minimum Weighted average Spread
S&P Test Matrix
Where the Minimum Weighted Average Additional PIK Interest is 0.0000%
Recovery
Scenario
1
S&P Minimum Weighted Average Recovery Rate
Recovery
Scenario
2
Recovery
Scenario
3
Recovery
Scenario
4
Recovery
Scenario
5
Recovery
Scenario
6
Recovery
Scenario
7
2.000% 1 2 3 4 5 6 7
2.025% 8 9 10 11 12 13 14
2.050% 15 16 17 18 19 20 21
2.075% 22 23 24 25 26 27 28
2.100% 29 30 31 32 33 34 35
2.125% 36 37 38 39 40 41 42
2.150% 43 44 45 46 47 48 49
2.175% 50 51 52 53 54 55 56
2.200% 57 58 59 60 61 62 63
2.225% 64 65 66 67 68 69 70
2.250% 71 72 73 74 75 76 77
2.275% 78 79 80 81 82 83 84
2.300% 85 86 87 88 89 90 91
2.325% 92 93 94 95 96 97 98
2.350% 99 100 101 102 103 104 105
2.375% 106 107 108 109 110 111 112
2.400% 113 114 115 116 117 118 119
2.425% 120 121 122 123 124 125 126
2.450% 127 128 129 130 131 132 133
2.475% 134 135 136 137 138 139 140
2.500% 141 142 143 144 145 146 147
2.525% 148 149 150 151 152 153 154
2.550% 155 156 157 158 159 160 161
2.575% 162 163 164 165 166 167 168
2.600% 169 170 171 172 173 174 175
2.625% 176 177 178 179 180 181 182
2.650% 183 184 185 186 187 188 189
2.675% 190 191 192 193 194 195 196
2.700% 197 198 199 200 201 202 203
2.725% 204 205 206 207 208 209 210
2.750% 211 212 213 214 215 216 217
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S&P Breakeven
Rate
Case
Recovery
Scenario
1
S&P Minimum Weighted Average Recovery Rate
Recovery
Scenario
2
Recovery
Scenario
3
Recovery
Scenario
4
Recovery
Scenario
5
Recovery
Scenario
6
Recovery
Scenario
7
2.775% 218 219 220 221 222 223 224
2.800% 225 226 227 228 229 230 231
2.825% 232 233 234 235 236 237 238
2.850% 239 240 241 242 243 244 245
2.875% 246 247 248 249 250 251 252
2.900% 253 254 255 256 257 258 259
2.925% 260 261 262 263 264 265 266
2.950% 267 268 269 270 271 272 273
2.975% 274 275 276 277 278 279 280
3.000% 281 282 283 284 285 286 287
S&P Breakeven
Rate
Case
Minimum Weighted average Spread
Where the Minimum Weighted Average Additional PIK Interest is 0.0875%
Recovery
Scenario
1
S&P Minimum Weighted Average Recovery Rate
Recovery
Scenario
2
Recovery
Scenario
3
Recovery
Scenario
4
Recovery
Scenario
5
Recovery
Scenario
6
Recovery
Scenario
7
2.000% 288 289 290 291 292 293 294
2.025% 295 296 297 298 299 300 301
2.050% 302 303 304 305 306 307 308
2.075% 309 310 311 312 313 314 315
2.100% 316 317 318 319 320 321 322
2.125% 323 324 325 326 327 328 329
2.150% 330 331 332 333 334 335 336
2.175% 337 338 339 340 341 342 343
2.200% 344 345 346 347 348 349 350
2.225% 351 352 353 354 355 356 357
2.250% 358 359 360 361 362 363 364
2.275% 365 366 367 368 369 370 371
2.300% 372 373 364 375 376 377 378
2.325% 379 380 381 382 383 384 385
2.350% 386 387 388 389 390 391 392
2.375% 393 394 395 396 397 398 399
2.400% 300 401 402 403 404 405 406
2.425% 407 408 409 410 411 412 413
2.450% 414 415 416 417 418 419 420
2.475% 421 422 423 424 425 426 427
2.500% 428 429 430 431 432 433 434
2.525% 435 436 437 438 439 440 441
2.550% 442 443 444 445 446 447 448
2.575% 449 450 451 452 453 454 455
2.600% 456 457 458 459 460 461 462
2.625% 463 464 465 466 467 468 469
2.650% 470 471 472 473 474 475 476
2.675% 477 478 479 480 481 482 483
2.700% 484 485 486 487 488 489 490
2.725% 491 492 493 494 495 496 497
2.750% 498 499 500 501 502 503 504
2.775% 505 506 507 508 509 510 511
2.800% 512 513 514 515 516 517 518
2.825% 519 520 521 522 523 524 525
2.850% 526 527 528 529 530 531 532
2.875% 533 534 535 536 537 538 539
2.900% 540 541 542 543 544 545 546
2.925% 547 548 549 550 551 552 553
2.950% 554 555 556 557 558 559 560
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S&P Breakeven
Rate
Case
Recovery
Scenario
1
S&P Minimum Weighted Average Recovery Rate
Recovery
Scenario
2
Recovery
Scenario
3
Recovery
Scenario
4
Recovery
Scenario
5
Recovery
Scenario
6
Recovery
Scenario
7
2.975% 561 562 563 564 565 566 567
3.000% 568 569 570 571 572 573 574
Minimum Weighted Average Spread
S&P Breakeven
Rate
Case
Where the Minimum Weighted Average Additional PIK Interest is 0.1750%
Recovery
Scenario
1
S&P Minimum Weighted Average Recovery Rate
Recovery
Scenario
2
Recovery
Scenario
3
Recovery
Scenario
4
Recovery
Scenario
5
Recovery
Scenario
6
Recovery
Scenario
7
2.000% 575 576 577 578 579 580 581
2.025% 582 583 584 585 586 587 588
2.050% 589 590 591 592 593 594 595
2.075% 596 597 598 599 600 601 602
2.100% 603 604 605 606 607 608 609
2.125% 610 611 612 613 614 615 616
2.150% 617 618 619 620 621 622 623
2.175% 624 625 626 627 628 629 630
2.200% 631 632 633 634 635 636 637
2.225% 638 639 640 641 642 643 644
2.250% 645 646 647 648 649 650 651
2.275% 652 653 654 655 656 657 658
2.300% 659 660 661 662 663 664 665
2.325% 666 667 668 669 670 671 672
2.350% 673 674 675 676 677 678 679
2.375% 680 681 682 683 684 685 686
2.400% 687 688 689 690 691 692 693
2.425% 694 695 696 697 698 699 700
2.450% 701 702 703 704 705 706 707
2.475% 708 709 710 711 712 713 714
2.500% 715 716 717 718 719 720 721
2.525% 722 723 724 725 726 727 728
2.550% 729 730 731 732 733 734 735
2.575% 736 737 738 739 740 741 742
2.600% 743 744 745 746 747 748 749
2.625% 750 751 752 753 754 755 756
2.650% 757 758 759 760 761 762 763
2.675% 764 765 766 767 768 769 770
2.700% 771 772 773 774 775 776 777
2.725% 778 779 780 781 782 783 784
2.750% 785 786 787 788 789 790 791
2.775% 792 793 794 795 796 797 798
2.800% 799 800 801 802 803 804 805
2.825% 806 807 808 809 810 811 812
2.850% 813 814 815 816 817 818 819
2.875% 820 821 822 823 824 825 826
2.900% 827 828 829 830 831 832 833
2.925% 834 835 836 837 838 839 840
2.950% 841 842 843 844 845 846 847
2.975% 848 849 850 851 852 853 854
3.000% 855 856 857 858 859 860 861
S&P Test Recovery Matrix
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193

Recovery
Scenario
Class A Class B Class C Class D Class E
1 59.20% 63.40% 67.70% 70.50% 73.90%
2 57.50% 61.50% 65.70% 68.50% 71.70%
3 56.20% 60.10% 64.20% 67.00% 70.10%
4 55.00% 58.80% 62.70% 65.50% 68.50%
5 54.00% 57.70% 61.50% 64.30% 67.20%
6 52.70% 56.20% 59.90% 62.60% 65.50%
7 51.20% 54.60% 58.30% 60.80% 63.60%
8 58.70% 62.80% 67.00% 69.80% 73.10%
9 57.00% 61.00% 65.10% 67.90% 71.10%
10 55.70% 59.60% 63.60% 66.40% 69.40%
11 54.50% 58.20% 62.10% 64.90% 67.80%
12 53.50% 57.10% 60.90% 63.60% 66.50%
13 52.20% 55.70% 59.40% 62.00% 64.80%
14 50.70% 54.00% 57.70% 60.10% 62.90%
15 58.20% 62.30% 66.40% 69.20% 72.50%
16 56.50% 60.50% 64.50% 67.30% 70.50%
17 55.20% 59.00% 63.00% 65.80% 68.80%
18 54.00% 57.70% 61.50% 64.30% 67.20%
19 53.00% 56.60% 60.30% 63.00% 65.90%
20 51.70% 55.10% 58.90% 61.40% 64.30%
21 50.20% 53.40% 57.10% 59.40% 62.30%
Moody’s Test Matrices
Subject to the provisions below, on and after the Effective Date, the Investment Manager, will have the
option to elect which of the cases set forth in the matrices set out in the Investment Management
Agreement (the "Moody’s Test Matrices"), as amended from time to time by the Investment Manager
and subject to Rating Agency Confirmation, shall be applicable for purposes of the Moody’s Minimum
Diversity Test, the Moody’s Maximum Weighted Average Rating Factor Test, the Moody’s Minimum
Weighted Average Recovery Rate Test, the Minimum Weighted Average Spread Test and the Minimum
Weighted Average Additional PIK Interest. For the elected Minimum Diversity Score:
(a)
(b)
(c)
(d)
the applicable row for determining the Minimum Weighted Average Spread will be the row
which corresponds to the elected case;
the applicable column for performing the Moody’s Maximum Weighted Average Rating Factor
Test will be the column which corresponds to the elected case;
the applicable row and column for performing the Moody’s Minimum Weighted Averaged
Recovery Rate Test will be the row and column which correspond to the elected case; and
the applicable value for determining the Minimum Weighted Average PIK Interest will be the
applicable value in the heading of the Moody’s Test Matrix in which the elected case is set out.
On the Effective Date, the Investment Manager will be required to elect which case shall apply initially.
Thereafter, on ten Business Days’ written notice to the Issuer, the Trustee, the Collateral Administrator
and Moody’s, the Investment Manager may elect to have a different case apply, provided that the
Moody’s Minimum Diversity Test, the Moody’s Maximum Weighted Average Rating Factor Test, the
Moody’s Minimum Weighted Average Recovery Rate Test and the Minimum Weighted Average Spread
Test applicable to the case to which the Investment Manager, desires to change are satisfied. In no
event will the Issuer or the Investment Manager be obliged to elect to have a different case apply. The
Investment Manager may interpolate between two adjacent rows and/or two adjacent columns and/or
two adjacent matrices within the same applicable scenario, on a straight-line basis and round the result
to two decimal points.
Interpolation Scheme
Minimum Weighted Average Recovery Rate in row r, column c and table t = RR r,c,t
Minimum Weighted Average Recovery Rate in row r +1 (adjacent to row r), column c and table t =
RR r+1,c,t,
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Minimum Weighted Average Recovery Rate in row r, column c +1(adjacent to column c) and table t =
RR r,c+1,t
Minimum Weighted Average Recovery Rate in row r, column c and table t +1(adjacent to table t) =
RR r,c,t+1
Minimum Weighted Average Spread in row r and table t = WAS r,t
Minimum Weighted Average Spread in row r +1 and table t = WAS r+1,t
Minimum Weighted Average Rating Factor in column c and table t = WARF c,t
Minimum Weighted Average Rating Factor in column c +1 and table t = WARF c+1,t
Minimum Diversity Score in table t = DS t
Minimum Diversity Score in table t +1 = DS t+1
Interpolated Minimum Weighted Average Recovery Rate =
Actual Portfolio Weighted Average Spread =
Actual Portfolio Moody’s Weighted Average Rating Factor =
Actual Portfolio Diversity Score =
Interpolation of Minimum Weighted Average Recovery Rate between adjacent rows:
(
+
−
)
∗ ( − )
=
+
+
−
rounded to two decimal points.
Interpolation of Minimum Weighted Average Recovery Rate between adjacent columns:
(
+
−
)
∗ ( − )
=
+
+
−
rounded to two decimal points.
Interpolation of Minimum Weighted Average Recovery Rate between adjacent diversity score tables:
(
−
)
∗ ( − )
=
+
+ −
rounded to two decimal points.
One representative case in Moody's Test Matrices is as follows:
Minimum Weighted Average Additional PIK Interest: 0.00%
Minimum Weighted Average Spread: 2.60%
Maximum Moody's Rating Factor: 2300
Minimum Diversity Score: 42
Minimum Weighted Average Moody's Recovery Rate: 56.50%
The CDO Monitor Test
The "CDO Monitor Test" will be satisfied on any date from the Effective Date until the end of the
Reinvestment period if, after giving effect to the purchase or sale of a Collateral Debt Obligation, the
Class A Default Differential of the Proposed Portfolio is positive on such date. The CDO Monitor Test
will be considered to be "improved" if each of the Class A Default Differential, the Class B Default
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195

Differential, the Class C Default Differential, the Class D Default Differential and the Class E Default
Differential of the Proposed Portfolio is greater than the Class A Default Differential, the Class B Default
Differential, the Class C Default Differential, the Class D Default Differential and the Class E Default
Differential of the Current Portfolio. The CDO Monitor Test shall not apply until the later of (a) the
Effective Date and (b) the receipt by the Investment Manager of the CDO Monitor from S&P.
The "Class A Break-even Default Rate" is, at any time, the maximum percentage of defaults which the
Current Portfolio or the Proposed Portfolio, as applicable, can sustain, as determined by S&P through
application of the CDO Monitor, which, after giving effect to S&P’s assumptions on recoveries and timing
and to the Priorities of Payment, will result in sufficient funds remaining for the payment of the Class A
Notes in full by their stated maturity and the timely payment of interest on the Class A Notes in full.
The "Class A Default Differential" is, at any time, the rate calculated by subtracting the Class A
Scenario Default Rate from the Class A Break-even Loss Rate at such time.
The "Class A Scenario Default Rate" is, at any time, an estimate of the cumulative default rate for the
Current Portfolio or the Proposed Portfolio, as applicable, consistent with a rating of "AAA" by S&P,
determined by application of the CDO Monitor Test at such time.
The "Class B Break-even Default Rate" is, at any time, the maximum percentage of defaults which the
Current Portfolio or the Proposed Portfolio, as applicable, can sustain, as determined by S&P through
application of the CDO Monitor, which, after giving effect to S&P’s assumptions on recoveries and timing
and to the Priorities of Payment, will result in sufficient funds remaining for the payment of the Class B
Notes in full by their stated maturity and the ultimate payment of interest on the Class B Notes in full.
The "Class B Default Differential" is, at any time, the rate calculated by subtracting the Class B
Scenario Default Rate from the Class B Break-even Default Rate at such time.
The "Class B Scenario Default Rate" is, at any time, an estimate of the cumulative default rate for the
Current Portfolio or the Proposed Portfolio, as applicable, consistent with a rating of "AA" by S&P,
determined by application of the CDO Monitor Test at such time.
The "Class C Break-even Default Rate" is, at any time, the maximum percentage of defaults which the
Current Portfolio or the Proposed Portfolio, as applicable, can sustain, as determined by S&P, through
application of the CDO Monitor, which after giving effect to S&P’s assumptions on recoveries and timing
and to the Priorities of Payments, will result in sufficient funds remaining for the payment of the Class C
Notes in full by their stated maturity and the ultimate payment of interest on the Class C Notes in full.
The "Class C Default Differential" is, at any time, the rate calculated by subtracting the Class C
Scenario Default Rate from the Class C Break-even Loss Rate at such time.
The "Class C Default Loss Rate" is, at any time, an estimate of the cumulative default rate for the
Current Portfolio or the Proposed Portfolio, as applicable, consistent with a rating of "A" by S&P,
determined by application of the CDO Monitor Test at such time.
The "Class D Break-even Default Rate" is, at any time, the maximum percentage of defaults which the
Current Portfolio or the Proposed Portfolio, as applicable, can sustain, as determined by S&P, through
application of the CDO Monitor, which after giving effect to S&P’s assumptions on recoveries and timing
and to the Priorities of Payments, will result in sufficient funds remaining for the payment of the Class D
Notes in full by their stated maturity and the ultimate payment of interest on the Class D Notes in full.
The "Class D Default Differential" is, at any time, the rate calculated by subtracting the Class D
Scenario Default Rate from the Class D Break-even Loss Rate at such time.
The "Class D Scenario Default Rate" is, at any time, an estimate of the cumulative default rate for the
Current Portfolio or the Proposed Portfolio, as applicable, consistent with a rating of "BBB" by S&P,
determined by application of the CDO Monitor Test at such time.
The "Class E Break-even Default Rate" is, at any time, the maximum percentage of defaults which the
Current Portfolio or the Proposed Portfolio, as applicable, can sustain, as determined by S&P, through
application of the CDO Monitor, which after giving effect to S&P’s assumptions on recoveries and timing
and to the Priorities of Payments, will result in sufficient funds remaining for the payment of the Class E
Notes in full by their stated maturity and the ultimate payment of interest on the Class E Notes in full.
The "Class E Default Differential" is, at any time, the rate calculated by subtracting the Class E
Scenario Default Rate from the Class E Break-even Loss Rate at such time.
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The "Class E Scenario Default Rate" is, at any time, an estimate of the cumulative default rate for the
Current Portfolio or the Proposed Portfolio, as applicable, consistent with a rating of "BB" by S&P,
determined by application of the CDO Monitor Test at such time.
The "Current Portfolio" means the portfolio of Collateral Debt Obligations (included at their Principal
Balance) and Eligible Investments existing (including purchased or binding commitment to purchase)
prior to the sale, maturity or other disposition of a Collateral Debt Obligation or a proposed reinvestment
of Principal Proceeds in a Substitute Collateral Debt Obligation, as the case may be.
The "Proposed Portfolio" means the portfolio of Collateral Debt Obligations (included at their Principal
Balance) and Eligible Investments resulting from the sale, maturity or other disposition of a Collateral
Debt Obligation or a proposed reinvestment of Principal Proceeds in a Substitute Collateral Debt
Obligation, as the case may be.
The "CDO Monitor" is the dynamic, analytical computer model developed by S&P and used to estimate
default risk of Collateral Debt Obligations and provided to the Investment Manager on or before the
Issue Date, as it may be modified by S&P from time to time. The CDO Monitor calculates the
cumulative default rate of a pool of Collateral Debt Obligations and Eligible Investments consistent with
a specified benchmark rating level based upon S&P’s proprietary corporate debt default studies. In
calculating the scenario default rate in respect of a Class of Notes, the CDO Monitor considers each
Obligor’s issuer credit rating, the number of Obligors in the portfolio, the Obligor and industry
concentrations in the Portfolio and the remaining weighted average maturity of the Collateral Debt
Obligations and Eligible Investments and calculates a cumulative default rate based on the statistical
probability of distributions or defaults on the Collateral Debt Obligations and Eligible Investments.
The S&P Minimum Weighted Average Recovery Rate Test
The "S&P Minimum Weighted Average Recovery Rate Test" will be satisfied as at any Measurement
Date from (and including) the Effective Date if (1) the S&P Class A Weighted Average Recovery Rate is
greater than or equal to the recovery rate percentage set out in the applicable row and column of the
S&P Tests Recovery Matrix based upon the applicable Recovery Scenario that is linked to the elected
S&P Break-even Rate Case as per the S&P Tests Matrix, and (2) the S&P Class B Weighted Average
Recovery Rate is greater than or equal to the recovery rate percentage set out in the applicable row and
column of the S&P Tests Recovery Matrix based upon the applicable Recovery Scenario that is linked to
the elected S&P Break-even Rate Case as per the S&P Tests Matrix, and (3) the S&P Class C
Weighted Average Recovery Rate is greater than or equal to the recovery rate percentage set out in the
applicable row and column of the S&P Tests Recovery Matrix based upon the applicable Recovery
Scenario that is linked to the elected S&P Break-even Rate Case as per the S&P Tests Matrix, and (4)
the S&P Class D Weighted Average Recovery Rate is greater than or equal to the recovery rate
percentage set out in the applicable row and column of the S&P Tests Recovery Matrix based upon the
applicable Recovery Scenario that is linked to the elected S&P Break-even Rate Case as per the S&P
Tests Matrix, and (5) the S&P Class E Weighted Average Recovery Rate is greater than or equal to the
recovery rate percentage set out in the applicable row and column of the S&P Tests Recovery Matrix
based upon the applicable Recovery Scenario that is linked to the elected S&P Break-even Rate Case
as per the S&P Tests Matrix.
If the S&P issue rating of such Collateral Debt Obligation which is a security is the same as or one subcategory
below the S&P issuer rating of the Obligor thereunder such Collateral Debt Obligation shall be
deemed to be a "Senior Unsecured Debt Security" or if it is two or more sub-categories below the
S&P issuer rating of the Obligor thereunder such Collateral Debt Obligation shall be deemed to be a
"Subordinated Debt Security".
"S&P Class A Weighted Average Recovery Rate" means, as of any Measurement Date, the number
(expressed as a percentage) obtained by summing the products obtained by multiplying the Principal
Balance of each Collateral Debt Obligation by its S&P Class A Recovery Rate, dividing such sum by the
Aggregate Principal Balance of all Collateral Debt Obligations and rounding up to the nearest 0.1 per
cent. For purposes of this rate, the Principal Balance of a Defaulted Obligation will be deemed to be its
outstanding principal amount and Synthetic Securities shall be assigned a priority category based on the
underlying Reference Obligation.
"S&P Class B Weighted Average Recovery Rate" means, as of any Measurement Date, the number
(expressed as a percentage) obtained by summing the products obtained by multiplying the Principal
Balance of each Collateral Debt Obligation by its S&P Class B Recovery Rate, dividing such sum by the
Aggregate Principal Balance of all Collateral Debt Obligations and rounding up to the nearest 0.1 per
cent.. For purposes of this rate, the Principal Balance of a Defaulted Obligation will be deemed to be its
outstanding principal amount and Synthetic Securities shall be assigned a priority category based on the
underlying Reference Obligation.
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"S&P Class C Weighted Average Recovery Rate" means, as of any Measurement Date, the number
(expressed as a percentage) obtained by summing the products obtained by multiplying the Principal
Balance of each Collateral Debt Obligation by its S&P Class C Recovery Rate, dividing such sum by the
Aggregate Principal Balance of all Collateral Debt Obligations and rounding up to the nearest 0.1%. For
purposes of this rate, the Principal Balance of a Defaulted Obligation will be deemed to be its
outstanding principal amount and Synthetic Securities shall be assigned a priority category based on the
underlying Reference Obligation.
"S&P Class D Weighted Average Recovery Rate" means, as of any Measurement Date, the number
(expressed as a percentage) obtained by summing the products obtained by multiplying the Principal
Balance of each Collateral Debt Obligation by its S&P Class D Recovery Rate, dividing such sum by the
Aggregate Principal Balance of all Collateral Debt Obligations and rounding up to the nearest 0.1 per
cent. For purposes of this rate, the Principal Balance of a Defaulted Obligation will be deemed to be its
outstanding principal amount and Synthetic Securities shall be assigned a priority category based on the
underlying Reference Obligation.
"S&P Class E Weighted Average Recovery Rate" means, as of any Measurement Date, the number
(expressed as a percentage) obtained by summing the products obtained by multiplying the Principal
Balance of each Collateral Debt Obligation by its S&P Class E Recovery Rate, dividing such sum by the
Aggregate Principal Balance of all Collateral Debt Obligations and rounding up to the nearest 0.1%. For
purposes of this rate, the Principal Balance of a Defaulted Obligation will be deemed to be its
outstanding principal amount and Synthetic Securities shall be assigned a priority category based on the
underlying Reference Obligation.
"S&P Class A Recovery Rate" means in respect of any Collateral Debt Obligation, the recovery rate
determined in accordance with the Investment Management Agreement or as so advised by S&P.
"S&P Class B Recovery Rate" means in respect of any Collateral Debt Obligation, the recovery rate
determined in accordance with the Investment Management Agreement or as so advised by S&P.
"S&P Class C Recovery Rate" means in respect of any Collateral Debt Obligation, the recovery rate
determined in accordance with the Investment Management Agreement or as so advised by S&P.
"S&P Class D Recovery Rate" means in respect of any Collateral Debt Obligation, the recovery rate
determined in accordance with the Investment Management Agreement or as so advised by S&P.
"S&P Class E Recovery Rate" means in respect of any Collateral Debt Obligation, the recovery rate
determined in accordance with the Investment Management Agreement or as so advised by S&P.
The Moody’s Minimum Diversity Test
The "Moody’s Minimum Diversity Test" will be satisfied as at any Measurement Date from (and
including) the Effective Date, if the Diversity Score equals or exceeds the applicable amount in the
Moody’s Matrix.
The "Diversity Score" is a single number that indicates collateral concentration and correlation in terms
of both issuer and industry concentration and correlation. It is similar to a score that Moody’s uses to
measure concentration and correlation for the purposes of its ratings. A higher Diversity Score reflects a
more diverse portfolio in terms of the issuer and industry concentration. The Diversity Score for the
Collateral Debt Obligations is calculated by summing each of the Industry Diversity Scores which are
calculated as follows (provided that no Defaulted Obligations shall be included in the calculation of the
Diversity Score or any component thereof):
(a)
(b)
an "Average Principal Balance" is calculated by summing the Obligor Principal Balances and
dividing by the sum of the aggregate number of issuers and/or borrowers represented;
an "Obligor Principal Balance" is calculated for each Obligor represented in the Collateral
Debt Obligations by summing the Principal Balances of all Collateral Debt Obligations
(excluding Defaulted Obligations) issued by such Obligor, provided that if a Collateral Debt
Obligation has been sold or is the subject of an optional redemption or Offer, and the Sale
Proceeds or Unscheduled Principal Payments from such event have not yet been reinvested in
Substitute Collateral Debt Obligations or distributed to the Noteholders or the other creditors of
the Issuer in accordance with the Priorities of Payment, the Obligor Principal Balance shall be
calculated as if such Collateral Debt Obligation had not been sold or was not subject to such an
optional redemption or Offer;
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(c)
(d)
(e)
an "Equivalent Unit Score" is calculated for each Obligor by taking the lesser of (i) one and (ii)
the Obligor Principal Balance for such Obligor divided by the Average Principal Balance;
an "Aggregate Industry Equivalent Unit Score" is then calculated for each of the 33 Moody’s
industrial classification groups by summing the Equivalent Unit Scores for each Obligor in the
industry (or such other industrial classification groups and Equivalent Unit Scores as are
published by Moody’s from time to time); and
an "Industry Diversity Score" is then established by reference to the Diversity Score Table
shown below (or such other Diversity Score Table as is published by Moody’s from time to
time) (the "Diversity Score Table") for the related Aggregate Industry Equivalent Unit Score. If
the Aggregate Industry Equivalent Unit Score falls between any two such scores shown in the
Diversity Score Table below, then the Industry Diversity Score is the lower of the two Diversity
Scores in the Diversity Score Table.
For purposes of calculating the Diversity Score (i) any Obligors affiliated with one another will be
considered to be one Obligor, (ii) a Synthetic Security shall be included as a Collateral Debt Obligation
having the relevant characteristics of the related Reference Obligation (and the Reference Entity under
such Synthetic Security shall be deemed to be the "Obligor" under the related Reference Obligation)
and not of the Synthetic Security, unless the Issuer, or the Investment Manager on its behalf,
determines otherwise and receives Rating Agency Confirmation in respect of such determination and
(iii) Structured Finance Obligations that are collateralised loan obligation transactions shall not be
included provided Rating Agency Confirmation is given by Moody's.
Diversity Score Table
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
0.0000 0.0000 5.0500 2.7000 10.1500 4.0200 15.2500 4.5300
0.0500 0.1000 5.1500 2.7333 10.2500 4.0300 15.3500 4.5400
0.1500 0.2000 5.2500 2.7667 10.3500 4.0400 15.4500 4.5500
0.2500 0.3000 5.3500 2.8000 10.4500 4.0500 15.5500 4.5600
0.3500 0.4000 5.4500 2.8333 10.5500 4.0600 15.6500 4.5700
0.4500 0.5000 5.5500 2.8667 10.6500 4.0700 15.7500 4.5800
0.5500 0.6000 5.6500 2.9000 10.7500 4.0800 15.8500 4.5900
0.6500 0.7000 5.7500 2.9333 10.8500 4.0900 15.9500 4.6000
0.7500 0.8000 5.8500 2.9667 10.9500 4.1000 16.0500 4.6100
0.8500 0.9000 5.9500 3.0000 11.0500 4.1100 16.1500 4.6200
0.9500 1.0000 6.0500 3.0250 11.1500 4.1200 16.2500 4.6300
1.0500 1.0500 6.1500 3.0500 11.2500 4.1300 16.3500 4.6400
1.1500 1.1000 6.2500 3.0750 11.3500 4.1400 16.4500 4.6500
1.2500 1.1500 6.3500 3.1000 11.4500 4.1500 16.5500 4.6600
1.3500 1.2000 6.4500 3.1250 11.5500 4.1600 16.6500 4.6700
1.4500 1.2500 6.5500 3.1500 11.6500 4.1700 16.7500 4.6800
1.5500 1.3000 6.6500 3.1750 11.7500 4.1800 16.8500 4.6900
1.6500 1.3500 6.7500 3.2000 11.8500 4.1900 16.9500 4.7000
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Diversity Score Table
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
1.7500 1.4000 6.8500 3.2250 11.9500 4.2000 17.0500 4.7100
1.8500 1.4500 6.9500 3.2500 12.0500 4.2100 17.1500 4.7200
1.9500 1.5000 7.0500 3.2750 12.1500 4.2200 17.2500 4.7300
2.0500 1.5500 7.1500 3.3000 12.2500 4.2300 17.3500 4.7400
2.1500 1.6000 7.2500 3.3250 12.3500 4.2400 17.4500 4.7500
2.2500 1.6500 7.3500 3.3500 12.4500 4.2500 17.5500 4.7600
2.3500 1.7000 7.4500 3.3750 12.5500 4.2600 17.6500 4.7700
2.4500 1.7500 7.5500 3.4000 12.6500 4.2700 17.7500 4.7800
2.5500 1.8000 7.6500 3.4250 12.7500 4.2800 17.8500 4.7900
2.6500 1.8500 7.7500 3.4500 12.8500 4.2900 17.9500 4.8000
2.7500 1.9000 7.8500 3.4750 12.9500 4.3000 18.0500 4.8100
2.8500 1.9500 7.9500 3.5000 13.0500 4.3100 18.1500 4.8200
2.9500 2.0000 8.0500 3.5250 13.1500 4.3200 18.2500 4.8300
3.0500 2.0333 8.1500 3.5500 13.2500 4.3300 18.3500 4.8400
3.1500 2.0667 8.2500 3.5750 13.3500 4.3400 18.4500 4.8500
3.2500 2.1000 8.3500 3.6000 13.4500 4.3500 18.5500 4.8600
3.3500 2.1333 8.4500 3.6250 13.5500 4.3600 18.6500 4.8700
3.4500 2.1667 8.5500 3.6500 13.6500 4.3700 18.7500 4.8800
3.5500 2.2000 8.6500 3.6750 13.7500 4.3800 18.8500 4.8900
3.6500 2.2333 8.7500 3.7000 13.8500 4.3900 18.9500 4.9000
3.7500 2.2667 8.8500 3.7250 13.9500 4.4000 19.0500 4.9100
3.8500 2.3000 8.9500 3.7500 14.0500 4.4100 19.1500 4.9200
3.9500 2.3333 9.0500 3.7750 14.1500 4.4200 19.2500 4.9300
4.0500 2.3667 9.1500 3.8000 14.2500 4.4300 19.3500 4.9400
4.1500 2.4000 9.2500 3.8250 14.3500 4.4400 19.4500 4.9500
4.2500 2.4333 9.3500 3.8500 14.4500 4.4500 19.5500 4.9600
4.3500 2.4667 9.4500 3.8750 14.5500 4.4600 19.6500 4.9700
4.4500 2.5000 9.5500 3.9000 14.6500 4.4700 19.7500 4.9800
4.5500 2.5333 9.6500 3.9250 14.7500 4.4800 19.8500 4.9900
4.6500 2.5667 9.7500 3.9500 14.8500 4.4900 19.9500 5.0000
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200

Diversity Score Table
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
Aggregate
Industry
Equivalent
Unit Score
Industry
Diversity
Score
4.7500 2.6000 9.8500 3.9750 14.9500 4.5000
4.8500 2.6333 9.9500 4.0000 15.0500 4.5100
4.9500 2.6667 10.0500 4.0100 15.1500 4.5200
The Moody’s Maximum Weighted Average Rating Factor Test
The "Moody’s Maximum Weighted Average Rating Factor Test" will be satisfied as at any
Measurement Date from (and including) the Effective Date, if the Moody’s Weighted Average Rating as
at such Measurement Date is equal to or less than the level specified in the applicable Moody’s Test
Matrix which is applicable under the case selected by the Investment Manager as at such Measurement
Date.
The "Moody’s Weighted Average Rating Factor" is determined by summing the products obtained by
multiplying the Principal Balance of each Collateral Debt Obligation, excluding Defaulted Obligations, by
its Moody’s Rating Factor, dividing such sum by the Aggregate Principal Balances of all such Collateral
Debt Obligations, excluding Defaulted Obligations, and rounding the result up to the nearest whole
number.
The "Moody’s Rating Factor" of any Collateral Debt Obligation and, in the case of a Participation or
Synthetic Security which is an Uncollateralised CLN, the Selling Institution or Synthetic Counterparty,
respectively, is the number set forth under the heading "Rating Factor" in the table below opposite the
Moody’s Rating (as defined under "Ratings — Moody’s Ratings" below).
Moody’s Rating Factor Table
Rating Rating Factor Rating Rating Factor
Aaa 1 Ba1 940
Aa1 10 Ba2 1,350
Aa2 20 Ba3 1,766
Aa3 40 B1 2,220
A1 70 B2 2,720
A2 120 B3 3,490
A3 180 Caa1 4,770
Baa1 260 Caa2 6,500
Baa2 360 Caa3 8,070
Baa3 610 Ca 10,000
The Moody’s Rating Factor of any Participation or Synthetic Security which is an Uncollateralised CLN
where the Selling Institution or Synthetic Counterparty, respectively, party thereto has been downgraded
to a long-term senior unsecured credit rating lower than "A3" by Moody’s, or such rating has been
withdrawn, will be the sum of the Moody’s Rating Factor applicable to the Moody’s Rating of such
Selling Institution or Synthetic Counterparty, respectively, and the Moody’s Rating Factor applicable to
the Moody’s Rating of the applicable Collateral Debt Obligation.
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The Moody’s Minimum Weighted Average Recovery Rate Test
The "Moody’s Minimum Weighted Average Recovery Rate Test" will be satisfied, as at any
Measurement Date from (and including) the Effective Date, if the Moody's Weighted Average Recovery
Rate (as defined below) is greater than or equal to the number set forth in the row and column of the
applicable Moody’s Test Matrix based upon the case chosen by the Investment Manager as currently
applicable to the Portfolio.
"Moody's Weighted Average Recovery Rate" means, as of any Measurement Date, the number,
expressed as a percentage, obtained by summing the products obtained by multiplying the outstanding
Principal Balance of each Collateral Debt Obligation (excluding Defaulted Obligations) by its
corresponding Moody’s Recovery Rate and dividing such sum by the Aggregate Principal Balance
(excluding Defaulted Obligations) and rounding to the nearest 0.1 per cent., provided that if Moody’s
confirms in writing that the Moody’s Recovery Rate for a particular class of Collateral Debt Obligations
or a particular Collateral Debt Obligation shall be greater than indicated in the Investment Management
Agreement, such higher Moody’s Recovery Rate shall be used.
The "Moody’s Recovery Rate" means, in respect of each Collateral Debt Obligation, the Moody’s
recovery rate determined in accordance with the Investment Management Agreement.
The Minimum Weighted Average Spread Test
The "Minimum Weighted Average Spread Test" will be satisfied if, as at any Measurement Date from
(and including) the Effective Date, the Weighted Average Spread as at such Measurement Date equals
or exceeds the Minimum Weighted Average Spread as at such Measurement Date.
The "Minimum Weighted Average Spread", as of any Measurement Date, will equal the greater of the
number set forth in the row headed "Minimum Weighted Average Spread" in respectively, the applicable
S&P Test Matrix and the applicable Moody’s Test Matrix, selected by the Investment Manager.
The "Minimum Weighted Average Additional PIK Interest", as of any Measurement Date, is the
number set out in the applicable Moody's Test Matrix or S&P Test Matrix, as appropriate.
The "Weighted Average Spread" as of any Measurement Date will equal a fraction (expressed as a
percentage) obtained by:
(a)
multiplying:
(1) the Principal Balance of each Floating Rate Collateral Debt Obligation (excluding
Defaulted Obligations, Delayed Drawdown Obligations, Revolving Securities, Deferring
Obligations and that portion of the Principal Balance of Purposely Deferring Obligations
in respect of which interest is being deferred as at the applicable Measurement Date)
held by the Issuer as of such Measurement Date; by
(2) (i) in the case of Euro denominated Collateral Debt Obligations, the current per annum
rate at which it pays interest in excess of EURIBOR or such other floating rate index
upon which such Floating Rate Collateral Debt Obligation bears interest as of the
applicable Measurement Date and excluding any amount thereof that is known by the
Issuer or the Investment Manager to be subject to any withholding tax, (ii) in the case of
Asset Swap Obligations or Collateral Debt Obligations the subject of a Derivative
Transaction the current per annum rate at which the related Asset Swap Transaction or
Derivative Transaction pays interest in excess of EURIBOR or such other floating rate
index upon which the related Asset Swap Transaction or Derivative Transaction pays
interest and (iii) in relation to Sterling Collateral Debt Obligations or Dollar Collateral
Debt Obligations which are not subject to Asset Swap Transactions or Currency Hedge
Transactions, the current per annum rate at which such Sterling Collateral Debt
Obligation or Dollar Collateral Debt Obligation pays interest in excess of LIBOR or such
other floating rate index upon which such Sterling Collateral Debt Obligation or Dollar
Collateral Debt Obligation pays interest;
(b)
multiplying:
(1) the Funded Amount of each Delayed Drawdown Obligation and Revolving Security
(excluding Defaulted Obligations) held by the Issuer as of such Measurement Date; by
(2) the current per annum rate at which it pays interest in excess of EURIBOR or such other
floating rate index by reference to which such Delayed Drawdown Obligation and
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Revolving Security bears interest and excluding any amount thereof that are known by
the Issuer or the Investment Manager to be subject to any withholding tax;
(c)
the products obtained by multiplying:
(1) the Principal Balance of each Fixed Rate Collateral Debt Obligation (excluding
Defaulted Obligations, Delayed Drawdown Obligations, Revolving Securities, Deferring
Obligations and that portion of the Principal Balance of Purposely Deferring Obligations
in respect of which interest is being deferred as at the applicable Measurement Date)
held by the Issuer as at such Measurement Date; by
(2) the current rate per annum at which it pays interest minus the applicable Swap Rate as
at such Measurement Date;
(d)
multiplying:
(1) Unfunded Amounts of any Delayed Drawdown Obligations and Revolving Securities in
respect of which commitment fees are payable as of such Measurement Date; by
(2) the current per annum rate payable by way of such commitment fee in respect of each
such Unfunded Amount and excluding any amount thereof that are known by the Issuer
or the Investment Manager to be subject to any withholding tax;
(e)
(f)
(g)
summing the amounts determined pursuant to clauses (a), (b), (c) and (d); and
dividing such sum by the aggregate of the Principal Balances referred to in clauses (a)(1) and
(c)(1) above and the aggregate of all Funded Amounts and Unfunded Amounts referred to in
clauses (b)(1) and (d)(1) above.
for each Offsetting Credit Default Swap and each Credit Short Obligation subtracting the
percentage obtained by dividing:
(1) the amount obtained by multiplying the notional amount of each such Offsetting Credit
Default Swap or each such Credit Short Obligation by the fixed amounts payable on an
annual basis (expressed as a percentage) by the Issuer pursuant to each such
Offsetting Credit Default Swap or each such Credit Short Obligation; and
(2) the aggregate Principal Balance of all Collateral Debt Obligations;
The Weighted Average Spread of any Non-Euro Obligation shall be calculated by reference to the
Principal Balance thereof and the spread payable thereon shall be the spread over EURIBOR payable
to the Issuer under the related Asset Swap Transaction.
The "Weighted Average Mezzanine Additional PIK Interest" as of any Measurement Date will equal a
fraction (expressed as a percentage) obtained by:
(a)
multiplying:
(1) the Principal Balance of each Mezzanine Obligation (excluding Defaulted Obligations)
held by the Issuer as of such Measurement Date (provided that, for such purpose, the
Principal Balance of a Mezzanine Obligation which is a Non-Euro Obligation shall be the
amount equal to 50 per cent. of the principal amount thereof outstanding at the relevant
time converted to Euro by the Investment Manager at the prevailing spot rate of
exchange); by
(2) the current per annum rate at which it contractually defers interest (disregarding the
portion of such rate paid out as current interest);
(b)
(c)
summing the amounts determined pursuant to paragraph (a) above; and
dividing such sum by the Aggregate Principal Balance of all Collateral Debt Obligations as at
the Measurement Date.
For purposes of calculating the Minimum Weighted Average Spread Test, the spread of any Collateral
Debt Obligation shall be excluded from such calculation to the extent that the Issuer or the Investment
Manager has actual knowledge that payment of interest on such Collateral Debt Obligation will not be
made by the Issuer thereof during the applicable Due Period.
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The "Swap Rate" means, as at any date of determination and in respect of any Fixed Rate Collateral
Debt Obligation, a rate equal to the prevailing swap rate with an average life equal to the Average Life of
such Fixed Rate Collateral Debt Obligation.
"Floating Rate Collateral Debt Obligation" means a Collateral Debt Obligation, the interest or coupon
payable in respect of which is calculated by reference to a floating rate or index and shall include any
Collateralised Credit Default Swaps.
"Fixed Rate Collateral Debt Obligation" means a Collateral Debt Obligation, the interest or coupon
payable in respect of which is calculated by reference to a fixed rate and for the avoidance of doubt shall
exclude any Collateralised Credit Default Swaps.
For purposes of calculating the Minimum Weighted Average Spread Test, the spread of any Collateral
Debt Obligation shall be excluded from such calculation to the extent that the Issuer or the Investment
Manager has actual knowledge that payment of interest on such Collateral Debt Obligation will not be
made by the Obligor thereof during the applicable due period.
The Weighted Average Maturity Test
The "Weighted Average Maturity Test" means a test which will be satisfied as at any Measurement
Date from (and including) the Effective Date if the Portfolio Weighted Average Maturity is on or before
15 August 2018.
"Portfolio Weighted Average Maturity" is, as of any date of determination the date calculated by
adding to the Issue Date the weighted average maturity of the Collateral Debt Obligations (expressed as
a number of months from the Issue Date) calculated by (i) summing the products obtained by multiplying
(a) each of (1) the Principal Balance (or portion thereof) of each Collateral Debt Obligation (excluding
Defaulted Obligations) that is then held by the Issuer and that matures or amortises on any date
subsequent to such date of determination, and (2) if the Aggregate Principal Balance of the Collateral
Debt Obligations is less than the aggregate initial Principal Balance of the Collateral Debt Obligations
(excluding Defaulted Obligations) at the end of the Initial Investment Period, the difference between
such initial Principal Balance and such outstanding Principal Balance by (b) the number of months from
the Issue Date to the date of such maturity or amortisation (in the case of clause (i)(a)(1) above) or to
such date of determination (in the case of clause (i)(a)(2) above) and (ii) dividing such sum by the
Aggregate Principal Balance (excluding Defaulted Obligations) used in (i)(a)(1) above. For the
avoidance of doubt, the Stated Maturity of the long dated Collateral Debt Obligations will be the Maturity
Date.
The "Portfolio Weighted Average Life" of the Collateral Debt Obligations as at any Determination Date
shall be expressed as a number of years and calculated by (i) summing the products obtained by
multiplying (a) the Principal Balance (or portion thereof) of each Collateral Debt Obligation (excluding
Defaulted Obligations) that is then held by the Issuer and that matures or amortises on any date
subsequent to such date of determination by (b) the number of years from such Determination Date to
the date of such maturity or amortisation and (ii) dividing such sum by the Aggregate Principal Balance
(excluding Defaulted Obligations).
Ratings
The "S&P Rating" of any Collateral Debt Obligation will be determined as follows:
(a)
(b)
(c)
if there is an issuer credit rating of the Obligor of such Collateral Debt Obligation, or of the
guarantor who unconditionally and irrevocably guarantees such Collateral Debt Obligation, then
the S&P Rating of such Obligor, or the guarantor, shall be such issuer credit rating (regardless
of whether there is a published rating by S&P of the Collateral Debt Obligation of such Obligor
held by the Issuer); or
in the event that paragraph (a) does not apply, the Issuer or the Investment Manager may, at
its option, and shall if no other paragraph of this definition applies, apply to S&P for a corporate
credit estimate, which shall be its S&P Rating provided that, pending receipt from S&P of such
estimate, such Collateral Debt Obligation shall for a maximum period of 21 days from the date
of acquisition thereof be assigned a temporary S&P Rating of "B-" and following expiry of such
21 day period shall be assigned a temporary S&P Rating of "CCC-"; or
with respect to any Collateral Debt Obligation that is a Synthetic Security or a Participation, the
S&P Rating of the issuer or the guarantor of such Collateral Debt Obligation or, if the issuer or
the guarantor of such Collateral Debt Obligation is not rated by S&P, the S&P Rating of such
Synthetic Security or Participation shall be the rating assigned thereto by S&P in connection
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with the acquisition thereof by the Issuer upon the request of the Issuer or the Investment
Manager save that in the case of a Synthetic Security which is an Uncollateralised CLN, only if
the related Synthetic Counterparty has been downgraded below "A" by S&P, the S&P Rating
with respect to such Synthetic Security will be the lower of the related S&P Rating of the
Synthetic Counterparty and S&P Rating of the Reference Obligation and in the case of
Participations the lower of the related S&P Rating of the Selling Institution and the S&P Rating
of the borrower; or
(d)
if none of paragraphs (a), (b) or (c) above applies, but another security or obligation of the
Obligor is rated by S&P and neither the Issuer nor the Investment Manager obtains an S&P
Rating for such Collateral Debt Obligation pursuant to paragraph (b) above, then the S&P
Rating of such Collateral Debt Obligation shall be determined as follows:
(i)
(ii)
(iii)
if there is a rating on a senior secured obligation of the Obligor, then the S&P Rating of
such Collateral Debt Obligation shall be one subcategory below such rating if such
Collateral Debt Obligation is a senior secured or senior unsecured obligation of the
Obligor;
if there is a rating on a senior unsecured obligation of the Obligor, then the S&P Rating
of such Collateral Debt Obligation shall equal such rating if such Collateral Debt
Obligation is a senior secured or senior unsecured obligation of the Obligor; and
if there is a rating on a subordinated obligation of the Obligor, and if such Collateral
Debt Obligation is a senior secured or senior unsecured obligation of the Obligor, then
the S&P Rating of such Collateral Debt Obligation shall be one subcategory above such
rating, if such rating is higher than "BB+", and shall be two subcategories above such
rating, if such rating is "BB+" or lower; or
(e)
if none of paragraphs (a), (b), (c) or (d) above apply, the S&P Rating of such Collateral Debt
Obligation may be determined using any one of the methods provided below:
(i)
(ii)
if such Collateral Debt Obligation is publicly rated by Moody’s, then the S&P Rating of
such Collateral Debt Obligation will be (A) one subcategory below the S&P equivalent of
the public rating assigned by Moody’s if such Collateral Debt Obligation is rated "Baa3"
or higher by Moody’s and (B) two subcategories below the S&P equivalent of the public
rating assigned by Moody’s if such Collateral Debt Obligation is publicly rated "Ba1" or
lower by Moody’s provided, however, that (x) an S&P Rating may only be derived under
this paragraph (i) from a Moody’s public rating and may not be derived from any
Moody’s confidential credit rating or credit estimate and (y) no Synthetic Security may
be deemed to have an S&P Rating based on a Moody’s Rating and (z) the Aggregate
Collateral Balance of the Collateral Debt Obligations that may be deemed to have an
S&P Rating based on a rating assigned by Moody’s as provided in this sub-clause (i)
may not exceed 20 per cent. of the Aggregate Collateral Balance; or
if such Collateral Debt Obligation is not publicly rated by Moody’s but a security with the
same ranking (a "parallel security") is publicly rated by Moody’s, then the S&P Rating of
such parallel security will be determined in accordance with the methodology set forth in
sub-clause (i) above and the S&P Rating of such Collateral Debt Obligation will be
determined in accordance with the methodology set forth in clause (e) above (for such
purposes treating the parallel security as if it were rated by S&P at the rating determined
pursuant to this sub-clause (ii)),
provided always that if a debt security or obligation of the Obligor has been in default during the past two
years, the S&P Rating of such Collateral Debt Obligation will be "D" and, if no S&P Rating can be
determined in accordance with any of the above paragraphs, the S&P Rating of any applicable
Collateral Debt Obligation will be "CCC-".
The "Moody’s Rating" of any Collateral Debt Obligation will be determined as follows:
(a)
for any Collateral Debt Obligation:
(i)
if the Obligor in respect of such Collateral Debt Obligation has a corporate family rating
from Moody’s then the Moody’s Rating of such Collateral Debt Obligation shall be such
rating;
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(ii)
(iii)
otherwise, if the Obligor in respect of such Collateral Debt Obligation has a senior
unsecured obligation publicly rated by Moody’s, then the Moody’s Rating of such
Collateral Debt Obligation shall be such rating; and
otherwise, if the Obligor in respect of such Collateral Debt Obligation has no corporate
family rating and no senior unsecured obligation publicly rated by Moody’s, but the
Collateral Debt Obligation itself is rated (other than a rating determined from an estimate
by Moody’s of such Collateral Debt Obligation’s rating factor), then the Moody’s Rating
of such Collateral Debt Obligation shall be that determined by the Investment Manager,
and subject to Rating Agency Confirmation;
(b)
if paragraph (a) does not apply to such Collateral Debt Obligation, the Moody’s Rating shall be
determined as follows, at the option of the Investment Manager either:
(i)
the confidential credit estimate assigned to such Collateral Debt Obligation by Moody’s
upon the request of the Issuer or the Investment Manager on behalf of the Issuer which
shall be the Moody’s corporate family rating thereof, provided that pending receipt from
Moody's of such estimate, if (i) neither the Issuer nor any of its Affiliates is subject to
reorganisation or bankruptcy proceedings and (ii) no debt securities or obligations of the
Issuer are in default:
(A)
(B)
in the case of up to the Specified Number of Collateral Debt Obligations that are
secured senior loans and mezzanine loans or Participations in secured senior
loans and mezzanine loans, such Collateral Debt Obligations shall have a
Moody's Rating of "B3" if the Investment Manager certifies to the Trustee that the
Investment Manager believes that such estimate will be at least "B3"; and
(i) if the Investment Manager is not able to certify as set out in sub-clause (A)
above that such estimate will be at least "B3" or (ii) if the number of Collateral
Debt Obligations that are secured senior loans and mezzanine loans or
participations in secured senior loans and mezzanine loans for which the
Moody's Rating has been determined according to (A) above exceeds the
Specified Number, in respect of the Collateral Debt Obligations in excess of the
Specified Number, the Moody's Rating of the relevant Collateral Debt Obligation
for the purposes of this sub-clause (B) shall be "Caa1". For the purposes of subclauses
(A) and (B), Specified Number means, initially five and shall be reduced
by one each time that the Investment Manager certifies that it believes that an
estimated Moody's Rating will be at least "B3" and Moody's assigns an estimate
that is less than "B3";
in each case until such time as Moody's assigns such credit estimate, whereafter the Moody's
Rating of such Collateral Debt Obligation will be such credit estimate assigned by Moody's,
(ii)
if the Collateral Debt Obligation is rated by S&P, then the implied Moody’s Rating (the
"Implied Moody’s Rating") of such Collateral Debt Obligation will be:
(A)
(B)
one sub-category below the Moody’s equivalent of the issuer rating assigned by
S&P if the Obligor of such Collateral Debt Obligation is rated "BBB-" or better by
S&P; and
two sub-categories below the Moody’s equivalent of the issuer rating assigned by
S&P if the Obligor of such Collateral Debt Obligation is rated lower than "BBB-"
by S&P,
provided however that (1) no more than 20 per cent. of the Collateral Debt Obligations
may be given an Implied Moody’s Rating based on a rating given by S&P as provided in
this paragraph (ii) and (2) no Collateral Debt Obligation may be given an Implied
Moody’s Rating based on a rating given by S&P as provided in this paragraph (ii) if the
Obligor under such Collateral Debt Obligation has no outstanding debt that is currently
paying a coupon, provided further that if the rating of any Collateral Debt Obligation or
Obligor thereof has been placed on credit watch for possible downgrade by Moody’s,
the Moody’s Rating shall be the one confirmed by Moody’s at the request of the
Investment Manager and, until such confirmation is given, shall be one subcategory
below the Moody’s Rating as otherwise determined in accordance with this definition,
and until such time as the Collateral Debt Obligation is no longer on credit watch for
possible downgrade or if the rating of any Collateral Debt Obligation or Obligor thereof
has been placed on credit watch for possible upgrade by Moody’s, the Moody’s Rating
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shall be one subcategory above the Moody’s Rating as otherwise determined in
accordance with this definition, until such time as the Collateral Debt Obligation is no
longer on credit watch for possible upgrade;
provided however that, in respect of (a) and (b) above, for any Collateral Debt Obligation which is a
Participation or a Synthetic Security, which is an Uncollateralised CLN, if the applicable Selling
Institution or Synthetic Counterparty, respectively, has been downgraded to a long-term senior
unsecured credit rating lower than "A3" by Moody’s, the Moody’s Rating will be determined as provided
in the definition of Moody’s Rating Factor above.
If at any time either Moody’s or S&P cease to provide rating services, references to rating categories of
Moody’s shall be deemed instead to be references to the equivalent categories of any other rating
agency or agencies selected by the Investment Manager acting on behalf of the Issuer (with written
notice to the Trustee), as of the most recent date on which such other rating agency or agencies and
Moody’s or S&P, as the case may be, published ratings for the type of obligation in respect of which any
such alternative rating agency is used.
The Coverage Tests
The "Coverage Tests" will be used primarily to determine whether interest may be paid on the Class B
Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Subordinated Notes
and whether Principal Proceeds may be reinvested in Substitute Collateral Debt Obligations, or whether
Interest Proceeds which would otherwise be used to pay interest on the Class B Notes, the Class C
Notes, the Class D Notes, the Class E Notes and the Class F Subordinated Notes must instead be used
to pay principal of the Class A Notes in the event of failure to satisfy the Class A Coverage Tests in
accordance with the Note Repayment Sequence or, in the event of failure to satisfy the Class B
Coverage Tests, to pay principal of the Class A Notes in accordance with the Note Repayment
Sequence and, after redemption in full thereof, principal of the Class B Notes or, in the event of failure to
satisfy the Class C Coverage Tests, to pay principal of the Class A Notes in accordance with the Note
Repayment Sequence and, after redemption in full thereof, principal of the Class B Notes and, after
redemption in full thereof, principal of the Class C Notes or, in the event of failure to satisfy the Class D
Coverage Tests, to pay principal of the Class A Notes in accordance with the Note Repayment
Sequence and, after redemption in full thereof, principal of the Class B Notes and, after redemption in
full thereof, principal of the Class C Notes and, after redemption in full thereof, principal of the Class D
Notes or, in the event of failure to satisfy the Class E Interest Coverage Test, to pay principal of the
Class A Notes in accordance with the Note Repayment Sequence and, after redemption in full thereof,
principal of the Class B Notes and, after redemption in full thereof, principal of the Class C Notes and,
after redemption in full thereof, principal of the Class D Notes and , after redemption in full thereof,
principal of the Class E Notes, in each case to the extent necessary to cause the Coverage Tests
relating to the relevant Class of Notes to be met except for the Class E Par Value Test breach of which
will result in payment of principal of the Class E Notes to the extent necessary to cause the Class E Par
Value Test to be satisfied.
Each Coverage Test shall be satisfied on a Measurement Date if the corresponding Par Value Ratio or
Interest Coverage Ratio (as the case may be) is at least equal to the percentage specified in the
definition of Coverage Test in the Conditions.
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DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENT
The investment management functions described herein will be performed by the Investment Manager
pursuant to authority granted to the Investment Manager by the Issuer under the Investment
Management Agreement, subject to the overall discretion and control of the Issuer. The Investment
Management Agreement contains procedures whereby any recommendation made by the Investment
Manager to the Collateral Administrator, as agent on behalf of the Issuer, in relation to the acquisition,
disposal, reinvestment and management of the Portfolio will be subject to a determination, in respect of
certain matters, and confirmation in respect thereof being given by the Collateral Administrator and
approval by the Trustee. Pursuant to the Investment Management Agreement, the Issuer has delegated
and may delegate authority to the Investment Manager to carry out certain functions in relation to the
Portfolio and the hedging arrangements without the requirement for specific approval by the Issuer, the
Collateral Administrator or the Trustee.
The Investment Manager has agreed to perform the investment management and related functions
described herein.
Fees
Subject to the Priorities of Payment, the Investment Manager shall be paid a Senior Investment
Management Fee and a Subordinated Investment Management Fee on each Payment Date up to the
Maturity Date (or, if earlier, the date upon which the Notes are to be redeemed in full). The Senior
Investment Management Fee shall be equal to 0.15 per cent. per annum of the Aggregate Collateral
Balance as at the first Business Day of the Due Period immediately preceding the applicable Payment
Date. The Subordinated Investment Management Fee shall be equal to 0.50 per cent. per annum of the
Aggregate Collateral Balance as at the first Business Day of the Due Period immediately preceding the
applicable Payment Date. Any value added tax in respect of the Senior Investment Management Fee or
the Subordinated Investment Management Fee (whether payable to the Investment Manager or directly
to the relevant Dutch tax authority) shall be paid in the priority level as set forth in the Interest Proceeds
Priority of Payments.
If the Incentive Investment Management Fee IRR Threshold has been reached on any Payment Date
(after taking into account all prior distributions to Class F Subordinated Noteholders and any distribution
made to Class F Subordinated Noteholders on such Payment Date), to the extent of any remaining
Interest Proceeds or Principal Proceeds after due application of such proceeds in accordance with the
relevant Priorities of Payment, an Incentive Investment Management Fee equal to 20 per cent. thereof
shall be paid to the Investment Manager (together with any payment of value added tax payable in
respect thereof (whether payable to the Investment Manager or directly to the relevant Dutch tax
authority)).
Any Senior Investment Management Fee or Subordinated Investment Management Fee accrued but
unpaid on the Payment Date on which it is due, shall bear interest at the rate of EURIBOR (determined
in accordance with Condition 6(e)) plus 2 per cent. per annum as calculated by the Collateral
Administrator on the basis of a 360 day year and the actual number of days elapsed, which interest shall
accrue from (and including) the Payment Date on which such Senior Investment Management Fee or
Subordinated Investment Management Fee, as applicable, is due to (but excluding) the day on which
such fees are actually paid and shall be payable in accordance with the Interest Proceeds Priority of
Payment on the next occurring Payment Date.
Removal and Resignation
Removal Upon Breach of Par Value Tests
The Investment Manager may be removed upon at least 90 days’ prior written notice by the Issuer or the
Trustee acting at the direction of the holders of the Controlling Class of Notes, acting by Extraordinary
Resolution, in the event that the Class A Par Value Test is not satisfied.
Key Personnel Event
The Investment Manager may also be removed upon 30 days'prior written notice by the Issuer or the
Trustee, at the direction of the holders of the Controlling Class of Notes, acting independently by
Extraordinary Resolution, in the event that Patrick Steiner ceases to have primary responsibility for
providing investment management services to the Issuer in respect of the Portfolio (such event, a "Key
Personnel Event") and is not replaced by either J. Ferguson, A. Gordon or M. Nechamkin or no other
replacement investment manager for the Investment Manager of the skill and experience at least
equivalent to that of Patrick Steiner, J. Ferguson, A. Gordon or M. Nechamkin in respect of management
of the Portfolio has been appointed.
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Removal for Cause
The Investment Manager may be removed for Cause upon ten days’ prior written notice by the Issuer in
its own discretion or the Trustee, at the direction of the holders of (a) at least 66 2/3 per cent. of the
Principal Amount Outstanding of the Class F Subordinated Notes (excluding any Class F Subordinated
Notes held by the Investment Manager or an Affiliate of the Investment Manager); or (b) at least 66
per cent. of the Principal Amount Outstanding of the Controlling Class (excluding any Notes held by the
Investment Manager or an Affiliate of the Investment manager), provided that notice of such removal
shall be given by the Issuer or the Trustee, as applicable, to the holder of each Class of Notes, in
accordance with Condition 16 (Notices). For purposes of the Investment Management Agreement,
"Cause" will mean (i) wilful breach by the Investment Manager of any material provision of the
Investment Management Agreement or the Trust Deed applicable to the Investment Manager (unrelated
to the economic performance of the Collateral Debt Obligations), (ii) breach by the Investment Manager
of any provision of the Investment Management Agreement or the Conditions or the Trust Deed
applicable to it which breach (x) has a material adverse effect on the Issuer or the Noteholders of any
Class and (y) if capable of being cured, is not cured within 30 days of the Investment Manager
becoming aware of, or receiving notice from, the Issuer or the Trustee of, such breach, or if such breach
is remediable but is not capable of cure within 30 days, the Investment Manager fails to cure such
breach within the period in which a reasonably diligent person could cure such breach (but in no event
longer than 60 days) (iii) the failure of any representation, warranty, certification or statement made or
delivered by the Investment Manager in or pursuant to the Investment Management Agreement or the
Trust Deed to be correct in any material respect when made and such failure (x) has a material adverse
effect on the Issuer or the Noteholders of any Class and (y) no correction is made for a period of 30
days after the Investment Manager becoming aware of, or its receipt of notice from the Issuer or the
Trustee of, such failure, or if such failure is remediable but is not capable of correction within 30 days,
the Investment Manager fails to correct such failure within the period in which a reasonably diligent
person could correct such failure (but in no event longer than 60 days) (iv) certain events of bankruptcy
or insolvency in respect of the Investment Manager, (v) the occurrence of an Event of Default specified
in paragraph (i) or (ii) of Condition 10 (Events of Default) of the Notes other than primarily resulting from
breach by the Paying Agents of any of their obligations under the Agency Agreement (vi) the occurrence
of an act by the Investment Manager (or any of its Affiliates) that constitutes fraud or criminal activity in
the performance of its obligations under the Investment Management Agreement, or the Investment
Manager or any of its senior executive officers (in the performance of his or her investment management
duties) being charged and criminal proceedings being commenced for a criminal offence, or (vii) the
Investment Manager ceasing to be permitted to act as such under the laws of the of the United Kingdom
or Netherlands.
Notes held by Investment Manager
Any Notes held by the Investment Manager, one or more of its Affiliates or one or more directors thereof
will have no voting rights with respect to any vote (or written direction or consent) in connection with the
removal of the Investment Manager and will be deemed not to be Outstanding in connection with any
such vote; provided, however, that any Notes held by the Investment Manager, one or more of its
Affiliates or one or more directors thereof will, save as otherwise expressly provided, have voting rights
(including in respect of written directions and consents) with respect to all other matters as to which
Noteholders are entitled to vote, including, without limitation, any vote in connection with the
appointment of a replacement Investment Manager which is not Affiliated with the Investment Manager
in accordance with the Investment Management Agreement. Solely for purposes of determining
whether any Notes are held by or on behalf of Affiliates of the Investment Manager in connection with
any vote relating to the removal of the Investment Manager or to the appointment of a Successor
Investment Manager, "Affiliates", as regards any funds, shall be deemed to include only funds for which
the Investment Manager is the sole provider of collateral or investment management services.
Resignation
The Investment Manager may at any time resign upon 90 days’ prior written notice to the Issuer, the
Collateral Administrator and the Trustee.
Successor Investment Manager
(1) Upon the resignation or removal of the Investment Manager, the Issuer shall use its reasonable
efforts to appoint a successor Investment Manager within 30 days after the date of notice of
resignation or removal of the Investment Manager and, failing which, the Trustee shall be
entitled (but not obliged) to appoint a successor Investment Manager on behalf of the Issuer
(and shall incur no liability for failing so to appoint a successor Investment Manager), in each
case, subject to the requirements relating to any replacement Investment Manager referred to
in paragraph (2) below having been satisfied. If neither the Issuer nor the Trustee shall have
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appointed a successor in such circumstances prior to the day on which the Investment
Manager would otherwise have vacated its post had such a successor been appointed, the
holders of the Class F Subordinated Notes, acting independently by Ordinary Resolution, will
be entitled to appoint a successor and will so appoint a successor within 60 days after the date
of notice of such resignation or removal, subject to the requirements relating to any successor
Investment Manager referred to in paragraph (2) below having been satisfied. Where, in such
circumstance, the Controlling Class shall have disapproved two proposed successors put
forward by the Class F Subordinated Noteholders or the Class F Subordinated Noteholders
have otherwise failed to appoint a successor within such 60-day period the holders of the
Controlling Class of Notes, acting independently by Extraordinary Resolution, will be entitled to
appoint such successor, subject to the requirements relating to any successor Investment
Manager referred to in paragraph (2) below having been satisfied, provided, however, that the
Class F Subordinated Noteholders shall not be entitled to veto such appointment nor shall the
Class F Subordinated Noteholders be required to give consent to any increases in
compensation payable to any successor Investment Manager pursuant to paragraph (4) below.
(2) No termination, resignation or removal of the Investment Manager shall be effective until the
date on which: (i) a successor Investment Manager acceptable to the Issuer and the Trustee:
(A) which in the opinion of the Issuer has demonstrated an ability to professionally and
competently perform duties similar to those imposed upon the Investment Manager under the
Investment Management Agreement; (B) which is legally qualified and has the capacity to act
as Investment Manager under the Investment Management Agreement, as successor to the
Investment Manager in the assumption of all of the responsibilities, duties and obligations of
the Investment Manager thereunder; (C) which shall not cause or result in the Issuer or the
Portfolio being required to register under the provisions of the Investment Company Act; (D)
which shall not cause the Issuer to be, or deemed to be, resident for tax purposes or be
engaged or deemed to be engaged, in the conduct of a trade or business in any jurisdiction
other than in Ireland; (E) which is not an Affiliate of the Investment Manager; and (F) in respect
of which Rating Agency Confirmation has been received, agrees in writing to assume all of the
Investment Manager's duties and obligations pursuant to the Investment Management
Agreement and the Trust Deed; and (ii) the Noteholders have been notified of such
appointment in accordance with Condition 16 (Notices) and the holders of the Controlling Class
of Notes and the Class F Subordinated Notes (including any Class F Subordinated Notes held
by or on behalf of the Investment Manager, one or more of its Affiliates or one or more directors
thereof) have not, acting independently by Ordinary Resolution, vetoed such appointment
within 30 days of such notice being given.
(3) Upon the appointment of a successor Investment Manager, the rights, duties and obligations of
such Investment Manager pursuant to the Investment Management Agreement may be
amended without the consent of the Noteholders generally but subject to the prior consent of
the Issuer, the Trustee, the holders of the Controlling Class of Notes and the Class F
Subordinated Notes, in each case, acting independently by Ordinary Resolution (and
excluding, in the case of any Ordinary Resolution of the holders of the Class F Subordinated
Notes, any Notes held by the Investment Manager, one or more of its Affiliates or one or more
directors thereof).
(4) In connection with any appointment of a successor Investment Manager, the Issuer may make
such arrangements for the compensation of such successor as the Issuer and such successor
shall agree, provided that, no compensation payable to a successor Investment Manager shall
be greater than that paid to the original Investment Manager without the prior consent of the
Class F Subordinated Noteholders acting independently by Ordinary Resolution.
Delegation
Save for delegation to Octagon Credit Investors LLC, the obligations of the Investment Manager under
the Investment Management Agreement may not be delegated, in whole or in part, without the prior
written consent of the Issuer, the Trustee and, the holders of a majority of the original principal amount
of each Class of Notes, in the case of each Class, voting separately, and excluding any Notes held by
the Investment Manager, one or more of its Affiliates or one or more directors thereof and
notwithstanding any such consent, no delegation of duties by the Investment Manager shall relieve it
from any liability under the Investment Management Agreement as set out below.
Liability of the Investment Manager
The Investment Manager will agree in the Investment Management Agreement that it shall, subject to
the terms and conditions thereof, perform its obligations thereunder with reasonable care, in good faith
and in a manner generally consistent with practices and procedures customarily followed by, and
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exercising a degree of skill and attention no less than that generally exercised by, institutional managers
of international standing relating to assets of the nature and character of the Portfolio for clients having
similar investment objectives and restrictions. To the extent not inconsistent with the foregoing, the
Investment Manager shall, in performing its duties, follow its customary standards, policies and
procedures and exercise a degree of skill and attention no less than that which it exercises for itself and
for other clients having similar investment objectives and restrictions. The Investment Manager is
exempted from liability arising out of, or in connection with, the performance of its duties under the
Investment Management Agreement except (a) by reason of its acts or omissions constituting bad faith,
negligence, wilful misconduct or reckless disregard in the performance of its obligations hereunder or (b)
with respect to the information concerning the Investment Manager provided in writing by the Investment
Manager for inclusion herein, if such information contains any untrue statement of material fact or omits
to state a material fact necessary in order to make statements contained in the section headed “The
Investment Manager” of the Prospectus, in the light of the circumstances under which they were made,
not misleading.
Indemnities
Investment Manager's Indemnity
The Investment Manager will (subject to the terms of the Investment Management Agreement)
indemnify and hold harmless (the Investment Manager in such case, the "Indemnifying Party") the
Issuer and the Trustee (for the benefit of the Noteholders) (the Issuer and the Trustee each, in such
case, an "Indemnified Party") from and against, in the case of the Issuer as an Indemnified Party, any
and all, Liabilities and Expenses incurred by the Issuer (which will not extend to any consequential loss
or damage of any kind to the Issuer including lost profits and whether or not foreseeable, but for the
avoidance of doubt excluding any amount contemplated or envisaged to be payable to or as the case
may be by the Issuer in relation to the Transaction Documents) in respect of or arising out of any part
(1), (2), (3) or (4) Investment Manager Breach (excluding for the avoidance of doubt, any part (5)
Investment Manager Breach to the extent not falling within a part (1), (2), (3) or (4) Investment Manager
Breach) and, in the case of the Trustee as an Indemnified Party, any and all Liabilities and Expenses
incurred by the Trustee or the Noteholders (which will not extend to any consequential loss or damage
of any kind to the Noteholders including lost profits and whether or not foreseeable but for the avoidance
of doubt excluding any amount contemplated or envisaged to be payable to the Noteholders in relation
to the Transaction Documents) in respect of or arising out of a part (1) Investment Manager Breach
(excluding, for the avoidance of doubt, any part (2), (3), (4) or (5) Investment Manager Breach to the
extent not falling within a part (1) Investment Manager Breach) except, in each case, to the extent that
any such Liability or Expenses would not have been incurred but for any act or omission constituting
wilful misconduct or negligence by the Issuer or the Trustee, as the case may be.
For purposes of the above paragraph "Liabilities" means collectively, liabilities, obligations, losses,
claims, damages, judgments, penalties, assessments, actions, suits, costs, expenses or other similar
liabilities (including, without limitation, in respect of taxes, duties, levies, imposts and other charges and
all legal fees and disbursements incurred in defending or disputing any of the foregoing and including
any irrecoverable value added tax or similar tax charged or chargeable in respect thereof); "Expenses"
means all fees and expenses reasonably and properly incurred (including fees and expenses of
counsel) and "Investment Manager Breaches" means each of the following:
(1) the acts or omissions of the Investment Manager constituting fraud, bad faith, wilful
misconduct, reckless disregard or negligence of the Investment Manager under the Investment
Management Agreement and under the Trust Deed or any other Transaction Document to
which it is a party;
(2) with respect to the information concerning the Investment Manager provided in writing to the
Issuer by the Investment Manager expressly for inclusion in this Prospectus, such information
containing any untrue statement of material fact or omitting to state a material fact necessary in
order to make the statements therein, in the light of the circumstances in which they were
made, not misleading;
(3) any unauthorised offers or solicitations to investors by the Investment Manager;
(4) any representation or warranty made by it pursuant to Clause 26.3 of the Investment
Management Agreement proving to have been incorrect in any material respect when made;
(5) any other breach of the terms of the Investment Management Agreement (including but not
limited to a failure to adhere to the Investment Restrictions set out in Clause 7 of the
Investment Management Agreement and any action required by Schedule 6 (US Tax
Procedures))) and Schedule 5 (UK Tax Procedures) of the Investment Management
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Agreement having a material adverse effect on the interests of the Issuer or any Class of
Noteholders (acting as a Class) or the Trustee,
and any one of parts (1), (2), (3), (4) or (5) above may be an "Investment Manager Breach".
Issuer's Indemnity
The Issuer will agree in the Investment Management Agreement to indemnify and hold harmless (the
Issuer in such case, the "Indemnifying Party") the Investment Manager and its partners, managing
members, directors, officers, employees, shareholders, agents or Affiliates of the Investment Manager
and consultants and other similar advisers engaged by the Investment Manager in the ordinary course
of its business (other than, for the avoidance of doubt, its legal advisers) (such parties, in each case, an
"Indemnified Party") (other than for the avoidance of doubt, in relation to such Indemnified Party in its
capacity as a Noteholder) from and against any and all liabilities, and will reimburse each Indemnified
Party for all expenses incurred in investigating, preparing, pursuing or defending any claim, action,
proceeding or investigation with respect to any pending or threatened litigation, caused by, or arising out
of or in connection with, the issuance of the Notes, the transactions contemplated by this Prospectus,
the Trust Deed, the Investment Management Agreement and/or any action taken by, or any failure to act
by, such Indemnified Party; provided, however, that no Indemnified Party shall be indemnified for any
liabilities or expenses it incurs as a result of any acts or omissions of any Indemnified Party constituting
Investment Manager Breaches.
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DESCRIPTION OF THE COLLATERAL ADMINISTRATOR
General
The information appearing in this section has been prepared by the Collateral Administrator and has not
been independently verified by the Issuer or the Initial Purchaser, and none of such persons assumes
any responsibility for the accuracy, completeness or applicability of such information.
Deutsche Bank Aktiengesellschaft
Deutsche Bank Aktiengesellschaft ("Deutsche Bank" or the "Bank") originated from the reunification of
Norddeutsche Bank Aktiengesellschaft, Hamburg, Rheinisch-Westfalische Bank Aktiengesellschaft,
Düsseldorf and Süddeutsche Bank Aktiengesellschaft, Munich: pursuant to the Law on the Regional
Scope of Credit Institutions, these had been disincorporated in 1952 from Deutsche Bank which was
founded in 1870. The merger and the name were entered in the Commercial Register of the District
Court Frankfurt am Main on 2 May 1957. Deutsche Bank is a banking institution and a stock corporation
incorporated under the laws of Germany under registration number HRB 30 000. The Bank has its
registered office in Frankfurt am Main, Germany. It maintains its head office at Taunusanlage 12, 60325
Frankfurt am Main and branch offices in Germany and abroad including in London, New York, Sydney,
Tokyo and an Asia-Pacific Head Office in Singapore which serve as hubs for its operations in the
respective regions.
The Bank is the parent company of a group consisting of banks, capital market companies, fund
management companies, a real estate finance company, instalment financing companies, research and
consultancy companies and other domestic and foreign companies (the "Deutsche Bank Group").
As at 30 September 2006, Deutsche Bank's issued share capital amounted to EUR 1,334,735,508.48
consisting of 521,381,058 ordinary shares of no par value. The shares are fully paid up and in
registered form. The shares are listed for trading and official quotation on all the German Stock
Exchanges. They are also listed on the New York Stock Exchange. The Management Board has
decided to pursue delisting on certain stock exchanges other than Germany and New York in order to
benefit from the integration of financial markets. In respect of the stock exchanges Amsterdam,
Brussels, London, Luxembourg, Paris, Vienna, Zurich and Tokyo, this decision has completely been
implemented.
As at 30 September 2006, Deutsche Bank Group had total assets of EUR 1,096,546 million, total
liabilities of EUR 1,065,496 million and total shareholders'equity of EUR 31,050 million on the basis of
United States Generally Accepted Accounting Principles ("U.S. GAAP").
Deutsche Bank's long-term senior debt has been assigned a rating of "AA-" (outlook positive) by
Standard & Poor's, "Aa1" (outlook stable) by Moody's Investors Services and "AA-" (outlook stable) by
Fitch Ratings.
Termination and Resignation of Appointment of the Collateral Administrator
The appointment of the Collateral Administrator may be terminated (a) without "cause" (as defined in the
Investment Management Agreement) at any time upon 60 days'prior written notice by the Issuer or the
Trustee at its discretion or acting upon the directions of the holders of each Class of Notes acting
independently by Ordinary Resolution or (b) with "cause" at any time with immediate effect by the Issuer
or the Trustee at its discretion or acting upon the directions of the holders of each Class of Notes acting
independently by Ordinary Resolution. In addition the Collateral Administrator can resign its
appointment without "cause" (as defined in the Investment Management Agreement) at any time with
immediate effect on 90 days'written notice and with "cause" on 10 days'prior written notice.
Notwithstanding the foregoing, no proposed termination or resignation of the Collateral Administrator will
be effective until a successor collateral administrator has been appointed.
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DESCRIPTION OF THE CLASS A1 NOTE PURCHASE AGREEMENT
The following is a summary of the principal terms of the Class A1 Note Purchase Agreement entered
into by the Issuer on the Issue Date, which should not be relied upon as an exhaustive description of the
detailed provisions of such document (copies of which are available from the specified offices of any
Transfer Agent).
Any capitalised terms used but not defined in this section shall have the meanings ascribed to them In
the Class A1 Note Purchase Agreement.
Summary of the Class A1 Note Purchase Agreement
Initial available commitment and Purpose
The maximum aggregate principal amount of the Class A1 Note Purchase Agreement is €52,500,000 or
its Euro equivalent in Sterling or Dollars converted at the Initial Rate of Exchange in the case of any
amounts drawn in Sterling or Dollars (the "Class A1 Note Purchase Agreement").
Pursuant to the Class A1 Note Purchase Agreement between the Issuer, the Trustee, the Investment
Manager, the Class A1 Note Agent and the initial holder of the Class A1 Notes (the "Initial Class A1
Noteholder"), the Initial Class A1 Noteholder will agree, subject to the terms thereof, to purchase the
Class A1 Notes and on each Class A1 Drawing Date at the request of the Investment Manager (acting
on behalf of the Issuer), to advance amounts in EUR, Dollars or Sterling (each a "Euro Denominated
Drawing", a "Dollar Denominated Drawing" and a "Sterling Denominated Drawing") in exchange for
repayment by the Issuer of amounts in, respectively, Sterling, EUR or Dollars. Each Class A1 Drawing
received by the Issuer will be used by the Investment Manager (acting on behalf of the Issuer) to
purchase the Collateral Debt Obligations denominated in the currency of such Class A1 Drawing. It is a
condition to the entitlement of each initial Class A1 Noteholder to transfer any Class A1 Notes that the
transferee assumes the obligations of such Initial Class A1 Noteholder under the Class A1 Note
Purchase Agreement in respect of the Class A1 Notes so transferred.
Interest payments
The relevant interest amount in respect of the Class A1 Notes shall be calculated by the Class A1 Note
Agent applying (i) the relevant Class A1 Euro Rate of Interest and the applicable Class A1 Day Count
Fraction to an amount equal to each relevant Euro Denominated Drawing outstanding during each
relevant Class A1 Note Interest Period; (ii) the relevant Class A1 Sterling Rate of Interest and the
applicable Class A1 Day Count Fraction to an amount equal to each relevant Sterling Denominated
Drawing outstanding during each relevant Class A1 Note Interest Period; and (iii) the relevant Class A1
Dollar Rate of Interest and the applicable Class A1 Day Count Fraction to an amount equal to each
relevant Dollar Denominated Drawing outstanding during each relevant Class A1 Note Interest Period,
(the sum of all such amounts so calculated, together, the "Class A1 Interest Amount").
Such Class A1 Interest Amounts (if any) shall be payable on the Business Day following the last day of
the related Interest Accrual Period.
Class A1 Commitment Fee
The Issuer will also pay a Class A1 Commitment Fee to the holders of the Class A1 Notes which shall
accrue during each Class A1 Note Commitment Accrual Period and be payable on each Payment Date
during the Reinvestment Period. The Class A1 Commitment Fee will be determined by applying (i) 0.18
per cent. per annum to an amount equal to the daily weighted average of the Class A1 Available
Commitment and (ii) 0.30 per cent. per annum to an amount equal to the daily weighted average of the
Class A1 Allocated Amount with respect to unfunded liabilities of the Issuer under Synthetic Securities,
Revolving Securities and Delayed Drawdown Obligations during such Class A1 Note Commitment
Accrual Period multiplying the product thereof by the actual number of days in such Class A1 Note
Commitment Accrual Period divided by 360 and rounding the resultant figure.
Break Cost
If a Class A1 Drawing is prepaid on a Business Day other than the Business Day following the last day
of the related Interest Accrual Period or if for any reason (other than a default by such Class A1
Noteholder or the Class A1 Note Agent) a Class A1 Drawing does not occur; the Issuer shall pay the
Break Costs attributable thereto on the date of repayment of such Class A1 Drawing or on the date that
the Class A1 Drawing did not occur, as applicable.
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Termination
No additional Class A1 Drawings may be drawn down under the Class A1 Notes at any time after the
Class A1 Available Commitment Termination Date (as defined in Condition 1 (Definitions)).
Rating of Class A1 Noteholders and Defaulting Class A1 Noteholder
The holders of the Class A1 Notes must also satisfy the Class A1 Rating Criteria. If any holder of a
Class A1 Note fails to satisfy the Class A1 Rating Criteria or otherwise defaults on its obligation to
provide Class A1 Drawings under the Class A1 Notes, such holder of the Class A1 Note shall be
required to take action as set out more specifically in the Class A1 Note Purchase Agreement.
In the Class A1 Note Purchase Agreement:
"Class A1 Conduit Noteholder" means a Class A1 Noteholder which has certified that it is either (i) an
asset backed commercial paper conduit or (ii) an entity which will fund its Class A1 Drawings hereunder
by borrowing (directly or through intermediate special purpose entities) from a specified financing
conduit (in which case the term "Class A1 Conduit Noteholder" (or "Class A1 Noteholder" to the extent
referring to such a Class A1 Conduit Noteholder) shall be deemed to refer collectively to such Class A1
Noteholder and its related Financing Conduit.
"Class A1 Rating Criteria" means the criteria which will be satisfied on any date up to and including the
Class A1 Available Commitment Termination Date with respect to any Class A1 Noteholder if (a) the
short-term S&P issuer credit rating of any Class A1 Noteholder that is a financial institution or a bank is
at least "A1" (or, in the case of a Class A1 Conduit Noteholder, such Class A1 Conduit Noteholder has
either (A) a short term S&P issuer credit rating of "A1+" or (B) a liquidity facility provider or funding
conduit acting as a committed lender who accedes to this Agreement whose short-term S&P issuer
credit rating is at least "A1") or such Class A1 Noteholder's obligations are guaranteed by entities with
such ratings; and (b) the long-term Moody's senior unsecured rating of any Class A1 Noteholder is at
least "A1" (or, in the case of a Class A1 Conduit Noteholder has a short term Moody's rating of "P-1") or
such Class A1 Noteholder's obligations are guaranteed by entities with a short-term Moody's rating of
"P-1" provided that if a Class A1 Noteholder has a Related CP Issuer, the Class A1 Rating Criteria shall
be applied by reference to such Related CP Issuer.
"Related CP Issuer" means, with respect to any Class A1 Noteholder, any commercial paper conduit
designated by it for the purpose of funding or maintaining its interest in the Class A1 Notes, together
with its successors and assigns.
Release of Funds
Any funds deposited by a Class A1 Noteholder to a separate segregated ledger of the Class A1
Collateralising Noteholder Account in connection with a Class A1 Downgrade Draw shall be released to
such Class A1 Noteholder on the earliest to occur of (i) the transfer by such Class A1 Noteholder of its
Class A1 Pro Rata Share of the Class A1 Commitment to one or more eligible transferees; (ii) the date
on which such Class A1 Noteholder or the related guarantor or committed lender, if any, satisfies the
Class A1 Rating Criteria and (iii) the Class A1 Available Commitment Termination Date. If a Class A1
Noteholder transfers its interest in Class A1 Notes in part (and not in whole) the Class A1 Noteholder
shall be entitled to receive the relevant proportion of the amounts standing to the credit of the Class A1
Collateralising Noteholder Account that corresponds to the amount of Class A1 Notes transferred by it.
If at any time the amount standing to the credit of a Noteholder Collateral Account is greater than the
Class A1 Collateral Requirement (as determined by the Collateral Administrator), the excess amount will
be released by the Issuer to such Class A1 Noteholder. Eligible Noteholder Collateral posted by a Class
A1 Noteholder will be released and substituted for other Eligible Noteholder Collateral upon receipt of a
request from such Class A1 Noteholder.
On any date on which a Class A1 Drawing is repayable to a Defaulting Class A1 Noteholder pursuant to
Condition 7(e) (Class A1 Repayments) such repayment shall instead be deposited to the separate
segregated ledger of the Class A1 Collateralising Noteholder Account and made available to fund future
Class A1 Drawings subject to and in accordance with the other provisions of this Agreement.
On any date on which a Class A1 Noteholder’s Class A1 Pro Rata Share of the Class A1 Available
Commitment is subject to reduction or termination in accordance with the terms of the Class A1 Note
Purchase Agreement, funds in the sub account of the Class A Collateralising Noteholder Account in an
amount equal to such reduction or the full amount of such termination shall be released to such Class
A1 Noteholder.
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Withholding taxes
All payments by the Issuer under the Class A1 Note Purchase Agreement, whether in respect of
principal, interest, fees or any other item, shall be made in full without any deduction or withholding in
respect of Tax (as defined in the Class A1 Note Purchase Agreement) or otherwise unless the deduction
or withholding is required by law. If such a deduction or withholding is required in respect of any
payment to any Class A1 Noteholder under the Class A1 Note Purchase Agreement, the Issuer shall
pay to the Class A1 Noteholder in accordance with the Priorities of Payments, an amount equal to the
loss, liability or cost which such Class A1 Noteholder determines will be or has been reasonably
suffered for or on account of Tax enacted, introduced or varied after the date of the Class A1 Note
Purchase Agreement in accordance with the terms of the Class A1 Note Purchase Agreement.
Miscellaneous
The Class A1 Note Purchase Agreement includes provisions for payments in respect of increased costs,
indemnities (including without limitation for tax indemnities), reimbursement of expenses and other
provisions dealing in the matters commonly dealt with in revolver note purchases in the United Kingdom
and other jurisdictions.
Offering of the Class A1 Notes
The Class A1 Notes are only being offered for sale in any jurisdiction to holders who satisfy certain
rating criteria set out in the Class A1 Note Purchase Agreement and subject to the terms and conditions
of the Class A1 Notes set out in the Trust Deed (comprising the Master Trust Terms and the Issue
Deed) and the Class A1 Note Purchase Agreement.
Mechanics of and conditions to drawing
See "Description of the Portfolio — Funding under the Class A1 Notes and Acquisition of Additional
Collateral Debt Obligations".
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HEDGING ARRANGEMENTS
1. General
The following is a summary of the principal terms of the hedging arrangements to be entered into by the
Issuer. The following is a summary only and should not be relied upon as an exhaustive description of
the detailed provisions of such documents (copies of which are available from the specified offices of
any Transfer Agent).
2. Currency Hedge Transactions
After the Issue Date, the Issuer may from time to time enter any cross currency and interest rate
transaction, currency option, spot foreign exchange contract, forward foreign exchange contract and
currency swaption (including any option with respect to any of these transactions and any combination
of these transactions) which is either (i) entered into in accordance with certain hedging procedures or
(ii) to which the Rating Agencies confirm that the entry into of which will not adversely affect the then
ratings of the Rated Notes. Each Currency Hedge Transaction shall be entered into under a 1992 ISDA
Master Agreement (Multicurrency Cross Border Currency) or 2002 ISDA Master Agreement (or such
other ISDA pro forma Master Agreement as may be published by ISDA from time to time) (together with
the Schedule and confirmation thereto, including any guarantee thereof and any credit support annex
entered into pursuant to the terms thereof, including any guarantee thereof and any credit support annex
entered into pursuant to the terms thereof, and each as amended or supplemented from time to time, a
"Currency Hedge Agreement") (except, in the case of a spot foreign exchange contract which may be
entered into on standard market terms with any entity whose short term senior unsecured debt
securities are rated no lower than "A1+" by Standard & Poor's or "P-1" by Moody's).
The following is a summary of the principal terms of certain other currency hedging transactions (each,
an "Asset Swap Transaction") that may be entered into by the Issuer.
3. Asset Swap Transactions
The Issuer (or the Investment Manager on behalf of the Issuer) may purchase Non-Euro Obligations,
provided that on or about the date of settlement of the acquisition of any such Non-Euro Obligation, the
Issuer (or the Investment Manager on behalf of the Issuer) enters into an Asset Swap Transaction with
an Asset Swap Counterparty that satisfies the applicable Rating Requirement and pursuant to the terms
of which initial and final principal exchanges are made to fund the Issuer’s acquisition of the related
Non-Euro Obligation and convert the proceeds received in respect thereof at maturity or on default
(including any sales proceeds) and coupon exchanges are made at the exchange rate specified for such
transaction which shall be the prevailing exchange rate at the time of purchase. The entry into any
Asset Swap Transaction shall, save in the case of Form Approved Asset Swap Transactions, be subject
to receipt of Rating Agency Confirmation and shall in addition be subject to there being no withholding or
deduction for or an amount of any tax required in respect of any payments by both parties to such Asset
Swap Transaction at the time of entry into such transaction. The notional amount of the Asset Swap
Transaction shall be based on the principal balance of the related collateral debt obligation, and the
Asset Swap Transaction will have the same maturity as that of the related collateral debt obligation.
Interest on any Mezzanine Obligation which is not paid on a current basis but which is capitalised shall
not be the subject of an Asset Swap Transaction to the extent accrued but unpaid at any time after the
effective date of such Asset Swap Transaction.
The Investment Manager shall convert all amounts received by it in respect of any Non-Euro Obligation
which is not the subject of a related Asset Swap Transaction into Euros promptly upon receipt thereof at
the then prevailing spot rate of exchange (as determined by the Investment Manager) and shall procure
that such amounts are paid into the Principal Account or the Interest Account, as applicable, determined
by reference to the nature of the payments so received.
The Issuer shall be obliged to pay to any Asset Swap Counterparty such amounts as it actually receives
in respect of any Non-Euro Obligation and shall not be obliged to pay any additional amounts to an
Asset Swap Counterparty in respect thereof.
For purposes of the Coverage Tests, the Portfolio Profile Tests, the Minimum Weighted Average Spread
Test and the CDO Monitor Test, a Non-Euro Obligation shall be included as a Collateral Debt Obligation
having the relevant characteristics of the related Asset Swap Transaction and not of the related Non-
Euro Obligation, unless the Investment Manager determines otherwise and receives Rating Agency
Confirmation in respect of such determination.
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For purposes of the Collateral Quality Tests other than the Minimum Weighted Average Spread Test
and the CDO Monitor Test, a Non-Euro Obligation shall be included as a Collateral Debt Obligation
having the relevant characteristics of the related Non-Euro Obligation and not of the related Asset Swap
Transaction, unless the Issuer, following consultation with the Investment Manager determines
otherwise and receives Rating Agency Confirmation.
If the Issuer and the applicable Asset Swap Counterparty so agree (subject to the requirements for a
Form-Approved Asset Swap or, in the event that terms are inconsistent with the definition of Form
Approved Asset Swap, receipt of Rating Agency Confirmation) an Asset Swap Transaction may contain
terms which are different from those described above.
Calculation Agent The Asset Swap Counterparty under an Asset Swap Agreement shall be the
Calculation Agent thereunder.
4. Interest Rate Hedge Transactions
The Issuer, taking into account the advice of the Investment Manager, may enter into one or more
Interest Rate Hedge Transactions with an Interest Rate Hedge Counterparty from time to time (provided
that the Interest Rate Hedge Counterparty satisfies the applicable Rating Requirement) in order to
manage the interest rate and other risks in connection with the Issuer’s issuance of, and making of
payments on, the Notes and the ownership and disposition of the Collateral Debt Obligations.
It is not anticipated that any Interest Rate Hedge Transactions will be entered into on or prior to the
Issue Date. The entry into any Interest Rate Hedge Transaction after the Issue Date shall be subject to
receipt of Rating Agency Confirmation and shall in addition be subject to there being no withholding or
deduction for any tax required in respect of any payments by either party to such Interest Rate Hedge
Transaction at the time of entry into such transaction.
5. Replacement Interest Rate Hedge Transactions, Asset Swap Transactions and Currency
Hedge Transactions
In the event that any Interest Rate Hedge Agreement or any such Asset Swap Agreement or any such
Currency Hedge Agreement terminates in whole at any time in circumstances in which the applicable
Interest Rate Hedge Counterparty or the applicable Asset Swap Counterparty or the applicable
Currency Hedge Counterparty is the "Defaulting Party" or sole "Affected Party" (as defined in the
applicable Interest Rate Hedge Agreement or Asset Swap Agreement or Currency Hedge Agreement),
the Issuer, or the Investment Manager on its behalf, shall use commercially reasonable efforts to enter
into a Replacement Interest Rate Hedge Agreement or Replacement Asset Swap Agreement
Replacement Currency Hedge Agreement on substantially the same terms as such Interest Rate Hedge
Agreement or Asset Swap Agreement or Currency Hedge Agreement within 30 days of the termination
thereof with a counterparty which (or whose guarantor) satisfies the applicable Rating Requirement.
In the event of termination of an Interest Rate Hedge Agreement or Asset Swap Agreement or Currency
Hedge Agreement in the circumstances referred to above, any Derivative Counterparty Termination
Payments payable by the Interest Rate Hedge Counterparty or an Asset Swap Counterparty or a
Currency Hedge Counterparty to the Issuer will be paid into the Derivative Termination Account and
shall be applied towards the costs of entry into a Replacement Interest Rate Hedge Agreement or a
Replacement Asset Swap Agreement or a Replacement Currency Hedge Agreement, together with,
where necessary, Interest Proceeds that are available for such purpose on any Payment Date pursuant
to the Priorities of Payment, subject to receipt of Rating Agency Confirmation, save:
(a)
(b)
(c)
where the Issuer, following consultation with the Investment Manager, determines not to
replace such Interest Rate Hedge Agreement or Asset Swap Agreement or Currency Hedge
Agreement and Rating Agency Confirmation is received in respect of such determination; or
where termination of the Interest Rate Hedge Agreement or Asset Swap Agreement or
Currency Hedge Agreement occurs on a Redemption Date pursuant to Conditions 7(a) (Final
Redemption), 7(b) (Redemption at the Option of the Class F Subordinated Noteholders) or 10
(Events of Default); or
to the extent that such Derivative Counterparty Termination Payments are not required for
application towards the costs of entry into such Replacement Interest Rate Hedge Agreement
or Replacement Asset Swap Agreement or Replacement Currency Hedge Agreement,
in which event such Derivative Counterparty Termination Payments shall be paid into the Principal
Account and shall constitute Unscheduled Principal Proceeds.
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In the event that the Issuer receives any Derivative Replacement Receipts upon entry into a
Replacement Interest Rate Hedge Agreement or Replacement Asset Swap Agreement or Replacement
Currency Hedge Agreement, such amount shall be paid into the Derivative Termination Account and
applied directly by the Investment Manager, on behalf of the Issuer, in payment of any Derivative Issuer
Termination Payment payable upon termination of the Interest Rate Hedge Agreement or Asset Swap
Agreement or Currency Hedge Agreement being so replaced. To the extent not fully paid out of
Derivative Replacement Receipts, any Derivative Issuer Termination Payment payable by the Issuer in
the event of termination of an Asset Swap Agreement or Interest Rate Hedge Agreement shall be paid
to the Interest Rate Hedge Counterparty or Asset Swap Counterparty or Currency Hedge Counterparty,
as applicable on the next Payment Date in accordance with the Priorities of Payment. To the extent not
required for making any such Derivative Issuer Termination Payment, such Derivative Replacement
Receipts shall be paid into the Principal Account and shall constitute Principal Proceeds.
In the event that a Replacement Asset Swap Transaction cannot be entered into in such circumstances,
the Investment Manager, on behalf of the Issuer, shall sell the applicable Non-Euro Obligation, pay the
proceeds thereof to the Asset Swap Counterparty, to the extent required pursuant to the terms of such
Asset Swap Transaction and/or to the extent not so required, shall convert all or part of such proceeds,
as applicable, into Euro and shall pay them into the Principal Account. In the event that such proceeds
are insufficient to pay any termination payment to an Asset Swap Counterparty in full, such amount,
including any Defaulted Asset Swap Issuer Termination Payment, shall be paid out of Asset Swap
Replacement Receipts received by the Issuer upon entry into of any replacement therefor, and
thereafter, out of the Interest Proceeds and the Principal Proceeds on the next following Payment Date
in accordance with the Priorities of Payment.
6. Standard Terms of Asset Swap Agreements, Interest Rate Hedge Agreements and
Currency Hedge Transactions
Each Interest Rate Hedge Agreement, Asset Swap Agreement or Currency Hedge Agreement and
Offsetting Credit Default Swap each Hedge Agreement entered into by or on behalf of the Issuer shall
contain the following standard provisions, save to the extent agreed otherwise by the Issuer, the
applicable Asset Swap Counterparty, Interest Rate Hedge Counterparty and Currency Hedge
Counterparty and Offsetting Credit Default Swap Counterparty (each a "Hedge Counterparty") and the
Investment Manager and subject to receipt of Rating Agency Confirmation in respect thereof.
Netting Netting shall only be permitted in respect of the same currency and the same Hedge
Transaction.
Gross Up Under each Hedge Agreement neither the Issuer nor the applicable Hedge Counterparty will
be obliged to gross up any payments thereunder in the event of any withholding or deduction required
thereon. Any such event will, however, result in a "Tax Event" (as defined in such Hedge Agreement)
which is a "Termination Event" for the purposes of each Hedge Agreement. In the event of the
occurrence of a Tax Event, the Hedge Agreement will include a provision for the relevant Affected Party
(as defined therein) to transfer its obligations under such Hedge Agreement to an Affiliate (in the case of
any Hedge Counterparty) or to an entity incorporated in an alternative jurisdiction (in the case of the
Issuer) subject to satisfaction of the conditions specified therein.
Limited Recourse The obligations of the Issuer under each Hedge Agreement will be limited to the
proceeds of enforcement of the Collateral as applied in accordance with the Priorities of Payment set
out in Condition 3(c) (Pre-Enforcement Priority of Payments).
Termination Provisions Under each Hedge Agreement, the Issuer (or the Investment Manager on its
behalf) will be able to terminate such Hedge Agreement if there is an Event of Default or a Termination
Event (each as defined in such Hedge Agreement and described below) with respect to the applicable
Hedge Counterparty and such Hedge Counterparty will be able to terminate such Hedge Agreement or
such Asset Swap Agreement if there is an Event of Default or a Termination Event (as defined in such
Interest Rate Hedge Swap Agreement and as described below) with respect to the Issuer. Each Hedge
Agreement contains termination events commonly found in standard ISDA documentation save for (i)
the disapplication as regards both parties of the Events of Default relating to "Credit Support Default",
"Default under Specified Transaction" and "Cross Default" and the Termination Event "Credit Event
Upon Merger" and (ii) the disapplication as regards the Issuer only of the Event of Default relating to
"Breach of Agreement", "Misrepresentation" and "Merger Without Assumption" and the Termination
Events relating to "Tax Event Upon Merger".
In addition, each Hedge Agreement shall contain the following Additional Termination Events:
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(a)
(b)
(c)
(d)
an Event of Default has occurred in respect of the Notes and the Trustee has taken action to
enforce the security over the Collateral, for the purposes of which any Hedge Counterparty or
the Trustee on behalf of the Issuer may designate an Early Termination Date in respect thereof;
the Notes are redeemed in whole prior to their stated maturity (otherwise than as a result of an
Event of Default thereunder), for the purposes of which the Hedge Agreement shall be deemed
to terminate automatically in full on the Redemption Date of the Notes;
any modification of the Priorities of Payment without the prior written consent of the Hedge
Counterparty which is materially prejudicial to the Hedge Counterparty with respect to its
position in the Priorities of Payment (as determined by the Trustee), and the payment
obligations in priority thereto or pari passu therewith following which the Hedge Counterparty
may terminate the Hedge Agreement; and
failure by a Hedge Counterparty to take any action required under paragraphs (a), (b) and (d)
of the "Rating Downgrade Requirements", unless Rating Agency Confirmation has been
received notwithstanding such failure;
each an "Additional Termination Event".
For the purposes of the Additional Termination Events specified in paragraphs (a), (b) and (c) above, the
Issuer shall be the sole "Affected Party" and for the purposes of that specified in paragraph (d) above,
the applicable Hedge Counterparty shall be the sole "Affected Party" (as defined in the applicable
Hedge Agreement). The Issuer has in the Investment Management Agreement delegated the exercise
of its right to designate an early termination date upon an Event of Default or Termination Event under
any Hedge Agreement, to the Investment Manager together with all other rights in respect thereof,
including, to the extent applicable, the calculation of any Termination Payment.
Upon the occurrence of any Event of Default or Termination Event, a Hedge Agreement may be
terminated by the Issuer or the Investment Manager on its behalf in accordance with the detailed
provisions thereof and a lump sum (the "Termination Payment") may become payable by the Issuer to
the applicable Hedge Counterparty or vice versa. Such Termination Payment will be determined by the
Issuer or the Investment Manager on its behalf by reference to market quotations obtained in respect of
the entry into a replacement swap on the same terms as that terminated or as otherwise described in
the applicable Hedge Agreement or, to the extent that such determination does not produce a
commercially reasonable result, any loss suffered by the determining party.
Rating Downgrade Requirements
Unless written notification to the contrary has been received from the Rating Agencies (or unless
previously agreed subject to receipt of Rating Agency Confirmation in respect thereof), following the
occurrence of an Initial Rating Event and/or a Subsequent Rating Event, the applicable Hedge
Counterparty may be required to take action at its own cost and expense in such circumstances,
including one or more of the following:
(a)
(b)
(c)
providing, or causing to be provided, a Third Party Credit Support Document from an entity
satisfying the Rating Requirement applicable to such Hedge Counterparty to the Issuer; or
transferring its rights and obligations under the applicable Hedge Agreement and all
Confirmations to an entity satisfying the applicable Rating Requirement; or
posting collateral in the applicable Required Collateral Amount with the Issuer in accordance
with the terms of an Approved Credit Support Document.
Notwithstanding the applicable Hedge Counterparty's posting of collateral in accordance with the terms
of the Approved Credit Support Documents, in the case of a Subsequent Rating Event, the applicable
Hedge Counterparty shall either transfer its rights and obligations to an acceptable third party or provide
a Third Party Credit Support Document on or prior to the date that is 30 calendar days after the
occurrence of such Subsequent Rating Event. Notwithstanding the foregoing, any Hedge
Counterparty's obligations under paragraphs (a) to (c) (inclusive) above shall remain in effect only for so
long as an Initial Rating Event or Subsequent Rating Event, as applicable, is continuing with respect to
such Hedge Counterparty.
"Approved Credit Support Document" means a collateral agreement in the form of the 1995 ISDA
Credit Support Annex (ISDA Agreement subject to English Law).
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"Initial Rating Event" means with respect to a Hedge Counterparty or its Credit Support Provider (to the
extent that such Hedge Counterparty's or its Credit Support Provider relevant obligations are rated by
Moody's or S&P, as applicable), if (a) such entity's long term senior unsecured debt rating by Moody's is
lower than "A1" or (b) such entity's short term senior unsecured debt rating by Moody's is lower than
"Prime 1" or (c) such entity's short term senior unsecured debt rating by S&P is lower than (i) "A1" for
Interest Rate Hedge Transactions and (ii) "A1+" for Asset Swap Transactions, or where such Hedge
Counterparty is engaged in both Interest Rate Hedge Transactions and Asset Swap Transactions with
the Issuer.
"Required Collateral Amount" means the greater of the amounts of Collateral required by Moody's and
S&P determined in accordance with their most recent published rating methodology.
"Subsequent Rating Event" means with respect to a Hedge Counterparty or its Credit Support Provider
(to the extent that such entity's relevant obligations are rated by Moody's or S&P, as applicable) if (a)
such entity's long term senior unsecured debt rating by Moody's is lower than "A3" or (b) such entity's
short term senior unsecured debt rating by Moody's is lower than "Prime 2" or (c) such entity's short
term senior unsecured debt rating by S&P is lower than "A 2".
"Third Party Credit Support Document" means any agreement or instrument (including any
guarantee, insurance policy, security agreement or pledge agreement) whose terms provide for the
guarantee of the applicable Hedge Counterparty's obligations under the applicable Hedge Agreement by
a third party.
Failure by the applicable Hedge Counterparty to take any action required under the ratings downgrade
requirements above, unless Rating Agency Confirmation has been received notwithstanding such
failure, will constitute an Additional Termination Event in respect of any Hedge Agreement or, in certain
cases, may constitute an Event of Default, entitling the Issuer to terminate such Hedge Agreement.
7. Transfer and Modification
The Investment Manager may not procure any modification to any Hedge Agreement without the Issuer
Rating Agency Confirmation in relation to such modification, save in the case of any Asset Swap
Agreement or Asset Swap Agreement to the extent that it would constitute a Form Approved Asset
Swap following such modification. A Hedge Counterparty may assign its obligations under a Hedge
Agreement to any institution provided however, that Rating Agency Confirmation shall have been given
in relation to such assignment.
8. Governing Law
Each Asset Swap Agreement, Interest Rate Hedge Agreement and Currency Hedge Agreement
together with each Hedge Transaction thereunder will be governed by, and construed in accordance
with either, the laws of the State of New York, or the laws of England and Wales.
9. Offsetting Credit Default Swaps
The Investment Manager, acting on behalf of the Issuer, may from time to time enter into Offsetting
Credit Default Swaps. An "Offsetting Credit Default Swap" is an unfunded credit default swap entered
into between the Issuer (as protection buyer) and an Offsetting Credit Default Swap Counterparty (as
protection seller), the Reference Obligation(s) of which is a Collateral Debt Obligation owned by the
Issuer the effect of which hedges (in whole or in part) the Issuer's credit exposure under such Collateral
Debt Obligation.
The entry into, or acquisition of, any Offsetting Credit Default Swap will be subject to Rating Agency
Confirmation (save in relation to an Offsetting Credit Default Swap which is a Form-Approved Offsetting
Credit Default Swap), will be subject to the limits specified in the Bivariate Risk Table, and will be
subject to:
(a)
(b)
at the time such Offsetting Credit Default Swap is entered into, the Minimum Weighted Average
Spread Test will be satisfied; and
the Offsetting Credit Default Swap having a notional amount less than or equal to (1) the
principal amount of the related Collateral Debt Obligation (other than a Collateral Debt
Obligation which is a Collateralised Credit Default Swap) that is a Reference Obligation or (2) in
the case of a Collateralised Credit Default Swap the notional amount of such Collateralised
Credit Default Swap; and
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(c)
(d)
the maturity of an Offsetting Credit Default Swap must be equal to or longer than the maturity of
the related Collateral Debt Obligation that is the Reference Obligation and may not exceed the
Maturity Date of the Notes; and
the Offsetting Credit Default Swap containing limited recourse and non-petition provisions
similar to those set out in the Investment Management Agreement.
In the event of any sale, prepayment or repayment of any Collateral Debt Obligation which is the
Reference Obligation in respect of an Offsetting Credit Default Swap, if such sale, prepayment or
repayment would result in the Principal Balance of the related Collateral Debt Obligation being less than
the notional amount of the relevant Offsetting Credit Default Swap then, at the discretion of the
Investment Manager, on behalf of the Issuer, (i) all or part, as applicable, of that Offsetting Credit Default
Swap will be sold or unwound so that its notional amount is less than or equal to the Principal Balance
of the related Collateral Debt Obligation or (ii) such excess notional amount shall be deemed to be a
Credit Short Obligation provided that following such sale, prepayment or repayment all the conditions
applicable under the Transaction Documents for the entering into of Credit Short Obligations would be
satisfied.
For the avoidance of doubt, the notional amount of any Offsetting Credit Default Swap whose maturity
and amortisation are equal to the Reference Obligation shall be deemed to have an "AAA" credit rating
by S&P.
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DESCRIPTION OF THE REPORTS
Terms used and not otherwise defined herein or in this Prospectus as specifically referenced herein
shall have the meaning given to them in Condition 1 (Definitions).
Monthly Reports
The Collateral Administrator, not later than the tenth Business Day after the first calendar day of each
month (save in respect of any month preceding a month in which a Payment Date Report will be
prepared) preceding the related Payment Date (or if such day is not a Business Day, the immediately
following Business Day) commencing in November 2007, on behalf, and at the expense, of the Issuer
and in consultation with the Investment Manager, shall compile and provide to the Issuer, the Trustee,
the Investment Manager, the Initial Purchaser and each Rating Agency and, upon written request
therefor in the form set out in the Agency Agreement, a monthly report and in each case only to the
extent that information has been provided to the Collateral Administrator (in respect of a holder of any
Notes which were assigned an Initial Rating, and in respect of a holder of any Class F Subordinated
Notes, the "Monthly Report"), which shall contain the information set out below with respect to the
Portfolio, determined by the Collateral Administrator in consultation with the Investment Manager. At the
end of each quarterly period holders of the Class F Subordinated Notes (upon request) are also
provided with a commentary provided by the Investment Manager with respect to the performance of the
Portfolio.
Portfolio
(a)
(b)
(c)
(d)
the Aggregate Principal Balance of the Collateral Debt Obligations;
in respect of each Collateral Debt Obligation, its Principal Balance, annual interest rate, Stated
Maturity, Obligor, Obligor's principal place of business or significant operations (determined on
the same basis as for paragraph (c) of the Eligibility Criteria), its S&P Industry Category and
Moody's industrial classification group and details of whether or not such Obligation is a
Synthetic Security;
in respect of each Collateral Debt Obligation, its S&P Rating and Moody's Rating (other than
any confidential credit estimate) as at the date of the current Monthly Report; and
in respect of each Collateral Enhancement Obligation and Exchanged Equity Security (to the
extent applicable), its Principal Balance, face amount, annual interest rate, Stated Maturity and
Obligor, details of the type of instrument it represents and details of any amounts payable
thereunder or other rights accruing pursuant thereto.
Accounts
(a)
(b)
the Balances standing to the credit of each of the Accounts (including the opening and closing
Balances of such Accounts at the beginning and end, respectively, of such period) and the
credits to and debits from such Accounts; and
the purchase price, principal amount, redemption price, annual interest rate, maturity date and
Obligor under each Eligible Investment purchased from funds in the Accounts as of the
beginning and end of such period.
Interest Rate Hedge Transactions, Asset Swap Transactions, Credit Short Obligations, Offsetting
Credit Default Swaps, Currency Hedge Transactions
(a)
(b)
(c)
the outstanding notional amount as defined in the applicable Interest Rate Hedge Transaction;
Asset Swap Transaction, Currency Hedge Transaction, Credit Short Obligation or Offsetting
Credit Default Swap;
the amount scheduled to be received and paid by the Issuer in respect of each Interest Rate
Hedge Transaction, Asset Swap Transaction, Currency Hedge Transaction Credit Short
Obligation or Offsetting Credit Default Swap on or about the next Payment Date; and
the then current Moody’s and S&P Rating of each Derivative Counterparty.
Coverage Tests and Collateral Quality Tests
(a)
a statement as to whether each of the Class A Par Value Test, the Class B Par Value Test, the
Class C Par Value Test, the Class D Par Value Test and the Class E Par Value Test is satisfied
and details of the relevant Par Value Ratios;
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(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
a statement as to whether each of the Class A Interest Coverage Test, the Class B Interest
Coverage Test, the Class C Interest Coverage Test, the Class D Interest Coverage Test and
the Class E Interest Coverage Test is satisfied and details of the relevant Par Value Ratios;
for each Monthly Report prepared during the Reinvestment Period, a statement as to whether
the CDO Monitor Test is satisfied and details of the applicable Loss Differential in respect of
each Class of Notes;
the S&P Weighted Average Recovery Rate and a statement as to whether the S&P Minimum
Weighted Average Recovery Rate Test is satisfied;
the Diversity Score and, for each Monthly Report prepared during the Reinvestment Period, a
statement as to whether the Moody’s Minimum Diversity Test is satisfied;
the Moody’s Weighted Average Rating and a statement as to whether the Moody’s Maximum
Weighted Average Rating Factor Test is satisfied;
the Moody's Weighted Average Recovery Rate and a statement as to whether the Moody’s
Minimum Weighted Average Recovery Rate Test is satisfied;
the Weighted Average Spread and a statement as to whether the Minimum Weighted Average
Spread Test is satisfied; and
the Portfolio Weighted Average Maturity and a statement as to whether the Weighted Average
Maturity Test is satisfied.
Portfolio Profile Tests
(a)
(b)
(c)
in respect of each Portfolio Profile Test, a statement as to whether such test is satisfied,
together with details of the result of the calculations required to be made in order to make such
determination which details shall include the applicable numbers, levels and/or percentages
resulting from such calculations;
the identity and Moody’s Rating and S&P Rating of each Synthetic Counterparty, Offsetting
Credit Default Swap Counterparty, Credit Short Obligation Counterparty and Selling Institution,
together with any changes in the identity of such entities since the date of determination of the
last Monthly Report and details of the aggregate amount of respectively Synthetic Securities
broken down by reference to whether such Synthetic Security is an Uncollateralised CLN, a
Collateralised Credit Default Swap or Secured Credit Linked Note and Participations entered
into with each such entity; and
a statement as to whether the limits specified in the Bivariate Risk Table are met by reference
to the Moody's Ratings and S&P Ratings of Selling Institutions and Synthetic Counterparties
and if such limits are not met a statement as to the nature of the non-compliance.
Reinvestment Diversion Test
A statement as to whether the Reinvestment Diversion Test is satisfied and the applicable Reinvestment
Diversion Ratio.
Payment Date Report
The Collateral Administrator, on behalf, and at the expense, of the Issuer and in consultation with the
Investment Manager, shall render an accounting report (the "Payment Date Report"), prepared and
determined as of each Determination Date, and delivered to the Investment Manager, the Issuer, the
Trustee, the Initial Purchaser, any holder of a beneficial interest in any Note (upon written request
therefor in the form set out in the Agency Agreement) and each Rating Agency not later than the second
Business Day preceding the related Payment Date. Upon receipt of each Payment Date Report, the
Collateral Administrator, in the name and at the expense of the Issuer, shall notify the Irish Stock
Exchange of the Principal Amount Outstanding of each Class of Notes after giving effect to the principal
payments, if any, on the next Payment Date. The Payment Date Report shall contain the following
information:
Portfolio
(a)
the Aggregate Principal Balance of the Collateral Debt Obligations as of the close of business
on such Determination Date, after giving effect to (A) Principal Proceeds received on the
Collateral Debt Obligations with respect to the related Due Period and the reinvestment of such
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Principal Proceeds in Substitute Collateral Debt Obligations during such Due Period and (B)
the disposition of any Collateral Debt Obligations during such Due Period;
(b)
(c)
a list of, respectively, the Collateral Debt Obligations and Collateral Enhancement Obligations
indicating the Principal Balance and Obligor of each; and
the information required pursuant to "Monthly Reports — Portfolio".
Notes
(a)
(b)
the Principal Amount Outstanding of the Notes of each Class and such aggregate amount as a
percentage of the original aggregate Principal Amount Outstanding of the Notes of such Class
at the beginning of the Due Period, the amount of principal payments to be made on the Notes
of each Class on the related Payment Date, amount of any Deferred Interest which is to be
deferred on such Payment Date in respect of each of the Class B Notes, Class C Notes, Class
D Notes and the Class E Notes and the aggregate amount of the Notes of each Class
Outstanding and such aggregate amount as a percentage of the original aggregate amount of
the Notes of such Class Outstanding after giving effect to the principal payments, if any, on the
next Payment Date; and
the interest payable in respect of each Class of Notes (as applicable) and the Class A1
Commitment Fee on the related Payment Date (in the aggregate and by Class).
Payment Date Payments
(a)
(b)
(c)
the amounts payable pursuant to the Interest Proceeds Priority of Payments and the Principal
Proceeds Priority of Payments;
the amount of any Trustee Fees and Expenses, the amount of any Investment Management
Fees and the amount of any Administrative Expenses payable on the related Payment Date, in
each case, on an itemised basis; and
any Scheduled Periodic Asset Swap Counterparty Payments and any Asset Swap
Counterparty Principal Exchange Amounts payable by any Asset Swap Counterparty on or
immediately prior to the related Payment Date.
Accounts
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
the Balance standing to the credit of the Interest Accounts at the end of the related Due Period;
the Balance standing to the credit of the Principal Accounts at the end of the related Due
Period;
the Balance standing to the credit of the Interest Accounts immediately after all payments and
deposits to be made on the next Payment Date;
the Balance standing to the credit of the Principal Accounts immediately after all payments and
deposits to be made on the next Payment Date;
the amounts payable from the Interest Accounts (through a transfer to the Payment Accounts)
pursuant to the Priorities of Payment on such Payment Date;
the amounts payable from the Principal Accounts (through a transfer to the Payment Accounts)
pursuant to the Priorities of Payment on such Payment Date;
the amounts payable from any other Accounts (through a transfer to the Payment Accounts)
pursuant to the Priorities of Payment on such Payment Date, together with details of whether
such amounts constitute Interest Proceeds or Principal Proceeds;
the Balance standing to the credit of each of the other Accounts at the end of the related Due
Period and the credits to and debits from such Accounts;
the purchase price, principal amount, redemption price, annual interest rate, maturity date of
and Obligor of each Eligible Investment purchased from funds in the Accounts; and
the amount of Collateral Enhancement Obligation Proceeds to be paid pursuant to the
Collateral Enhancement Obligations Proceeds Priority of Payments on such Payment Date and
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the Balance standing to the credit of the Collateral Enhancement Account on such Payment
Date after taking into account such payment.
Coverage Tests, Collateral Quality Tests and Portfolio Profile Tests, Reinvestment Diversion Test
The information required pursuant to "Monthly Reports — Coverage Tests and Collateral Quality Tests
and Portfolio Profile Tests".
Interest Rate Hedge Transactions
The information required pursuant to "Monthly Reports — Interest Rate Hedge Transactions".
Asset Swap Transactions
The information required pursuant to "Monthly Reports — Asset Swap Transactions".
Currency Hedge Transactions
Offsetting Credit Default Swaps and Credit Short Obligations
The information required pursuant to "Monthly Reports — Offsetting Credit Default Swaps and Credit
Short Obligations".
Class F Subordinated Noteholder Report
The Collateral Administrator, on behalf, and at the expense, of the Issuer and in consultation with the
Investment Manager, shall provide information (the "Class F Subordinated Noteholder Report"),
determined as of each Determination Date (except with respect to the approximate value referenced in
paragraph (i) below) and delivered to the Trustee, the Investment Manager, the Initial Purchaser and the
Issuer on the date so provided for the Payment Date Report. The Trustee shall, in addition, deliver a
copy of the Class F Subordinated Noteholder Report to any holder of Class F Subordinated Notes or
any Combination Notes which contain a Class F Subordinated Component upon written request therefor
in the form set out in the Agency Agreement no later than the second Business Day preceding the
related Payment Date. All Class F Subordinated Noteholder Reports shall be mailed from outside the
United States. The Class F Subordinated Noteholder Report shall contain the following information:
Portfolio
(a)
(b)
(c)
(d)
(e)
(f)
(g)
the approximate aggregate market value of, respectively, the Collateral Debt Obligations and
the Collateral Enhancement Obligations as of the preceding month end;
subject to any confidentiality obligations binding on the Issuer, the identity of each Collateral
Debt Obligation that became a Defaulted Obligation or that experienced a rating change since
the last such report;
the Aggregate Principal Balance of the Collateral Debt Obligations, as of (i) the Effective Date
and (ii) the close of business on such Determination Date, after giving effect to (A) Principal
Proceeds received on the Collateral Debt Obligations with respect to the related Due Period
and the reinvestment of such Principal Proceeds in Substitute Collateral Debt Obligations
during such Due Period and (B) the disposal of any Collateral Debt Obligations during such
Due Period;
the Principal Amount Outstanding of the Notes of each Class and as a percentage of the
original Principal Amount Outstanding of the Notes of such Class at the beginning of the Due
Period, the amount of principal payments to be made on the Notes of each Class on the related
Payment Date, the Principal Amount Outstanding of the Notes of each Class and as a
percentage of the original Amount Outstanding of the Notes of such Class, in each case after
giving effect to the principal payments, if any, on such Payment Date and the amount of any
Deferred Interest deferred on such Payment Date and the amount of Deferred Interest already
outstanding in respect of the Class B Notes, Class C Notes, Class D Notes and the Class E
Notes;
the Principal Proceeds received during the related Due Period;
the Interest Proceeds received during the related Due Period;
the Collateral Enhancement Proceeds received during the related Due Period;
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(h)
(i)
a list of the Collateral Debt Obligations, indicating the Principal Balance, annual interest rate,
Stated Maturity, S&P Industry Category, Moody’s industrial classification group, the Moody’s
Rating and the S&P Rating (but excluding any confidential credit estimates in relation thereto);
and
the identity of any Collateral Debt Obligations that were released for sale or other disposition,
indicating whether such Collateral Debt Obligation is a Defaulted Obligation, a Credit Improved
Obligation, a Credit Impaired Obligation or an Exchanged Equity Security and pursuant to
which clause of the Investment Management Agreement such Collateral Debt Obligation or
Exchanged Equity Security was sold or disposed of.
Payments
The amounts payable on the related Payment Date in respect of each item set out in the Interest
Proceeds Priority of Payments, the Principal Proceeds Priority of Payments and the Collateral
Enhancement Obligation Proceeds Priority of Payments and the balances standing to the Accounts.
Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F
Subordinated Notes and Combination Notes
(a)
(b)
the Interest Amount payable in respect of the Class A Notes, Class B Notes, the Class C
Notes, the Class D Notes, the Class E Notes, the Class F Subordinated Notes, and the
corresponding amounts payable in respect of the Combination Notes and the amount payable
in respect of the Class A1 Commitment Fee, on the next Payment Date; and
EURIBOR for the related Due Period and the Floating Rate of Interest applicable to each Class
of Notes which are Floating Rate Notes during the related Due Period.
Coverage Ratios
The results of each of the Coverage Tests as of the close of business on the related Measurement Date
and as at the end of each purchase, sale or other disposition of Collateral Debt Obligations since the
last report.
Nothing in any of the foregoing shall oblige the Issuer or Investment Manager to disclose, whether
directly or indirectly, any information held under an obligation of confidentiality.
Each Report shall state that it is for informational purposes only, that certain information included in the
Report is estimated, approximated or projected and that the Report is provided without any
representations or warranties as to accuracy or completeness and that none of the Issuer, the Trustee,
the Investment Manager, the Initial Purchaser, the Initial Purchaser or the Collateral Administrator will
have any liability for such estimates, approximations or projections.
Accounts
(a)
(b)
a notice setting forth LIBOR, as calculated by the LIBOR Calculation Agent, for the Interest
Accrual Period following each LIBOR Determination Date and the Note Interest Rate for the
next Distribution Date; and
such other information as the Trustee or the Investment Manager may reasonably request.
Reinvestment Diversion Test
A statement as to whether the Reinvestment Diversion Test is satisfied and the applicable Reinvestment
Diversion Ratio.
Minimum Reporting for purpose of the German Investment Tax Act
The Issuer shall use its reasonable efforts to comply with the Minimum Reporting Requirements,
provided always that the Issuer may satisfy such Minimum Reporting Requirements by providing the
requisite financial information (upon such information being made available to it) to a professional tax
adviser with instructions to such adviser to re-format the relevant information as required and none of
the Issuer, the Trustee, the Collateral Administrator nor the Agents shall have any liability whatsoever
for any such information prepared and/or published by the German Tax Adviser under the Minimum
Reporting Requirements or for any tax consequences to any Noteholder or other party. See "Risk
Factors — German Investment Tax Act" and "Taxation in Germany".
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TAX CONSIDERATIONS
1. General
The following is a summary based on present law of certain Dutch income tax consideration, U.S.
federal income tax considerations and German income tax considerations for prospective purchasers of
the Notes. It addresses only purchasers that buy in the original offering at the original offering price and
hold the Notes as capital assets. The discussion is a general summary. It is not a substitute for tax
advice. The discussion does not consider the circumstances of particular purchasers, some of which
(such as banks, insurance companies, dealers, tax-exempt organizations or persons holding the Notes
as part of a hedge, straddle, conversion, or integrated or constructive sale transaction) are subject to
special tax regimes. It also does not address purchasers that buy Notes, in an additional issuance or
otherwise, after the Issue Date.
This summary is based on the U.S., Dutch and German tax laws, regulations (final, temporary and
proposed), administrative rulings and practice and judicial decisions in effect or available on the date of
this Prospectus. All of the foregoing are subject to change or differing interpretation at any time, which
change or interpretation may apply retroactively and could affect the continued validity of this summary.
This summary is included herein for general information only, and there can be no assurance that the
U.S. Internal Revenue Service (the "IRS") will take a similar view of the U.S. federal income tax
consequences of an investment in the Notes as described herein. ACCORDINGLY, PROSPECTIVE
PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO U.S.
FEDERAL INCOME TAX, DUTCH AND GERMAN TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES, AND THE POSSIBLE APPLICATION OF STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS. IN PARTICULAR, NO REPRESENTATION IS MADE AS
TO THE MANNER IN WHICH PAYMENTS UNDER THE NOTES WOULD BE CHARACTERIZED BY
ANY RELEVANT TAXING AUTHORITY.
As used in this section, the term "U.S. Holder" includes a beneficial owner of a Note that is, for U.S.
federal income tax purposes, a citizen or individual resident of the United States of America, an entity
treated for United States federal income tax purposes as a corporation or a partnership created or
organized in or under the laws of the United States of America or any state thereof or the District of
Columbia, an estate the income of which is includable in gross income for U.S. federal income tax
purposes regardless of its source, or a trust if, in general, a court within the United States of America is
able to exercise primary supervision over its administration and one or more U.S. persons have the
authority to control all substantial decisions of such trust, and certain eligible trusts that have elected to
be treated as United States persons. This summary assumes that a U.S. Holder has a U.S. Dollar
functional currency and the Issuer has a non-U.S. Dollar functional currency. This summary also does
not address the rules applicable to certain types of investors that are subject to special U.S. federal
income tax rules, including but not limited to, dealers in securities or currencies, traders in securities,
financial institutions, U.S. expatriates, tax-exempt entities (except with respect to specific issues
discussed herein) charitable remainder trusts and their beneficiaries, insurance companies, persons or
their qualified business units ("QBUs") whose functional currency is not the U.S. Dollar, persons that
own (directly or indirectly) equity interests in holders of Notes.
In this summary, each of the Combination Notes will be treated as its respective Components rather
than a single unit. Therefore, in the following discussions, any reference in the summary applicable to
each Class of Notes also applies to any corresponding Component of the Combination Notes.
Purchasers of Notes may be required to pay stamp taxes and other charges, in accordance with the
laws and practices of the country of purchase, in addition to the Issue Price of each Note.
2. Netherlands Taxation
General
The following summary describes the principal Dutch tax consequences of the acquisition, holding,
redemption and disposal of the Notes, but does not purport to be a comprehensive description of all
Dutch tax considerations thereof. This summary is intended as general information only and each
prospective investor should consult a professional tax adviser with respect to the tax consequences of
an investment in the Notes.
This summary is based on the tax legislation, published case law, treaties, regulations and published
policy, in force as of the date of this Offering Circular, though it does not take into account any
developments or amendments thereof after that date whether or not such developments or amendments
have retroactive effect.
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This summary does not address the Dutch tax consequences for:
(i)
(ii)
(iii)
holders of Notes holding a substantial interest (aanmerkelijk belang) in the Issuer. Generally
speaking, a holder of Notes holds a substantial interest in the Issuer, if such holder of Notes,
alone or, where such holder is an individual, together with his or her partner (statutory defined
term) or certain other related persons, directly or indirectly, holds (i) an interest of 5 percent or
more of the total issued capital of the Issuer or of 5 percent or more of the issued capital of a
certain class of shares of the Issuer, (ii) rights to acquire, directly or indirectly, such interest or
(iii) certain profit sharing rights in the Issuer;
pension funds or other entities that are exempt from Dutch corporate income tax;
investment institutions (fiscale beleggingsinstellingen).
Withholding tax
All payments made by the Issuer under the Notes may be made free of withholding or deduction for any
taxes of whatsoever nature imposed, levied, withheld or assessed by the Netherlands or any political
subdivision or taxing authority thereof or therein.
Corporate and individual income tax
(a)
Residents of the Netherlands
If a holder is resident or deemed to be resident of the Netherlands for Dutch tax purposes and is fully
subject to Dutch corporate income tax or is only subject to Dutch corporate income tax in respect of its
enterprise to which the Notes are attributable, income derived from the Notes and gains realised upon
the redemption or disposal of the Notes are generally taxable in the Netherlands.
If an individual holder is resident or deemed to be resident of the Netherlands for Dutch tax purposes
(including the individual holder who has opted to be taxed as a resident of the Netherlands), income
derived from the Notes and gains realised upon the redemption or disposal of the Notes are taxable at
the progressive rates of the Dutch income tax act 2001, if:
(i)
(ii)
the holder has an enterprise or an interest in an enterprise, to which enterprise the
Notes are attributable; or
such income or gains qualify as income from miscellaneous activities (resultaat uit
overige werkzaamheden), which include the performance of activities with respect to the
Notes that exceed regular, active portfolio management (normaal, actief
vermogensbeheer).
If neither condition (i) nor condition (ii) applies to the holder of the Notes, taxable income with regard to
the Notes must be determined on the basis of a deemed return on income from savings and
investments (sparen en beleggen), rather than on the basis of income actually received or gains actually
realised. At present, this deemed return on income from savings and investments has been fixed at a
rate of 4% of the average of the individual's yield basis (rendementsgrondslag) at the beginning of the
calendar year and the individual's yield basis at the end of the calendar year, insofar as the average
exceeds a certain threshold. The average of the individual's yield basis is determined as the fair market
value of certain qualifying assets held by the holder of the Notes less the fair market value of certain
qualifying liabilities on 1 January and 31 December, divided by two. The fair market value of the Notes
will be included as an asset in the individual's yield basis. The deemed return on income from savings
and investments of 4% will be taxed at a rate of 30 per cent.
(b)
Non-residents of the Netherlands
If a holder is not a resident nor deemed to be a resident of the Netherlands for Dutch tax purposes (nor
has opted to be taxed as a resident of the Netherlands), such holder is not taxable in respect of income
derived from the Notes and gains realised upon the redemption or disposal of the Notes, unless:
(i)
(ii)
the holder has an enterprise or an interest in an enterprise that is, in whole or in part, carried on
through a permanent establishment or a permanent representative in the Netherlands to which
permanent establishment or a permanent representative the Notes are attributable; or
the holder is entitled to a share in the profits of an enterprise that is effectively managed in the
Netherlands, other than by way of securities or through an employment contract, and to which
enterprise the Notes are attributable; or
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(iii)
the holder is an individual and such income or gains qualify as income from miscellaneous
activities in the Netherlands, which include the performance of activities in the Netherlands with
respect to the Notes that exceed regular, active portfolio management.
Gift and Inheritance taxes
(a)
Residents of the Netherlands
Generally, gift and inheritance taxes will be due in the Netherlands in respect of the acquisition of the
Notes by way of a gift by, or on the death of, a holder that is a resident or deemed to be a resident of the
Netherlands for the purposes of Dutch gift and inheritance tax at the time of the gift or his or her death.
A holder of the Dutch nationality is deemed to be a resident of the Netherlands for the purposes of the
Dutch gift and inheritance tax, if he or she has been resident in the Netherlands during the ten years
preceding the gift or his or her death. A holder of any other nationality is deemed to be a resident of the
Netherlands for the purposes of the Dutch gift and inheritance tax if he or she has been resident in the
Netherlands at any time during the twelve months preceding the time of the gift. The same twelve-month
rule may apply to entities that have transferred their seat of residence out of the Netherlands.
(b)
Non-residents of the Netherlands
No gift or inheritance taxes will arise in the Netherlands in respect of the acquisition of the Notes by way
of gift by, or as a result of the death of, a holder that is neither a resident nor deemed to be a resident of
the Netherlands for the purposes of the Dutch gift and inheritance tax, unless:
(i)
(ii)
(iii)
such holder at the time of the gift has, or at the time of his or her death had, an
enterprise or an interest in an enterprise that is or was, in whole or in part, carried on
through a permanent establishment or a permanent representative in the Netherlands
and to which permanent establishment or a permanent representative, the Notes are or
were attributable; or
the Notes are or were attributable to the assets of an enterprise that is effectively
managed in the Netherlands and the donor is or the deceased was entitled, other than
by way of Notes or through an employment contract, to a share in the profits of that
enterprise, at the time of the gift or at the time of his or her death; or
in the case of a gift of the Notes by a holder that at the date of the gift was neither a
resident nor deemed to be a resident of the Netherlands, such holder dies within 180
days after the date of the gift, while at the time of his or her death being a resident or
deemed to be a resident of the Netherlands.
Value added tax
In general, no value added tax will arise in respect of payments in consideration for the issue of the
Notes or in respect of the cash payment made under the Notes, or in respect of a transfer of Notes.
Other taxes and duties
No registration tax, customs duty, transfer tax, stamp duty or any other similar documentary tax or duty,
will be payable in the Netherlands by a holder in respect of or in connection with the subscription, issue,
placement, allotment, delivery or transfer of the Notes.
EU Savings Directive
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required,
from 1 July, 2005, to provide to the tax authorities of another Member State details of payment of
interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other
Member State. However for a transitional period, Belgium, Luxembourg and Austria are instead required
(unless during that period they elect otherwise) to operate a withholding system in relation to such
payments (the ending of such transitional period being dependent upon the conclusion of certain other
agreements relating to information exchange with certain other countries).
Also with effect from 1 July, 2005, a number of non-EU countries including Switzerland, and certain
dependent or associated territories of certain Member States have agreed to adopt similar measures
(either provision of information or transitional withholding) (a withholding system in the case of
Switzerland) in relation to payments made by a person within its jurisdiction to, or collected by such a
person for, an individual resident in a Member State. In addition, the Member States have entered into
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eciprocal provision of information or transitional withholding arrangements with certain of those
dependent or associated territories in relation to payments made by a person in a Member State to, or
collected by such a person for, an individual resident in one of those territories.
3. Taxation in Germany
The information contained in this section is not intended as tax advice and does not purport to describe
all of the tax considerations that may be relevant to a prospective purchaser of the Notes. It is based
upon German tax laws (including tax treaties) in effect and applied as of the date hereof, which are
subject to change, potentially with retroactive effect. It should be read in conjunction with the section
entitled "Risk Factors — German Investment Tax Act."
Prospective purchasers of the Notes are advised to consult their own tax advisers as to the tax
consequences, under German tax laws and the tax laws of the country in which they are
resident, of purchasing, holding and disposing of the Notes and receiving payments under the
Notes.
The Issuer has been advised that the Notes should not qualify as "units" in a foreign investment fund for
the following reason:
Based on a circular of the German Federal Ministry of Finance (Bundesministerium der Finanzen) dated
2 June 2005 (BStBl. I 2005 page 728 (732), sec. 6), the Notes will not be classified as "units in a foreign
investment fund" if "according to the contractual conditions (Vertragsbedingungen), in addition to the
substitution of debt securities for the purpose of ensuring size, maturity profile and risk structure only up
to 20 per cent. per annum of the assets (Vermögen) of the Issuer may, be traded on a discretionary
basis by the Issuer".
As set out in "The Portfolio—Management of the Portfolio—Discretionary Reinvestment during the
Reinvestment Period", paragraph (c), the following rule is provided for:
"During the Reinvestment Period only, the Investment Manager acting on behalf of the Issuer may
dispose of any Collateral Debt Obligation (other than a Credit Improved Obligation, a Credit Impaired
Obligation, a Defaulted Obligation or an Exchanged Equity Security which may only be sold in the
circumstances provided below) and reinvest the Sale Proceeds (other than Collateral Enhancement
Obligation Proceeds and accrued interest on such Collateral Debt Obligations included in Interest
Proceeds by the Investment Manager) thereof in Substitute Collateral Debt Obligations, such sale and
reinvestment being subject to: (…)
(…) the Collateral Administrator confirming that the Aggregate Principal Balance of Collateral Debt
Obligations sold in any year (with each year commencing on the Issue Date or, as the case may be, an
anniversary thereof, and ending in the next succeeding anniversary thereof) when aggregated with the
Aggregate Principal Balance of any Collateral Debt Obligations to be sold (in each case excluding any
Credit Improved Obligations, Credit Impaired Obligations or Defaulted Obligations sold) does not exceed
20 per cent. of the Aggregate Collateral Balance, measured as at the beginning of each such year."
There is no guidance as to how the tax authorities would apply the 20 per cent. threshold in detail and in
particular whether they would include the dispositions of Credit Improved Obligations within the 20 per
cent. threshold. Accordingly, the Issuer believes that good arguments the rules taken from the
Prospectus should comply with the rules established by the tax authorities in the above circular however
no assurance can be given that the Investment Tax Act will not be applicable to the Class E Notes, the
Class F Subordinated Notes and to the Class P Combination Notes.
The Issuer has been advised that the tax authorities would be expected to follow the above
interpretation issued by the German Federal Ministry of Finance. The tax authorities may, however,
change their position with effect for the future or, although this is considered unlikely, with retroactive
effect. Furthermore, there is no case law on this issue and the German courts may or may not share the
view expressed by the German Federal Ministry of Finance, if the issue were ever brought to court.
Investors subject to the German Investment Tax Act
If the German Investment Tax Act applies then it will apply to an investor holding "units"
(Investmentanteile) which fall within the scope of the Investment Tax Act if (i) such an investor is
resident in Germany for German tax purposes or (ii) such an investor is not resident in Germany for
German tax purposes but holds such units through a permanent establishment (or a permanent
representative) in Germany or (iii) such an investor (other than a foreign credit institution or a foreign
financial services institution) physically presents such units at the office of a German Disbursing Agent
(as defined below) (an "over-the-counter transaction" – Tafelgeschäft) (all such investors together, the
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"Investors Subject to the Investment Tax Act"). A "German Disbursing Agent" means a German
credit institution or a German financial services institution each as defined in the German Banking Act
(Kreditwesengesetz), including a German branch of a non-German credit institution or a non-German
financial services institution, but excluding a non-German branch of a German credit institution or a
German financial services institution.
The Issuer will use its reasonable efforts to comply with the minimum statutory reporting and publication
requirements of the Investment Tax Act (if applicable) for "semi-transparent" funds (the "Minimum
Reporting Requirements") provided always that (i) compliance with such Minimum Reporting
Requirements is not, in the opinion and at the entire discretion of the Issuer or Investment Manager in
consultation with the Collateral Administrator, unduly onerous, (ii) the Issuer may satisfy such Minimum
Reporting Requirements by providing the requisite financial information (upon such information being
made available to it) to a professional German tax adviser with instructions to such adviser to re-format
the relevant information as required as well as to certify the re-formatted information and to publish such
information in the Electronic Federal Gazette in accordance with Section 5 of the Investment Tax Act on
behalf of the Issuer and (iii) neither the Issuer, the Trustee, the Collateral Administrator, the Investment
Manager nor any Agent shall have any liability whatsoever for any such information prepared and/or
published under the Minimum Reporting Requirements or for any tax consequences to any Noteholder
or other party. It is believed that, in consequence of compliance with such Minimum Reporting
Requirements, investors holding Notes which are subject to the Investment Tax Act will not be subject to
the lump-sum taxation provisions of section 6 of the Investment Tax Act, but that in principle the rules for
semi-transparent funds will apply. Under the rules of the Investment Tax Act for semi-transparent funds,
the Issuer's taxable earnings (e.g. payments of interest received) are in principle taxed in the hands of
investors. Certain earnings retained by the Issuer (e.g. retained interest income) (if any) would be
deemed to be distributed to investors holding Notes which are subject to the Investment Tax Act at the
end of the Issuer's financial year in which the income was earned by the Issuer. Therefore, a tax liability
for investors could arise before payments have actually been received.
Where units to which the Investment Tax Act applies are kept in a custodial account maintained with a
German Disbursing Agent, such German Disbursing Agent would be required to withhold tax at a rate of
30 per cent. (plus solidarity surcharge thereon at a rate of 5.5 per cent.) not only of the gross amount of
interest paid, but in addition at the point of time the units are sold or redeemed by the Issuer also of the
aggregate amount of income deemed to have accrued to investors holding units which are subject to the
Investment Tax Act and not yet otherwise subject to taxation. In the case of an over-the-countertransaction,
such withholding tax is levied at the rate of 35 per cent. (plus solidarity surcharge thereon at
a rate of 5.5 per cent.).
However, if the Issuer does not comply with the Minimum Reporting Requirements, or if the German tax
authorities do not accept the validity of such reporting, the investors holding Notes which are subject to
the Investment Tax Act will be subject to the adverse lump-sum taxation provisions of section 6 of the
Investment Tax Act pursuant to which the higher of (i) distributions on such Notes, the interim profit
(Zwischengewinn) and 70 per cent. of the annual increase in the market price of such Notes and (ii) 6
per cent. of the market price of such Notes at the end of every calendar year, (the "Assumed Profits")
would be taxed. The interim profit represents mainly interest accrued or received by an investment fund
(within the meaning of the Investment Tax Act) but not yet distributed or attributed to the investors in the
fund.
Moreover, there is a risk that investments made by or on behalf of the Issuer qualify as units in foreign
investment funds (within the meaning of the Investment Tax Act) which do not satisfy the Minimum
Reporting Requirements and therefore qualify as "non-transparent" (sub-) funds. In this case the Issuer
may be deemed to have earned Assumed Profits from these investments according to the lump-sum
taxation provisions of section 6 of the Investment Tax Act and such Assumed Profits may accordingly be
attributed to investors holding units which are subject to the Investment Tax Act, resulting in adverse tax
and liquidity consequences for such investors.
Investors should be aware that there are a number of uncertainties regarding the interpretation of the tax
provisions contained in the Investment Tax Act (including those relating to the Minimum Reporting
Requirements).
Taxation of investors tax resident in Germany and not subject to the Investment Tax Act
Payments of interest (including accrued interest) on Notes not falling within the scope of the Investment
Tax Act paid to an investor who is resident in Germany for German tax purposes (a "German Investor")
is subject to corporate income tax (Körperschaftsteuer) or income tax (Einkommensteuer) (plus in both
cases a solidarity surcharge thereon at a rate of 5.5 per cent.) and, if the Notes are held as business
assets, to trade tax (Gewerbesteuer) in Germany.
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Any gains realized upon a sale or partial or final redemption of Notes (including accrued interest) over
their current book value or otherwise realized ("Capital Gains") by a German Investor who holds Notes
as business assets are subject to income tax or corporate income tax (plus a solidarity surcharge
thereon at a rate of 5.5 per cent.) and, if the Notes form part of a permanent establishment maintained in
Germany by the German Investor, to trade tax. Tax treaties concluded by Germany generally permit
German tax authorities to impose a tax on such Capital Gains in this situation.
In case of German individual Investors who hold Notes as part of their private assets and to the extent
the Notes qualify as financial innovations in the meaning of the German Income Tax Act
(Einkommensteuergesetz), any gains realised upon a sale or partial or final redemption of Notes
(including accrued interest) over their acquisition costs or otherwise realised are subject to income tax
(plus a solidarity surcharge thereon at a rate of 5.5 per cent.).
To the extent Notes held by German individual Investors as part of their private assets do not qualify as
financial innovations, gains realised upon a sale or partial or final redemption of Notes (including
accrued interest) or otherwise realised are not subject to German income tax provided the individual
investor has held the Notes for a period of more than one year.
If the Notes are held in a custodial account which the German Investor maintains with a German
Disbursing Agent, a 30 per cent. (or 35 per cent. in the case of over-the-counter transactions
(Tafelgeschäft)) withholding tax on interest payments (Zinsabschlagsteuer) plus a 5.5 per cent. solidarity
surcharge thereon, will be levied. Withholding tax on interest is also imposed on interest which has
accrued up to the sale, transfer or redemption of Notes and been credited separately (Stückzinsen).
Withholding tax and a solidarity surcharge on interest payments (including accrued interest) are credited
as prepayments against the German income or corporate income tax and the solidarity surcharge
liability of the German Investor. Where interest (including accrued interest) is subject to withholding tax,
the Issuer is not required to gross up any payments made to a German Investor or to otherwise
compensate or indemnify such German Investor for withholding taxes levied in connection with the
Notes.
Where Capital Gains are taxable in Germany and the German Investor keeps the Notes in a custodial
account maintained with a German Disbursing Agent, withholding tax is deducted at a rate of 30 per
cent. (plus a solidarity surcharge thereon at a rate of 5.5 per cent.) of the amount by which the proceeds
from the sale or redemption of the Notes exceed the purchase price paid by such German Investor. This
is the case provided that since acquisition such Notes have been held by the German Disbursing Agent
in a custodial account; where the Notes have not been so held, withholding tax is deducted at a rate of
30 per cent. (plus a solidarity surcharge thereon at a rate of 5.5 per cent.) based on 30 per cent. of the
proceeds derived from the sale or redemption of the Notes. In the case of over-the-counter transactions,
withholding tax will be levied at a rate of 35 per cent. (plus solidarity surcharge thereon at a rate of 5.5
per cent.). Withholding tax is credited against the final liability of the German Investor to income tax or
corporate income tax. The Issuer is not required to gross up any payments made to a German Investor
or to otherwise compensate or indemnify such German Investor for withholding taxes levied in
connection with Capital Gains.
On May 25, 2007 the German Federal Parliament (Bundestag) approved a tax reform bill presented by
the German government. According to the tax reform bill a flat rate settlement tax (Abgeltungssteuer) on
investment income and private capital gains will be introduced as an element of the said tax reform.
The flat tax would be levied as a withholding tax, inter alia, on interest income and capital gains from the
disposal of securities including full risk notes held as non-business assets, irrespective of any holding
period. The flat tax would satisfy any income tax liability of the investor in respect of such investment
income or private capital gains. The tax would be levied at a rate of 25% (plus 5.5% solidarity surcharge
thereon and, if applicable, church tax) of the relevant gross income. However, taxpayers may apply for a
tax assessment i.e. to include all investment income and private capital gains in their taxable income if
the resulting tax would be lower. The latter would be the case if the personal income tax rate of the
investor were to be lower than the flat tax rate. However, even if this were to be the case, the investment
income and private capital gains would have to be taken into account at their gross amount, i.e. any
income-related expenses except for a small lump-sum tax allowance would not be deductible from the
investor's tax base.
According to the tax reform bill, the flat rate settlement tax would take effect from January 1, 2009. A
decision by the German Parliament of the Federal States (Bundesrat) is scheduled for 6 July 2007.
Taxation of investors not tax resident in Germany and not subject to the Investment Tax Act.
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Payments of interest (including accrued interest) on Notes not falling within the scope of the Investment
Tax Act paid to an investor who is not resident in Germany for tax purposes (a "Foreign Investor") and
Capital Gains realised by a Foreign Investor are subject to German taxation and in certain cases also to
German withholding tax if the Notes form part of the business assets of a permanent establishment
(including a permanent representative) maintained in Germany by the Foreign Investor or if a Foreign
Investor physically presents the Notes at the office of a German Disbursing Agent (an over-the-counter
transaction).
4. United States Federal Income Taxation
__________________________________________________________________________________
In General
The following summary describes the principal U.S. federal income tax consequences of the purchase,
ownership and disposition of the Notes to investors that acquire the Notes at original issuance for an
amount equal to the "Issue Price" of the relevant Class of Notes (for purposes of this section, with
respect to each such Class of Notes, the first price at which a substantial amount of Notes of such Class
are sold to the public (excluding bond houses, brokers, underwriters, placement agents, and
wholesalers) is referred to herein as the "Issue Price"). This summary does not purport to be a
comprehensive description of all the tax considerations that may be relevant to a particular investor's
decision to purchase the Notes. In addition, this summary does not describe any tax consequences
arising under the laws of any state, locality or taxing jurisdiction other than the United States federal
income tax laws. In general, the summary assumes that a holder holds a Note as a capital asset and
not as part of a hedge, straddle, or conversion transaction, within the meaning of Section 1258 of the
Code.
______________________________
The advice below was not written and is not intended to be used and cannot be used by any taxpayer
for purposes of avoiding United States federal income tax penalties that may be imposed. The advice is
written to support the promotion or marketing of the transaction. Each taxpayer should seek advice
based on the taxpayer’s particular circumstances from an independent tax advisor.
The foregoing language is intended to satisfy the requirements under the new regulations in Section
10.35 of Circular 230.
______________________________
This summary is based on the U.S. tax laws, regulations (final, temporary and proposed), administrative
rulings and practice and judicial decisions in effect or available on the date of this Prospectus. All of the
foregoing are subject to change or differing interpretation at any time, which change or interpretation
may apply retroactively and could affect the continued validity of this summary.
This summary is included herein for general information only, and there can be no assurance that the
U.S. Internal Revenue Service (the "IRS") will take a similar view of the U.S. federal income tax
consequences of an investment in the Notes as described herein. ACCORDINGLY, PROSPECTIVE
PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO U.S.
FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NOTES, AND THE POSSIBLE APPLICATION OF STATE, LOCAL, FOREIGN OR OTHER
TAX LAWS. IN PARTICULAR, NO REPRESENTATION IS MADE AS TO THE MANNER IN WHICH
PAYMENTS UNDER THE NOTES WOULD BE CHARACTERIZED BY ANY RELEVANT TAXING
AUTHORITY.
As used in this section, the term "U.S. Holder" includes a beneficial owner of a Note that is, for U.S.
federal income tax purposes, a citizen or individual resident of the United States of America, an entity
treated for United States federal income tax purposes as a corporation or a partnership created or
organized in or under the laws of the United States of America or any state thereof or the District of
Columbia, an estate the income of which is includable in gross income for U.S. federal income tax
purposes regardless of its source, or a trust if, in general, a court within the United States of America is
able to exercise primary supervision over its administration and one or more U.S. Persons have the
authority to control all substantial decisions of such trust, and certain eligible trusts that have elected to
be treated as United States persons. This summary assumes that a U.S. Holder has a U.S. Dollar
functional currency and the Issuer has a non-U.S. Dollar functional currency. This summary also does
not address the rules applicable to certain types of investors that are subject to special U.S. federal
income tax rules, including but not limited to, dealers in securities or currencies, traders in securities,
financial institutions, U.S. expatriates, tax-exempt entities (except with respect to specific issues
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discussed herein), charitable remainder trusts and their beneficiaries, insurance companies, persons or
their qualified business units ("QBUs") whose functional currency is not the U.S. Dollar, persons that
own (directly or indirectly) equity interests in holders of Notes and subsequent purchasers of the Notes.
In this summary, each of the Combination Notes will be treated as its respective Components rather
than a single unit. Therefore, in the following discussions, any reference in the summary applicable to
each Class of Notes also applies to any corresponding Component of the Combination Notes. Holders
of the Class P Combination Notes should refer to their own tax advisers with respect to the Class P OAT
Security Component.
Purchasers of Notes may be required to pay stamp taxes and other charges, in accordance with the
laws and practices of the country of purchase, in addition to the Issue Price of each Note.
Tax Treatment of the Issuer
The Code and the Treasury regulations promulgated thereunder provide a specific exemption from net
income-based U.S. federal income tax to non-U.S. corporations that restrict their activities in the United
States to trading in stocks and securities (and any other activity closely related thereto) for their own
account, whether such trading (or such other activity) is conducted by the corporation or its employees
or through a resident broker, commission agent, custodian or other agent. See "The Portfolio —
Management of the Portfolio". This particular exemption does not apply to non-U.S. corporations that
are engaged in activities in the United States other than trading in stocks and securities (and any other
activity closely related thereto) for their own account or that are dealers in stocks and securities.
The Issuer intends to rely on the above exemption and does not intend to operate so as to be subject to
U.S. federal income taxes on its net income. Although no activity closely comparable to that
contemplated by the Issuer has been the subject of any Treasury regulation, administrative ruling or
judicial decision, under current law and assuming compliance with the Issuer's relevant governing
documents, the Trust Deed, the Investment Management Agreement, the Agency Agreement and other
related documents, the Issuer believes that its permitted activities will not cause it to be engaged in a
trade or business in the United States, and consequently, the Issuer's profits will not be subject to U.S.
federal income tax on a net income basis. However, if the IRS were to successfully assert that the
Issuer were engaged in a United States trade or business and the Issuer had taxable income that was
effectively connected with such U.S. trade or business, the Issuer would be subject under the Code to
the regular U.S. corporate income tax on such effectively connected taxable income (and possibly to the
30 per cent. branch profits tax as well). The imposition of such taxes would materially affect the Issuer's
financial ability to make payments with respect to the Notes and could materially affect the yield of the
Notes. In addition, the imposition of such taxes could constitute a Withholding Tax Event.
The fiscal year that the Issuer intents to use for accounting purposes may differ from the taxable year
that the Issuer intends to use for U.S. federal income tax purposes.
Legislation recently proposed in the United States Senate would, for tax years beginning at least two
years after its enactment, tax a corporation as a U.S. corporation if the equity of that corporation is
regularly traded on an established securities market and the management and control of the corporation
occurs primarily within the United States. It is unknown whether this proposal will be enacted in its
current form and, whether if enacted, the Issuer would be subject to its provisions. However, upon
enactment of this or similar legislation, the Issuer will be permitted, with an opinion of counsel, to take
such action as it deems advisable to prevent the Issuer from being subject to such legislation. These
actions could include removing some Classes of Notes from listing on a stock exchange.
Generally, foreign currency gains are sourced to the residence of the recipient. Thus, foreign currency
gains of a non-U.S. corporation are generally treated as foreign source income. However, if for this
purpose a non-United States corporation has a principal place of business in the United States (the
"U.S. business"), even if the corporation has another principal place of business outside the United
States, generally any foreign currency gain properly reflected as income of the U.S. business is treated
as U.S. Source Income. Any U.S. source foreign currency gains that are not derived from the sale of
property are subject to U.S. withholding tax. A non-U.S. corporation could be considered to have a U.S.
business for this purpose even if it does not have any income effectively connected to a United States
trade or business for purposes of being subject to U.S. taxation on its net income. The Issuer intends to
take the position that none of its foreign currency gains will be subject to U.S. withholding tax. However,
the application of these rules is unclear and the activities of the Issuer could cause it to have foreign
currency gains subject to U.S. withholding tax. In addition, the imposition of such taxes could constitute
a Withholding Tax Event.
United States Withholding Taxes Although, based on the foregoing, the Issuer is not expected to be
subject to U.S. federal income tax on a net income basis, income derived by the Issuer may be subject
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to withholding taxes imposed by the United States or other countries. Generally, U.S. source interest
income received by a foreign corporation not engaged in a trade or business within the United States is
subject to U.S. withholding tax at the rate of 30 per cent. of the amount thereof. The Code provides an
exemption (the "portfolio interest exemption") from such withholding tax for interest paid with respect
to certain debt obligations issued after 18 July 1984, unless the interest constitutes a certain type of
contingent interest or is paid to a 10 per cent. shareholder of the payor, to a controlled foreign
corporation related to the payor, or to a bank with respect to a loan entered into in the ordinary course of
its business. In this regard, the Issuer is permitted to acquire a particular Collateral Debt Obligation only
if the payments thereon are exempt from U.S. withholding taxes at the time of purchase or commitment
to purchase (with the exception of commitment fees associated with Collateral Debt Obligations
constituting Revolving Securities or Delayed Drawdown Obligations) or the Obligor is required to make
"gross-up" payments that offset fully any such tax on any such payments. Any commitment fees
associated with Collateral Debt Obligations constituting Revolving Securities or Delayed Drawdown
Obligations and any lending fees received under a securities lending agreement may be subject to U.S.
withholding tax, which would reduce the Issuer's net income from such activities. However, the Issuer
does not anticipate that it will otherwise derive material amounts of any other items of income that would
be subject to U.S. withholding taxes. Accordingly, assuming compliance with the foregoing restrictions
and subject to the foregoing qualifications, income derived by the Issuer will be free of or fully "grossed
up" for any material amount of U.S. withholding tax. However, there can be no assurance that income
derived by the Issuer will not generally become subject to U.S. withholding tax as a result of a change in
U.S. tax law or administrative practice, procedure, or interpretations thereof. Any change in U.S. tax law
or administrative practice, procedure, or interpretations thereof resulting in the income of the Issuer
becoming subject to U.S. withholding taxes could constitute a Withholding Tax Event. It is also
anticipated that the Issuer will acquire Collateral Debt Obligations that consist of obligations of non-U.S.
issuers. In this regard, the Issuer may only acquire a particular Collateral Debt Obligation if either the
payments thereon are not subject to foreign withholding tax (with the exception of commitment fees
associated with Collateral Debt Obligations constituting Revolving Securities and Delayed Drawdown
Obligations) or the Obligor of the Collateral Debt Obligation is required to make "gross-up" payments.
Prospective investors should be aware that, under certain U.S. Treasury regulations, the IRS may
disregard the participation of an intermediary in a "conduit" financing arrangement and the conclusions
reached in the immediately preceding paragraph assume that such U.S. Treasury regulations do not
apply. Those U.S. Treasury regulations could require withholding of U.S. federal income tax from
payments to the Issuer of interest on the Collateral Debt Obligations. In order to prevent "conduit"
classification, each Non-U.S. Holder and beneficial owner of a Class A1 Note, a Class E Note or a Class
F Subordinated Note (including the Class F Subordinated Component of any applicable Class of
Combination Notes) that is acquiring, directly or in conjunction with affiliates, more than 33 per cent. of
the principal amount outstanding of any such Class of Notes will make, or will be deemed to make, a
representation to the effect that it is not an Affected Bank. "Affected Bank" means a "bank" for
purposes of Section 881 of the Code (including an entity controlled by such bank or acting on behalf of
such bank) where such bank neither (x) meets the definition of a U.S. Holder nor (y) is entitled to the
benefits of an income tax treaty with the United States under which withholding taxes on interest
payments made by obligors resident in the United States to such bank are reduced to 0 per cent.
Tax Treatment of U.S. Holders of the Senior Notes and the Deferrable Interest Notes
Treatment of the Notes (other than the Class F Subordinated Notes) The Issuer expects the Notes
to be treated as debt for U.S. federal income tax purposes when issued. Although the Class F
Subordinated Notes are denominated as debt, based on the capital structure of the Issuer and the
characteristics of the Class F Subordinated Notes, it is likely that the Class F Subordinated Notes would
be treated as equity for U.S. federal income tax purposes. This summary assumes that the foregoing
treatment of each Class of Notes is correct. For the remainder of this discussion on "Tax
Considerations", the term "Notes" refers to the Notes (other than the Class F Subordinated Notes). The
Class F Subordinated Notes are discussed below under "Tax Treatment of U.S. Holders of Class F
Subordinated Notes". Further, the Issuer will treat, and each holder and beneficial owner of a Note (by
acquiring such Note or an interest in such Note) will agree to treat, such Note as debt for U.S. federal
income tax purposes except (x) as otherwise required by applicable law, (y) to the extent a holder
makes a protective QEF election (as described below under "—Tax Treatment of U.S. Holders of Class
F Subordinated Notes—Investment in a Passive Foreign Investment Company"), or (z) to the extent that
a holder files certain United States tax information returns required of only certain equity owners with
respect to various reporting requirements under the Code (as described below under "—Transfer
Reporting Requirements" and "—Tax Return Disclosure and Investor List Requirements"). With regard
to the characterisation for U.S. federal income tax purposes of the Notes issued after the Initial Issue
Date, prospective investors should note that the characterisation of an instrument as debt or equity for
U.S. federal income tax purposes is highly factual and must be based on the applicable law and the
facts and circumstances existing at the time such instrument is issued (which in the case of the Class
A1 Notes, will include the time of each draw on such Class A1 Notes) and material changes from those
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existing on the Initial Issue Date (e.g. a material decline in the value of the Issuer's assets, a material
adverse change in the Issuer's ability to repay the Notes previously issued, and/or a material decline in
the proportion of the Class F Subordinated Notes) could affect the characterisation of the Notes issued
after (but not before) such changes. Additionally, no ruling will be sought from the IRS regarding this, or
any other, aspect of the U.S. federal income tax treatment of the Notes. Accordingly, there can be no
assurance that the IRS will not contend, and that a court will not ultimately hold, that one or more
Classes of the Notes (e.g. the Class E Notes because of their place in the capital structure of the Issuer)
are equity in the Issuer. Recharacterisation of a Class of Notes, particularly the Class E Notes because
of their place in the capital structure, may be more likely if a single investor or a group of investors that
holds all of the Class F Subordinated Notes also holds all of the more senior Class of Notes in the same
proportion as the Class F Subordinated Notes are held. If any of the Classes of the Notes were treated
as equity in, rather than debt of, the Issuer for U.S. federal income tax purposes, U.S. Holders of such
Notes would be subject to taxation under rules substantially the same as those set forth below under
"Tax Treatment of U.S. Holders of Class F Subordinated Notes" which could cause adverse tax
consequences upon sale, exchange, redemption, retirement or other taxable disposition of, or the
receipt of certain types of distributions on, the Notes of such Class or Classes by a U.S. Holder of such
Notes.
In this regard, any U.S. Holder of a Note that treats such Note as equity in the Issuer for U.S. federal
income tax purposes, inconsistently with the Issuer's treatment of such Notes for such purposes, is
required to disclose such treatment on its U.S. federal income tax return. Additionally, if a U.S. Holder
of a Note treats such Note as debt of the Issuer for U.S. federal income tax purposes, consistently with
the Issuer's treatment of such Note for such purposes, it is unclear whether such U.S. Holder will be
able to make a protective QEF election (described below in "Tax Treatment of U.S. Holders of Class F
Subordinated Notes—Investment in a Passive Foreign Investment Company") in anticipation of any
possible recharacterisation of such Note as equity in the Issuer.
Interest or Discount on the Notes in Dollars Subject to the discussion below, U.S. Holders of Class
A Notes generally will include in gross income payments of stated interest received on the Class A
Notes, in accordance with their usual method of accounting for U.S. federal income tax purposes, as
ordinary interest income from sources outside the United States. The Class A1 Commitment Fee will be
includable as ordinary income by a U.S. Holder in accordance with its regular method of accounting.
If the Issue Price of the Notes is less than such Notes'respective "stated redemption price at maturity"
by more than a de minimis amount, U.S. Holders will be considered to have purchased such Notes with
original issue discount ("OID"). The respective stated redemption price at maturity of such Notes will be
the sum of all payments to be received on such Notes, other than payments of stated interest which is
unconditionally payable in money at least annually during the entire term of a debt instrument
("Qualified Stated Interest"). Prospective U.S. Holders of the Notes should note that, because interest
on the Notes is unconditionally payable in money on each Payment Date (and, therefore, will be
Qualified Stated Interest), none of the Notes should have OID. However, if it is determine that interest
on a Class of Notes is not unconditionally payable in money on each Payment Date, then all of the
stated interest payments on Class of Notes will be included in the stated redemption prices at maturity of
such Class of Notes, and must therefore be accrued by U.S. Holders pursuant to the rules described
below.
A U.S. Holder of such Class of Notes issued with OID will be required to accrue and include in gross
income the sum of the daily portions of total OID on such Notes for each day during the taxable year on
which the U.S. Holder held such Notes, generally under a constant yield method, regardless of such
U.S. Holder's usual method of accounting for U.S. federal income tax purposes. In addition, U.S. Holder
should include any de minimis OID in gross income proportionately as stated principal payments are
received. Such de minimis OID should be treated as gain from the sale or exchange of property and
may be eligible as capital gain if the Note is a capital asset in the hands of the U.S. Holder.
In the case of Notes that provide for a floating rate of interest, the amount of OID to be accrued over the
term of such Notes will be based initially on the assumption that the floating rate in effect for the first
accrual period of the Notes will remain constant throughout their term. To the extent such rate varies
with respect to any accrual period, such variation will be reflected in an increase or decrease of the
amount of OID accrued for such period. Under the foregoing method, U.S. Holders of the Deferrable
Interest Notes may be required to include in gross income increasingly greater amounts of OID and may
be required to include OID in advance of the receipt of cash attributable to such income.
The Issuer intends to treat a Class of Notes issued with more than de minimis OID as being subject to
rules prescribed by Section 1272(a)(6) of the Code using an assumption as to the prepayments on such
Class of Notes, as discussed below under "Income Tax Considerations—OID on the Notes". A
prepayment assumption applies to debt instruments if payment under such debt instruments may be
accelerated by reason of prepayments of other obligations securing such debt instruments.
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OID on the Notes The following discussion will apply to a Class of Notes if it is issued with more than
de minimis OID. Because principal repayments on these Notes are subject to acceleration, the method
by which OID on such Notes is required to be accrued is uncertain. For purposes of accruing OID on
these Notes under such circumstances, the Issuer intends to treat these Notes as being subject to the
"prepayment assumption method" prescribed by Sections 1271 through 1273 and 1275 of the Code.
These rules require that the amount and rate of accrual of OID be calculated based on a prepayment
assumption and the anticipated reinvestment rate, if any, relating to the Notes and prescribe a method
for adjusting the amount and rate of accrual of the discount where the actual prepayment rate differs
from the prepayment assumption. Under the Code, the prepayment assumption must be determined in
the manner prescribed by the Treasury regulations, which have not yet been issued. The legislative
history provides, however, that Congress intended the Treasury regulations to require that the
prepayment assumption be the prepayment assumption that is used in determining the initial offering
price of the Notes. The Issuer intends to assume that the Collateral Debt Obligations will not prepay.
No representation is made that the Notes will prepay at the prepayment assumption or at any other rate.
The IRS issued final regulations in June 1996 governing the calculation of OID on instruments having
contingent interest payments. These Treasury regulations specifically do not apply for purposes of
calculating OID on debt instruments subject to Section 1272(a)(6) of the Code such as the Notes.
Additionally, the Treasury regulations do not contain provisions specifically interpreting Section
1272(a)(6) of the Code. The Issuer intends to base its computations on Section 1272(a)(6) of the Code
and the Treasury regulations as described in this Prospectus. However, because no regulatory
guidance currently exists under Section 1272(a)(6) of the Code, there can be no assurance that this
methodology represents the correct manner of calculating OID. If the IRS were to successfully contend
that another method of accruing OID with respect to these Notes is appropriate, the U.S. federal income
tax consequences to a U.S. Holder of such Notes could be adverse or more favourable. One such
alternative method of accruing OID may be the non contingent bond method that governs contingent
payment debt obligations. Such method could affect the amount and character of the gain or loss
recognised upon a disposition of a Note.
A subsequent purchaser of a Note issued with OID who purchases such Note at a cost less than the
remaining stated redemption price at maturity will also be required to include in gross income the sum of
the daily portions of OID on such Note. In computing the daily portions of OID for a subsequent
purchaser of a Note (as well as an initial purchaser that purchases at a price higher than the adjusted
Issue Price, but less than the stated redemption price at maturity), however, the daily portion is reduced
by the amount that would be the daily portion for the day (computed in accordance with the rules set
forth above) multiplied by a fraction, the number of which is the amount, if any, by which the price paid
by the U.S. Holder for such Note exceeds the following amount:
• the sum of the Issue Price plus the aggregate amount of OID that would have been includable
in the gross income of an original U.S. Holder (who purchased the Note at the Issue Price),
less
• any prior payments included in the stated redemption price at maturity,
and the denominator of which is the sum of the daily portions for such Note for all days beginning on the
date after the purchase date and ending on the maturity date computed under the prepayment
assumption.
A U.S. Holder who pays a premium for a Note (i.e., purchases the Note for an amount greater than the
stated redemption price at maturity) may elect to amortize such premium under a constant yield method
over the life of such Note. The amortizable amount for any accrual period would offset the amount of
interest that must be included in the gross income of a U.S. Holder in such accrual period. The U.S.
Holder's basis in such Note would be reduced by the amount of amortization. It is not clear whether the
prepayment assumption would be taken into account in determining the life of such Note for the timing
of the amortization of such premium for this purpose.
If the U.S. Holder acquires a Note at a discount to the adjusted Issue Price of the Note that is greater
than a specified de minimis amount, such discount is treated as market discount. Absent an election to
accrue into income currently, the amount of accrued market discount on a Note is included in income as
ordinary income when principal payments are received or the U.S. Holder disposes of the Note. Market
discount is accrued rateably unless the U.S. Holder elects to use a constant yield method for accrual.
For this purpose, the term "rateably" may be based on the term of the Note or a U.S. Holder may be
permitted to accrue market discount in proportion to interest on Notes issued without OID or in
proportion to OID on Notes issued with OID.
As a result of the complexity of the OID rules, each U.S. Holder of the Notes should consult its own tax
advisor regarding the impact of the OID rules on its investment in such Notes.
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Election to Treat All Interest as OID The OID rules permit a U.S. Holder of a Note to elect to accrue
all interest, discount (including de minimis market or original issue discount) and premium in income as
interest, based on a constant yield method. If an election to treat all interest as OID were to be made
with respect to a Note with market discount, the U.S. Holder of such Note would be deemed to have
made an election to include in income currently market discount with respect to all other debt
instruments having market discount that such U.S. Holder acquires during the year of the election or
thereafter. Similarly, a U.S. Holder that makes this election for a Note that is acquired at a premium will
be deemed to have made an election to amortize bond premium with respect to all debt instruments
having amortizable bond premium that such U.S. Holder owns or acquires. The election to accrue
interest, discount and premium on a constant yield method with respect to a Note cannot be revoked
without the consent of the IRS.
Disposition of the Notes In general, a U.S. Holder of a Note initially will have a basis in such Note
equal to the cost of such Note to such U.S. Holder, (i) increased by any amount includable in income by
such U.S. Holder as OID with respect to such Note (and as market discount if such U.S. Holder elected
to accrue market discount currently on the Note), and (ii) reduced by any amortised premium and by
payments on such Note, other than payments of stated interest on a Class A Note. Upon a sale,
exchange, redemption, retirement or other taxable disposition of a Note, a U.S. Holder will generally
recognize gain or loss equal to the difference between the amount realized on the sale, exchange,
redemption, retirement or other taxable disposition (other than amounts attributable to accrued interest
on a Class A Note, which will be taxable as described above) and the U.S. Holder's tax basis in such
Note. Except to the extent of accrued interest or market discount not previously included in income,
gain or loss from the disposition of a Note generally will be long-term capital gain or loss if the U.S.
Holder held the Note for more than one year at the time of disposition, provided that such Note is held
as a "capital asset" (generally, property held for investment) within the meaning of Section 1221 of the
Code, except to the extent of accrued market discount not previously included in income.
However, if the IRS or a court determines that the Notes constitute contingent payment debt obligations
subject to the non contingent bond method, then a U.S. Holder generally will have a basis in such Note
equal to the cost of such Note to such U.S. Holder (i) increased by OID accrued with respect to such
Note (determined without regard to adjustments made to reflect the differences between actual and
projected payments), and (ii) reduced by the amount of any non-contingent payments and the projected
amount of any contingent payments previously made on such Note. Any gain recognized on the sale,
exchange, redemption, retirement or other taxable disposition of such Note will be treated as ordinary
interest income. Further, in such a case, any loss will be treated as ordinary loss to the extent of prior
interest inclusions with respect to such Note, reduced by the total net negative adjustments that the U.S.
Holder has taken into account as ordinary loss with respect to such Note; any remaining loss will be a
capital loss.
In certain circumstances, U.S. Holders that are individuals may be entitled to preferential treatment for
net long-term capital gains; however, the ability of U.S. Holders to offset capital losses against ordinary
income is limited.
Any gain recognized by a U.S. Holder on the sale, exchange, redemption, retirement or other taxable
disposition of a Note generally will be treated as from sources within the United States assuming that
such Notes are not held by a U.S. Holder through a non-U.S. branch.
Payments of Interest and OID in Non-U.S. Dollar Currency A U.S. Holder with a U.S. Dollar
functional currency that uses the cash method of accounting for U.S. federal income tax purposes and
receives a payment of interest on a Note (other than OID) denominated in Euro or Sterling ("Non-U.S.
Dollar Currency") will be required to include in gross income the U.S. Dollar value of the payment in
Non-U.S. Dollar Currency on the date such payment is received (based on the U.S. Dollar spot rate for
the Non-U.S. Dollar Currency on the date such payment is received) regardless of whether the payment
is in fact converted to Dollars at that time. No exchange gain or loss will be recognized with respect to
the receipt of such payment.
A U.S. Holder that uses the accrual method of accounting for U.S. federal income tax purposes, or that
otherwise is required to accrue interest prior to receipt, will be required to include in gross income the
U.S. Dollar value of the amount of interest income that has accrued and is otherwise required to be
taken into account with respect to a Note during an accrual period. The U.S. Dollar value of such
accrued interest income will be determined by translating such interest income at the average U.S.
Dollar exchange rate for Non-U.S. Dollar Currency in effect during the accrual period or, with respect to
an accrual period that spans two taxable years, the partial period within the taxable year. A U.S. Holder
may elect, however, to translate such accrued interest income using the U.S. Dollar spot rate for the
Non-U.S. Dollar Currency on the last day of the accrual period or, with respect to an accrual period that
spans two taxable years, on the last day of the taxable year. If the last day of an accrual period is within
five Business Days of the date of receipt of the accrued interest, a U.S. Holder may translate such
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interest using the U.S. Dollar spot rate on the date of receipt. The above election must be applied
consistently to all debt instruments from year to year and may not be changed without the consent of the
IRS. Prior to making such an election, a U.S. Holder should consult its own tax advisor.
A U.S. Holder that uses the accrual method of accounting for U.S. federal income tax purposes may
recognize exchange gain or loss with respect to accrued interest income on the date the payment of
such income is received. The amount of any such exchange gain or loss recognized will equal the
difference, if any, between the U.S. Dollar value of the payment in Non-U.S. Dollar Currency received
(based on the U.S. Dollar spot rate for the Non-U.S. Dollar Currency on the date such payment is
received) with respect to such accrued interest and the U.S. Dollar value of the income inclusion with
respect to such accrued interest (computed as determined above). Any such exchange gain or loss will
be treated as ordinary income or loss, but generally will not be treated as an adjustment to interest
income, and will generally be treated as U.S. Source Income or loss, respectively.
The Issuer intends to take the position that OID for any accrual period on a Note will be determined in
Non-U.S. Dollar Currency and then translated into Dollars in the same manner as stated interest
accrued by an accrual basis U.S. Holder, as described above. As described above, however, the
treatment of Notes issued with OID is subject to uncertainty, and it is possible that different rules would
apply. Applying this method, all payments on a Note (other than payments of Qualified Stated Interest)
will generally be viewed first as payments of previously-accrued OID (to the extent thereof), with
payments attributed first to the earliest-accrued OID, and then as payments of principal. Upon receipt of
a payment attributable to OID (whether in connection with a payment of interest or on the sale,
exchange, redemption, retirement or other taxable disposition of a Note), a U.S. Holder may recognize
exchange gain or loss as described above with respect to accrued interest income. Any such exchange
gain or loss will be treated as ordinary income or loss, but generally will not be treated as an adjustment
to interest income, and will generally be treated as U.S. Source Income or loss, respectively.
Receipt of Non-U.S. Dollar Currency Non-U.S. Dollar Currency received as payment on a Note or on
a sale, exchange, redemption, retirement or other taxable disposition of a Note will have a tax basis
equal to its U.S. Dollar value at the time such payment is received or at the time of such sale, exchange,
redemption, retirement or other taxable disposition, as the case may be. Non-U.S. Dollar Currency that
are purchased will generally have a tax basis equal to the U.S. Dollar value of Non-U.S. Dollar Currency
on the date of purchase. Any exchange gain or loss recognized on a sale, exchange, redemption,
retirement or other taxable disposition of the Non-U.S. Dollar Currency (including its use to purchase
Notes or upon exchange for Dollars) will be ordinary income or loss and will generally be treated as U.S.
Source Income or loss, respectively.
Foreign Currency Gain or Loss on Purchase or Disposition A U.S. Holder that purchases the Notes
with Non-U.S. Dollar Currency generally will recognize exchange gain or loss in an amount equal to the
difference (if any) between the U.S. Dollar fair market value of Non-U.S. Dollar Currency used to
purchase the Notes determined at the spot rate of exchange in effect on the date of purchase of the
Notes and such U.S. Holder's tax basis in the Non-U.S. Dollar Currency. If a U.S. Holder receives Non-
U.S. Dollar Currency on a sale, exchange, redemption, retirement or other taxable disposition of a Note,
the amount realized will be based on the U.S. Dollar value of the Non-U.S. Dollar Currency on the date
the payment is received or the date of disposition of the Note. Any gain or loss realized upon the sale,
exchange, redemption, retirement or other taxable disposition of the Note that is attributable to
fluctuations in currency exchange rates will be exchange gain or loss. Any gain or any loss attributable
to fluctuations in exchange rates will equal the difference between the U.S. Dollar value of the principal
amount of the Note, determined on the date such payment is received or such Note is disposed based
on the U.S. Dollar spot rate for the Non-U.S. Dollar Currency on such date and the U.S. Dollar value of
principal amount of such Note, determined on the date the U.S. Holder acquired such Note based on the
U.S. Dollar spot rate for the Non-U.S. Dollar Currency on such date. Such exchange gain or loss will be
recognized only to the extent of the total gain or loss realized by the U.S. Holder on the sale, exchange,
redemption, retirement or other taxable disposition of such Note. Any exchange gain or loss will be
treated as ordinary income or loss, but generally will not be treated as an adjustment to interest income,
and will generally be treated as U.S. Source Income or loss, respectively.
As a result of the uncertainty regarding the U.S. federal income tax consequences to U.S. Holders with
respect to the Notes and the complexity of the foregoing rules, each U.S. Holder of a Note is urged to
consult its own tax advisor regarding the U.S. federal income tax consequences to the Holder of the
purchase, ownership and disposition of such Note.
Alternative Characterization of the Notes. U.S. Holders should recognize that there is some uncertainty
regarding the appropriate classification of instruments such as the Notes. It is possible, for example,
that the IRS may contend that a Class of Notes should be treated as equity interests (or as part debt,
part equity) in the Issuer. Such a recharacterisation might result in material adverse U.S. federal income
tax consequences to U.S. Holders. If U.S. Holders of a Class of the Notes were treated as owning
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equity interests in the Issuer, the U.S. federal income tax consequences to U.S. Holders of such
recharacterised Notes would be as described under "— Tax Treatment of U.S. Holders of Class F
Subordinated Notes", "— Transfer Reporting Requirements" and "— Tax Return Disclosure and Investor
List Requirements." In order to avoid the application of the PFIC rules, each U.S. Holder of a Note
should consider whether to make a qualified electing fund election provided in Section 1295 of the Code
on a "protective" basis (although such protective election may not be respected by the IRS because
current regulations do not specifically authorize that particular election). See "— Investment in a
Passive Foreign Investment Company". Further, U.S. Holders of any Class of Notes that may be
recharacterised as equity in the Issuer should consult with their own tax advisors with respect to
whether, if they owned equity in the Issuer, they would be required to file information returns in
accordance with sections 6038, 6038B, and 6046 of the Code (and, if so, whether they should file such
returns on a protective basis.
Tax Treatment of U.S. Holders of Class F Subordinated Notes
Investment in a Passive Foreign Investment Company The Issuer will constitute a passive foreign
investment company ("PFIC") and the Class F Subordinated Notes will be treated as equity in the Issuer
for U.S. federal income tax purposes. Accordingly, U.S. Holders of Class F Subordinated Notes (other
than certain U.S. Holders that are subject to the rules pertaining to a controlled foreign corporation with
respect to the Issuer, described below) will be considered U.S. shareholders in a PFIC. In general, a
U.S. Holder of a PFIC may desire to make an election to treat the Issuer as a qualified electing fund
("QEF") with respect to such U.S. Holder. Generally, a QEF election should be made with the filing of a
U.S. Holder's federal income tax return for the first taxable year for which it held the Class F
Subordinated Notes. If a timely QEF election is made for the Issuer, an electing U.S. Holder will be
required in each taxable year to include in gross income (i) as ordinary income, such holder's pro rata
share of the Issuer's ordinary earnings and (ii) as long-term capital gain, such holder's pro rata share of
the Issuer's net capital gain, whether or not distributed and translated into Dollars using the average
U.S. Dollar exchange rate for the Non-U.S. Dollar Currency for the Issuer's taxable year. In determining
the Issuer's ordinary earnings, the OID interest that accrues on the Notes may be expensed by the
Issuer (whether or not the OID is de minimis). A U.S. Holder will not be eligible for the dividends
received deduction with respect to such income or gain. In addition, any losses of the Issuer in a
taxable year will not be available to such U.S. Holder and may not be carried back or forward in
computing the Issuer's ordinary earnings and net capital gain in other taxable years. An amount
included in an electing U.S. Holder's gross income should be treated as income from sources outside
the United States for U.S. foreign tax credit limitation purposes. However, if U.S. Holders collectively
own (directly or constructively) 50 per cent. or more (measured by vote or value) of the Class F
Subordinated Notes, such amount will be treated as income from sources within the United States for
such purposes to the extent that such amount is attributable to income of the Issuer from sources within
the United States. If applicable to a U.S. Holder of Class F Subordinated Notes, the rules pertaining to a
controlled foreign corporation, discussed below, generally override those pertaining to a PFIC with
respect to which a QEF election is in effect.
In certain cases in which a QEF does not distribute all of its earnings in a taxable year, U.S.
shareholders may also be permitted to elect to defer payment of some or all of the taxes on the QEF's
income subject to an interest charge on the deferred amount. In this respect, prospective purchasers of
Class F Subordinated Notes should be aware that it is expected that the Collateral Debt Obligations may
be purchased by the Issuer with substantial OID, the cash payment of which may be deferred, perhaps
for a substantial period of time, and the Issuer may use interest and other income from the Collateral
Debt Obligations to purchase additional Collateral Debt Obligations or to retire the Notes. As a result,
the Issuer may have in any given year substantial amounts of earnings for U.S. federal income tax
purposes that are not distributed on the Class F Subordinated Notes. Thus, absent an election to defer
payment of taxes, U.S. Holders that make a QEF election with respect to the Issuer may owe tax on
significant "phantom" income.
In addition, it should be noted that if the Issuer invests in obligations that are not in registered form for
U.S. federal income tax purposes, a U.S. Holder making a QEF election (i) may not be permitted to take
a deduction for any loss attributable to such obligations when calculating its share of the Issuer's
earnings and (ii) may be required to treat income attributable to such obligations as ordinary income
even though the income would otherwise constitute capital gains. The Issuer is not restricted from
investing in obligations that are not in registered form for U.S. federal income tax purposes.
The Issuer will provide, upon request, all information and documentation that a U.S. Holder making a
QEF election is required to obtain for U.S. federal income tax purposes.
A U.S. Holder of Class F Subordinated Notes (other than certain U.S. Holders that are subject to the
rules pertaining to a controlled foreign corporation with respect to the Issuer, described below) that does
not make a timely QEF election will be required to report any gain on disposition of any Class F
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Subordinated Notes as if it were an excess distribution, rather than capital gain, and to compute the tax
liability on such gain and any excess distribution received with respect to the Class F Subordinated
Notes as if such items had been earned rateably over each day in the U.S. Holder's holding period (or a
certain portion thereof) for the Class F Subordinated Notes. The U.S. Holder will be subject to tax on
such items at the highest ordinary income tax rate for each taxable year, other than the current year of
the U.S. Holder, in which the items were treated as having been earned, regardless of the rate
otherwise applicable to the U.S. Holder. Further, such U.S. Holder will also be liable for an additional
tax equal to interest on the tax liability attributable to income allocated to prior years as if such liability
had been due with respect to each such prior year. For purposes of these rules, gifts, exchanges
pursuant to corporate reorganizations and use of the Class F Subordinated Notes as security for a loan
may be treated as a taxable disposition of the Class F Subordinated Notes. Very generally, an "excess
distribution" is the amount by which distributions during a taxable year with respect to a Class F
Subordinated Note exceed 125 per cent. of the average amount of distributions in respect thereof during
the three preceding taxable years (or, if shorter, the U.S. Holder's holding period for the Class F
Subordinated Note). In addition, a stepped-up basis in the Class F Subordinated Note upon the death
of an individual U.S. Holder may not be available.
In many cases, application of the tax on gain on disposition and receipt of excess distributions will be
substantially more onerous than the treatment applicable if a timely QEF election is made.
ACCORDINGLY, U.S. HOLDERS OF THE CLASS F SUBORDINATED NOTES SHOULD CONSIDER
CAREFULLY WHETHER TO MAKE A QEF ELECTION WITH RESPECT TO THE CLASS F
SUBORDINATED NOTES AND THE CONSEQUENCES OF NOT MAKING SUCH AN ELECTION.
Investment in a Controlled Foreign Corporation The Issuer may be classified as a controlled foreign
corporation ("CFC"). In general, a foreign corporation will be classified as a CFC if more than 50 per
cent. of the shares of the corporation, measured by reference to combined voting power or value, is
owned (actually or constructively) by "U.S. Shareholders". A U.S. Shareholder, for this purpose, is any
U.S. Person that possesses (actually or constructively) ten per cent. or more of the combined voting
power (generally the right to vote for directors of the corporation) of all classes of shares of a
corporation. Although the Class F Subordinated Notes do not vote for directors of the Issuer, it is
possible that the IRS would assert that the Class F Subordinated Notes are de facto voting securities
and that U.S. Holders possessing (actually or constructively) ten per cent. or more of the total stated
amount of outstanding Class F Subordinated Notes are U.S. Shareholders. If this argument were
successful and Class F Subordinated Notes representing more than 50 per cent. of the voting power or
value of the Issuer's equity are owned (actually or constructively) by such U.S. Shareholders, the Issuer
would be treated as a CFC.
If the Issuer were treated as a CFC, a U.S. Shareholder of the Issuer would be treated, subject to
certain exceptions, as receiving a deemed dividend at the end of the taxable year of the Issuer in an
amount equal to that person's pro rata share of the subpart F income (as defined below) of the Issuer.
Such deemed dividend would be treated as income from sources within the United States for U.S.
foreign tax credit limitation purposes to the extent that it is attributable to income of the Issuer from
sources within the United States. Among other items, and subject to certain exceptions, "subpart F
income" includes dividends, interest, annuities, gains from the sale or exchange of shares and
securities, certain gains from commodities transactions, certain types of insurance income and income
from certain transactions with related parties. It is likely that, if the Issuer were to constitute a CFC, all
or most of its income would be subpart F income and, in general, if the Issuer's subpart F income
exceeds 70 per cent. of its gross income, the entire amount of the Issuer's income will be subpart F
income. In addition, special rules apply to determine the appropriate exchange rate to be used to
translate such amounts treated as a dividend and the amount of any foreign currency gain or loss with
respect to distributions of previously taxed amounts attributable to movements in exchange rates
between the times of deemed and actual distributions. U.S. Holders should consult their tax advisors
regarding these special rules.
If the Issuer were treated as a CFC, a U.S. Shareholder of the Issuer which made a QEF election with
respect to the Issuer would be taxable on the subpart F income of the Issuer under rules described in
the preceding paragraph and not under the QEF rules previously described. As a result, to the extent
subpart F income of the Issuer includes net capital gains, such gains will be treated as ordinary income
of the U.S. Shareholder under the CFC rules, notwithstanding the fact that the character of such gains
generally would otherwise be preserved under the QEF rules.
Furthermore, if the Issuer were treated as a CFC and a U.S. Holder were treated as a U.S. Shareholder
therein, the Issuer would not be treated as a PFIC or a QEF with respect to such U.S. Holder for the
period during which the Issuer remained a CFC and such U.S. Holder remained a U.S. Shareholder
therein (the "qualified portion" of the U.S. Holder's holding period for the Class F Subordinated Notes).
If the qualified portion of such U.S. Holder's holding period for the Class F Subordinated Notes
subsequently ceased (either because the Issuer ceased to be a CFC or the U.S. Holder ceased to be a
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U.S. Shareholder), then solely for purposes of the PFIC rules, such U.S. Holder's holding period for the
Class F Subordinated Notes would be treated as beginning on the first day following the end of such
qualified portion, unless the U.S. Holder had owned any Class F Subordinated Notes for any period of
time prior to such qualified portion and had not made a QEF election with respect to the Issuer. In that
case, the Issuer would again be treated as a PFIC which is not a QEF with respect to such U.S. Holder
and the beginning of such U.S. Holder's holding period for the Class F Subordinated Notes would
continue to be the date upon which such U.S. Holder acquired the Class F Subordinated Notes, unless
the U.S. Holder made an election to recognize gain with respect to the Class F Subordinated Notes and
a QEF election with respect to the Issuer.
Indirect Interests in PFICs and CFCs If the Issuer owns a Collateral Debt Obligation or an Exchanged
Equity Security issued by a non-U.S. corporation that is treated as equity for U.S. federal income tax
purposes, U.S. Holders of the Class F Subordinated Notes could be treated as owning an indirect equity
interest in a PFIC or a CFC and could be subject to certain adverse tax consequences.
In particular, if the Issuer owns equity interests in PFICs ("Lower-Tier PFICs"), a U.S. Holder of the
Class F Subordinated Notes would be treated as owning directly the U.S. Holder's proportionate amount
(by value) of the Issuer's equity interests in the Lower-Tier PFICs. A U.S. Holder's QEF election with
respect to the Issuer would not be effective with respect to such Lower-Tier PFICs. However, a U.S.
Holder would be able to make QEF elections with respect to such Lower-Tier PFICs if the Lower-Tier
PFICs provide certain information and documentation to the Issuer in accordance with applicable
Treasury regulations. However, there can be no assurance that the Issuer would be able to obtain such
information and documentation from any Lower-Tier PFIC, and thus there can be no assurance that a
U.S. Holder would be able to make or maintain a QEF election with respect to any Lower-Tier PFIC. If a
U.S. Holder does not have a QEF election in effect with respect to a Lower-Tier PFIC, as a general
matter, the U.S. Holder would be subject to the adverse consequences described above under "Income
Tax Considerations - Investment in a Passive Foreign Investment Company" with respect to any excess
distributions made by such Lower-Tier PFIC to the Issuer, any gain on the disposition by the Issuer of its
equity interest in such Lower-Tier PFIC treated as indirectly realized by such U.S. Holder, and any gain
treated as indirectly realized by such U.S. Holder on the disposition of its equity in the Issuer (which may
arise even if the U.S. Holder realizes a loss on such disposition). Such amount would not be reduced by
expenses or losses of the Issuer, but any income recognized may increase a U.S. Holder's tax basis in
its Class F Subordinated Notes. Moreover, if the U.S. Holder has a QEF election in effect with respect
to a Lower-Tier PFIC, the U.S. Holder would be required to include in income the U.S. Holder's pro rata
share of the Lower-Tier PFIC's ordinary earnings and net capital gain as if the U.S. Holder's indirect
equity interest in the Lower-Tier PFIC were directly owned, and it appears that the U.S. Holder would
not be permitted to use any losses or other expenses of the Issuer to offset such ordinary earnings
and/or net capital gains, but recognition of such income may increase a U.S. Holder's tax basis in its
Class F Subordinated Notes.
Accordingly, if any of the Collateral Debt Obligations or Exchanged Equity Securities are treated as
equity interests in a PFIC, such U.S. Holders could experience significant amounts of phantom income
with respect to such interests. Other adverse tax consequences may arise for such U.S. Holders that
are treated as owning indirect interests in CFCs. U.S. Holders should consult their own tax advisors
regarding the tax issues associated with such investments in light of their own individual circumstances.
Distributions on the Class F Subordinated Notes The treatment of actual distributions of cash on the
Class F Subordinated Notes, in very general terms, will vary depending on whether a U.S. Holder has
made a timely QEF election as described above. See "Income Tax Considerations — Investment in a
Passive Foreign Investment Company". If a timely QEF election has been made, distributions should be
allocated first to amounts previously taxed pursuant to the QEF election (or pursuant to the CFC rules, if
applicable) and to this extent will not be taxable to U.S. Holders. Distributions in excess of amounts
previously taxed pursuant to a QEF election (or pursuant to the CFC rules, if applicable) will be taxable
to U.S. Holders as ordinary income upon receipt to the extent of any remaining amounts of untaxed
current and accumulated earnings and profits of the Issuer. Distributions in excess of any current and
accumulated earnings and profits will be treated first as a non-taxable reduction to the U.S. Holder's tax
basis for the Class F Subordinated Notes to the extent thereof and then as capital gain.
In the event that a U.S. Holder does not make a timely QEF election, then except to the extent that
distributions may be attributable to amounts previously taxed pursuant to the CFC rules, some or all of
any distributions with respect to the Class F Subordinated Notes may constitute excess distributions,
taxable as previously described. See "Income Tax Considerations — Investment in a Passive Foreign
Investment Company". In that event, except to the extent that distributions may be attributable to
amounts previously taxed to the U.S. Holder pursuant to the CFC or PFIC rules or are treated as excess
distributions, distributions on the Class F Subordinated Notes generally would be treated as dividends to
the extent paid out of the Issuer's current or accumulated earnings and profits not allocated to any
excess distributions, then as a non-taxable reduction to the U.S. Holder's tax basis for the Class F
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Subordinated Notes to the extent thereof and then as capital gain. Dividends received from a foreign
corporation generally will be treated as income from sources outside the United States for U.S. foreign
tax credit limitation purposes. However, if U.S. Holders collectively own (directly or constructively) 50
per cent. or more (measured by vote or value) of the Class F Subordinated Notes, a percentage of the
dividend income equal to the proportion of the Issuer's earnings and profits from sources within the
United States generally will be treated as income from sources within the United States for such
purposes.
Distributions paid in Non-U.S. Dollar Currency will be translated into a U.S. Dollar amount based on the
spot rate of exchange in effect on the date of receipt whether or not the payment is converted into
Dollars at that time. A U.S. Holder will recognize exchange gain or loss with respect to distributions of
previously taxed amounts attributable to movements in exchange rates between the times of the
deemed distributions and actual distributions, and any such exchange gain or loss will be treated as
ordinary income from the same source as the associated income inclusion. The tax basis of Non-U.S.
Dollar Currency received by a U.S. Holder generally will equal the U.S. Dollar value of the Non-U.S.
Dollar Currency determined at the spot rate of exchange in effect on the date the Non-U.S. Dollar
Currency are received, regardless of whether the payment is converted into Dollars at that time. Any
gain or loss recognized on a subsequent conversion of Non-U.S. Dollar Currency for Dollars, in an
amount equal to the difference between the Dollars received and the U.S. Holder's tax basis in the Non-
U.S. Dollar Currency, generally will be U.S. source ordinary income or loss.
Purchase or Disposition of the Class F Subordinated Notes A U.S. Holder that purchases the Class
F Subordinated Notes with Non-U.S. Dollar Currency generally will recognize U.S. source ordinary
income or loss in an amount equal to the difference (if any) between the U.S. Dollar fair market value of
the Non-U.S. Dollar Currency used to purchase the Class F Subordinated Notes determined at the spot
rate of exchange in effect on the date of purchase of the Class F Subordinated Notes and such U.S.
Holder's tax basis in the Non-U.S. Dollar Currency. In general, a U.S. Holder of a Class F Subordinated
Note will recognize a gain or loss upon the sale, exchange, redemption, retirement or other taxable
disposition of a Class F Subordinated Note equal to the difference between the amount realized and
such U.S. Holder's adjusted tax basis in the Class F Subordinated Note. Except as discussed below,
such gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if the U.S.
Holder held the Class F Subordinated Notes for more than one year at the time of the disposition. In
certain circumstances, U.S. Holders who are individuals may be entitled to preferential treatment for net
long-term capital gains; however, the ability of U.S. Holders to offset capital losses against ordinary
income is limited. Any gain recognized by a U.S. Holder on the sale, exchange, redemption, retirement
or other taxable disposition of a Class F Subordinated Note (other than, in the case of a U.S. Holder
treated as a "U.S. Shareholder", any such gain characterized as a dividend, as discussed below)
generally will be treated as from sources within the United States.
Initially, a U.S. Holder's tax basis for a Class F Subordinated Note will equal the cost of such Class F
Subordinated Note to such U.S. Holder. The cost of a Class F Subordinated Note to a U.S. Holder will
be the U.S. Dollar value of the Non-U.S. Dollar Currency purchase price based on the spot rate of
exchange in effect on the date of purchase. Such basis will be increased by amounts taxable to such
U.S. Holder by virtue of a QEF election, or by virtue of the CFC rules, as applicable, and decreased by
actual distributions from the Issuer that are deemed to consist of such previously taxed amounts or are
treated as a non-taxable reduction to the U.S. Holder's tax basis for the Class F Subordinated Note (as
described above). If a U.S. Holder receives Non-U.S. Dollar Currency on the sale or other taxable
disposition of a Class F Subordinated Note, the amount realized in Dollars generally will be based on
the spot rate of exchange in effect on the date of the sale or other taxable disposition.
If a U.S. Holder does not make a timely QEF election as described above, any gain realized on the sale,
exchange, redemption, retirement or other taxable disposition of a Class F Subordinated Note (or any
gain deemed to accrue prior to the time a non-timely QEF election is made) will be taxed as ordinary
income and subject to an additional tax reflecting a deemed interest charge under the special tax rules
described above. See "Income Tax Considerations — Investment in a Passive Foreign Investment
Company".
Except for a limited exception applicable to individuals, if the Issuer were treated as a CFC and a U.S.
Holder were treated as a "U.S. Shareholder" therein, then any gain realized by such U.S. Holder upon
the disposition of Class F Subordinated Notes, other than gain constituting an excess distribution under
the PFIC rules, if applicable, would be treated as ordinary income to the extent of the U.S. Holder's
share of the current or accumulated earnings and profits of the Issuer. In this regard, earnings and
profits would not include any amounts previously taxed pursuant to a timely QEF election or pursuant to
the CFC rules, as applicable.
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Tax Treatment of Tax-Exempt U.S. Holders
U.S. Holders which are tax-exempt entities ("Tax-Exempt U.S. Holders") will not be subject to the tax
on unrelated business taxable income ("UBTI") with respect to interest and capital gains income derived
from an investment in the Notes. However, a Tax-Exempt U.S. Holder that also acquires the Class F
Subordinated Notes should consider whether interest it receives with respect to the Notes may be
treated as UBTI under rules governing certain payments received from controlled entities.
A Tax-Exempt U.S. Holder generally will not be subject to the tax on UBTI with respect to regular
distributions or excess distributions on the Preferred Equity. A Tax-Exempt U.S. Holder which is not
subject to tax on UBTI with respect to excess distributions may not make a QEF election. In addition, a
Tax-Exempt U.S. Holder which is subject to the rules relating to controlled foreign corporations with
respect to the Class F Subordinated Notes generally should not be subject to the tax on UBTI with
respect to income from such Class F Subordinated Notes.
Notwithstanding the discussion in the preceding two paragraphs, a Tax-Exempt U.S. Holder which
incurs acquisition indebtedness (as defined in Section 514(c) of the Code) with respect to the Notes may
be subject to the tax on UBTI with respect to income from the Notes to the extent that the Notes
constitute debt-financed property (as defined in Section 514(b) of the Code) of the Tax-Exempt U.S.
Holder. A Tax-Exempt U.S. Holder subject to the tax on UBTI with respect to income from the Class F
Subordinated Notes will be taxed on excess distributions in the manner discussed above under "Income
Tax Considerations — Tax Treatment of U.S. Holders of Class F Subordinated Notes" — Investment in
a Passive Foreign Investment Company". Such a Tax-Exempt U.S. Holder will be permitted, and should
consider whether, to make a QEF election with respect to the Issuer as discussed above.
Tax-Exempt U.S. Holders should consult their own tax advisors regarding an investment in the Notes.
Transfer Reporting Requirements
A U.S. Person (including a Tax-Exempt U.S. Holder) that purchases the Class F Subordinated Notes for
cash will be required to file a Form 926 or similar form with the IRS if (i) such person owned, directly or
by attribution, immediately after the transfer at least ten per cent. by voting power or value of the Issuer
or (ii) if the transfer, when aggregated with all transfers made by such person (or any related person)
within the preceding 12 month period, exceeds U.S. $100,000. In the event a U.S. Holder fails to file
any such required form, the U.S. Holder could be required to pay a penalty equal to ten per cent. of the
gross amount paid for such Class F Subordinated Notes subject to a maximum penalty of U.S. $100,000
except in cases involving intentional disregard). U.S. Persons should consult their tax advisors with
respect to this or any other reporting requirement which may apply with respect to their acquisition of the
Class F Subordinated Notes.
Tax Treatment of Combination Notes
Although each Combination Note will be evidenced as a single instrument, under U.S. federal income
tax principles, a strong likelihood exists that a U.S. Holder of Combination Notes will be treated as if it
directly owned the Class or Classes of Notes corresponding to the Components of such Combination
Notes. For U.S. tax purposes the Issuer will treat and each U.S. Holder and beneficial owner of
Combination Notes (by acquiring such Combination Notes or interests therein) will agree to treat the
Combination Notes as consisting of the separate Class or Classes of Notes corresponding to the
Components of such Combination Notes for U.S. federal income tax purposes. In accordance with such
treatment of the Combination Notes, in calculating its tax basis in the Components comprising a
Combination Note, a U.S. Holder will allocate the purchase price paid for such Combination Note among
the Components in proportion to their relative fair market values at the time of purchase. A similar
principle will apply in determining the amount allocable to the Components upon a sale of a Combination
Note. The exchange of Combination Notes for the separate Class or Classes of Notes corresponding to
the Components of the Combination Notes should not be a taxable event. A U.S. Holder of a
Combination Note should review the applicable discussion above with respect to the Class or Classes of
Notes relating to the U.S. federal income tax consequences of the purchase, ownership and disposition
of such Class or Classes of Notes. Any U.S. Holder of Combination Notes that treats such Notes for
U.S. federal income tax purposes inconsistently with the Issuer's treatment of such Notes as consisting
of the separate Classes of Notes corresponding to the Components of such Combination Notes is
required to disclose such treatment on its U.S. federal income tax return. Holders of the Class P
Combination Notes should refer to their own tax advisers with respect to the Class P OAT Security
Component.
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Tax Return Disclosure and Investor List Requirements
Any person that files a U.S. federal income tax return or U.S. federal information return and participates
in a reportable transaction in a taxable year is required to disclose certain information on IRS Form 8886
(or its successor form) attached to such person's U.S. tax return for such taxable year (and also file a
copy of such form with the IRS's Office of Tax Shelter Analysis) and to retain certain documents related
to the transaction. In addition, under these regulations, under certain circumstances, certain organizers
and sellers of a reportable transaction will be required to maintain lists of participants in the transaction
containing identifying information, retain certain documents related to the transaction, and furnish those
lists and documents to the IRS upon request. The Code imposes significant penalties for failure to
comply with these disclosure and list keeping requirements. The definition of reportable transaction is
highly technical. However, in very general terms, a transaction may be a "reportable transaction" if,
among other things, it is offered under conditions of confidentiality or it results in the claiming of a loss
for U.S. federal income tax purposes in excess of certain threshold amounts.
In this regard, in order to prevent the transactions described herein from being treated as offered under
conditions of confidentiality, the Investment Manager, the Issuer and the holders and beneficial owners
of the Notes (and each of their respective employees, representatives or other agents) may disclose to
any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the
transactions described herein and all materials of any kind (including opinions or other tax analyses) that
are provided to them relating to such U.S. tax treatment and U.S. tax structure. However, any such
disclosure of the tax treatment, tax structure and other tax-related materials shall not be made for the
purpose of offering to sell the Notes and Class F Subordinated Notes offered hereby or soliciting an
offer to purchase any such Notes and Class F Subordinated Notes. For purposes of this paragraph, the
terms "tax treatment" and "tax structure" have the meaning given to such terms under Treasury
regulation section 1.6011-4(c) and any analogous U.S. state or local law. In general, the tax treatment
of a transaction is the purported or claimed U.S. tax treatment of the transaction under applicable U.S.
federal, state and local law, and the tax structure of a transaction is any fact that may be relevant to
understanding the purported or claimed U.S. tax treatment of the transaction under applicable U.S.
federal, state and local law.
If the Issuer participates in a reportable transaction, a U.S. Holder of the Class F Subordinated Notes
that is a "reporting shareholder" of the Issuer will be treated as participating in the transaction and will be
subject to the rules described above. Although most of the Issuer's activities generally are unlikely to
give rise to "reportable transactions", it is nonetheless possible that the Issuer will participate in certain
types of transactions that could be treated as reportable transactions. A U.S. Holder of Class F
Subordinated Notes will be treated as a reporting shareholder of the Issuer if (i) such U.S. Holder owns
ten per cent. or more of the Class F Subordinated Notes and makes a QEF election with respect to the
Issuer, or (ii) the Issuer is treated as a CFC and such U.S. Holder is a U.S. Shareholder (as defined
above) of the Issuer.
Prospective investors in the Notes should consult their own tax advisors concerning any possible
disclosure obligations with respect to their ownership or disposition of the Notes in light of their particular
circumstances.
Tax Treatment of Non-U.S. Holders of Notes and the Class F Subordinated Notes
In general, payments on the Notes and the Class F Subordinated Notes to a Holder that is not, for U.S.
federal income tax purposes, a U.S. Holder (a "non-U.S. Holder") and gain realized on the sale,
exchange, redemption, retirement or other taxable disposition of the Notes and the Class F
Subordinated Notes by a non-U.S. Holder, will not be subject to U.S. federal income or withholding tax,
unless (i) such income is effectively connected with a trade or business conducted by such non-U.S.
Holder in the United States, or (ii) in the case of gain, such non-U.S. Holder is a non-resident alien
individual who holds the Notes and the Class F Subordinated Notes as a capital asset and is present in
the United States for more than 182 days in the taxable year of the sale, exchange, redemption,
retirement or other taxable disposition and certain other conditions are satisfied.
Information Reporting and Backup Withholding
Under certain circumstances, the Code requires "information reporting", and may require "backup
withholding" with respect to certain payments made on the Notes and the Class F Subordinated Notes
and the payment of the proceeds from the disposition of the Notes and the Class F Subordinated Notes.
Backup withholding generally will not apply to corporations, tax-exempt organizations, qualified pension
and profit sharing trusts, and individual retirement accounts. Backup withholding will apply to a U.S.
Holder if the U.S. Holder fails to provide certain identifying information (such as the U.S. Holder's
taxpayer identification number) or otherwise comply with the applicable requirements of the backup
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withholding rules. The application for exemption from backup withholding for a U.S. Holder is available
by providing a properly completed IRS Form W-9.
A non-U.S. Holder of the Notes and the Class F Subordinated Notes generally will not be subject to
these information reporting requirements or backup withholding with respect to payments of interest or
distributions on the Notes and the Class F Subordinated Notes if (1) it certifies to the Trustee its status
as a non-U.S. Holder under penalties of perjury on the appropriate IRS Form W-8, and (2) in the case of
a non-U.S. Holder that is a "nonwithholding foreign partnership", "foreign simple trust" or "foreign grantor
trust" as defined in the applicable Treasury regulations, the beneficial owners of such non-U.S. Holder
also certify to the Trustee their status as non-U.S. Holders under penalties of perjury on the appropriate
IRS Form W-8.
The payments of the proceeds from the disposition of a Note or a Class F Subordinated Note by a non-
U.S. Holder to or through the U.S. office of a broker generally will not be subject to information reporting
and backup withholding if the non-U.S. Holder certifies its status as a non-U.S. Holder (and, if
applicable, its beneficial owners also certify their status as non-U.S. Holders) under penalties of perjury
on the appropriate IRS Form W-8, satisfies certain documentary evidence requirements for establishing
that it is a non-U.S. Holder or otherwise establishes an exemption. The payment of the proceeds from
the disposition of a Note or a Class F Subordinated Note by a non-U.S. Holder to or through a non-U.S.
office of a non-U.S. broker will not be subject to backup withholding or information reporting unless the
non-U.S. broker has certain specific types of relationships to the United States, in which case the
treatment of such payment for such purposes will be as described in the following sentence. The
payment of proceeds from the disposition of a Note or a Class F Subordinated Note by a non-U.S.
Holder to or through a non-U.S. office of a U.S. broker or to or through a non-U.S. broker with certain
specific types of relationships to the United States generally will not be subject to backup withholding but
will be subject to information reporting unless the non-U.S. Holder certifies its status as a non-U.S.
Holder (and, if applicable, its beneficial owners also certify their status as non-U.S. Holders) under
penalties of perjury or the broker has certain documentary evidence in its files as to the non-U.S.
Holder's foreign status and the broker has no actual knowledge to the contrary.
Backup withholding is not an additional tax and may be refunded (or credited against the U.S. Holder's
or non-U.S. Holder's U.S. federal income tax liability, if any); provided that certain required information is
furnished to the IRS. The information reporting requirements may apply regardless of whether
withholding is required.
5. EU Directive on the Taxation of Savings Income
On 1 July 2005 a new EU directive regarding the taxation of savings income payments came into effect.
The directive obliges a Member State to provide to the tax authorities of another Member State details of
payments of interest or other similar income payments made by a person within its jurisdiction for the
immediate benefit of an individual or to certain non-corporate entities resident in that other Member
State (or for certain payments secured for their benefit). However, Austria, Belgium and Luxembourg
have opted out of the reporting requirements and may instead apply a special withholding tax for a
transitional period in relation to such payments of interest, deducting tax at rates rising over time to 35
per cent. This transitional period commenced on 1 July 2005 and will terminate at the end of the first
fiscal year following agreement by certain non-EU countries to the exchange of information relating to
such payments.
Also with effect from 1 July 2005, a number of non-EU countries and certain dependent or associated
territories of Member States have adopted similar measures (either provision of information or
transitional withholding) in relation to payments of interest or other similar income payments made by a
person in that jurisdiction for the immediate benefit of an individual or to certain non-corporate entities in
any Member State. The Member States have entered into reciprocal provision of information or
transitional special withholding tax arrangements with certain of those dependent or associated
territories. These apply in the same way to payments by persons in any Member State to individuals or
certain non-corporate residents of those territories.
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CERTAIN ERISA CONSIDERATIONS
__________________________________________________________________________________
The advice below was not written and is not intended to be used and cannot be used by any taxpayer
for purposes of avoiding United States federal income tax penalties that may be imposed. The advice is
written to support the promotion or marketing of the transaction. Each taxpayer should seek advice
based on the taxpayer's particular circumstances from an independent tax advisor.
The foregoing disclaimer is provided to satisfy obligations under Circular 230 governing standards of
practice before the Internal Revenue Service.
__________________________________________________________________________________
The U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes fiduciary
standards and certain other requirements on employee benefit plans and other retirement arrangements
subject thereto, including collective investment funds, insurance company general and separate
accounts whose underlying assets are treated as if they were assets of such plans pursuant to the U.S.
Department of Labor's "plan assets" regulation, set forth at 29 C.F.R. Section 2510.3-101 (the "Plan
Assets Regulation") and on those persons who are fiduciaries with respect to such plans or
arrangements. ERISA's general fiduciary requirements include the requirement of investment prudence
and diversification and the requirement that investments be made in accordance with the governing plan
documents. The prudence of a particular investment will be determined by the responsible fiduciary by
taking into account the particular circumstances of the plan and all of the facts and circumstances of the
investment including, but not limited to, the matters discussed above under "Risk Factors" and the fact
that in the future there may be no market in which such fiduciary will be able to sell or otherwise dispose
of an investment.
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of plans and arrangements subject to ERISA (as well as those that are not subject to ERISA
but which are subject to Section 4975 of the Code (together "Plans")) and certain persons (referred to
as "parties in interest" or "disqualified persons") having certain relationships to such Plans, unless a
statutory or administrative exemption applies to the transaction. In particular, a sale or exchange of
property or an extension of credit between a Plan and a "party in interest" or "disqualified person" may
constitute a prohibited transaction. In the case of indebtedness, the prohibited transaction provisions
apply throughout the term of such indebtedness (and not only on the date of the initial borrowing). A
party in interest or disqualified person who engages in a prohibited transaction may be subject to excise
taxes or other liabilities under ERISA and the Code.
Governmental, church and non-U.S. plans, while not subject to the fiduciary responsibility provisions of
ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to U.S. federal, state
or local laws or non-U.S. laws that are substantially similar to the foregoing provisions of ERISA and the
Code. Fiduciaries of any such plans should consult with their counsel before purchasing any Notes.
Under a "look-through rule" set forth in the Plan Assets Regulation, if a Plan invests in an "equity
interest" of an entity such as the Issuer and no other exception applies, the Plan's assets include both
the equity interest and an undivided interest in each of the entity's underlying assets. An equity interest
does not include debt (as determined by applicable local law) which does not have substantial equity
features. Under the Plan Assets Regulation, if a Plan invests in an "equity interest" of an entity that is
neither a "publicly-offered security" nor a security issued by an investment company registered under
the Investment Company Act, the Plan's assets include both the equity interest and an undivided
interest in each of the entity's underlying assets, unless it is established that the entity is an "operating
company" or that equity participation in the entity by "benefit plan investors" is not "significant." Equity
participation in an entity by "benefit plan investors" is "significant" if 25 per cent. or more of the value of
any class of equity interest in the entity is held by "benefit plan investors". Recently, the Pension
Protection Act of 2006 effectively amended, by statute, the definition of "benefit plan investors" in the
Plan Asset Regulations. Employee benefit plans that are not subject to Title I of ERISA and plans that
are not subject to Section 4975 of the Code, such as U.S. governmental and church plans or non-U.S.
plans, are no longer considered "benefit plan investors." Accordingly, only employee benefit plans
subject to Title I of ERISA or Section 4975 of the Code or an entity whose underlying assets include
plan assets by reason of such plan's investment in the entity are considered in determining whether
investment by "benefit plan investors" represents 25 per cent. or more of any class of equity of the
Issuer. Therefore, the term "benefit plan investor" includes (a) an "employee benefit plan" (as defined in
Section 3(3) of Title I of ERISA) that is subject to the fiduciary responsibilities provisions of ERISA, (b) a
"plan" as defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, (c) any
entity whose underlying assets include "plan assets" by reason of any such employee benefit plan's or
plan's investment in the entity or (d) a "benefit plan investor" as such term is otherwise defined in any
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egulations promulgated by the U.S. Department of Labor under Section 3(42) of ERISA (collectively,
"Benefit Plan Investors"). For purposes of making the 25 per cent. determination, the value of any
equity interests held by a person (other than a benefit plan investor) who has discretionary authority or
control with respect to the assets of the Issuer or any person who provides investment advice for a fee
(direct or indirect) with respect to the Issuer's assets, or any affiliate of such a person (a "Controlling
Person"), shall be disregarded. Under the Plan Assets Regulation, an "affiliate" of a person includes any
person, directly or indirectly through one or more intermediaries, controlling, controlled by or under
common control with the person, and "control" with respect to a person, other than an individual, means
the power to exercise a controlling influence over the management or policies of such person.
The U.S. Supreme Court's decision, in John Hancock Mutual Life Insurance Co. v. Harris Trust and
Savings Bank ("Harris Trust"), 510 U.S. 86 (1993), held that those funds allocated to the general
account of an insurance company pursuant to a contract with an employee benefit plan that varies with
the investment experience of the insurance company are "plan assets". The American Council of Life
Insurance requested a prohibited transaction class exemption to counteract the effects of Harris Trust.
In the preamble to the resulting Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg. 35925 (12
July 1995) ("PTCE 95-60"), the Department of Labor noted that for purposes of calculating the 25 per
cent. threshold under the significant participation test of the Plan Assets Regulation, only the proportion
of an insurance company general account's equity investment in the entity that represents plan assets
should be taken into account. Furthermore, a change in the level of plan investment in a general
account subsequent to the general account's purchase of an interest in the entity would not, by itself,
trigger a new determination of whether plan participation is significant. However, it is the Department of
Labor's view that a purchase by the general account of an additional interest in the entity subsequent to
its initial investment or an acquisition in the entity by any investor subsequent to the general account's
initial investment would require a new determination of significant plan participation. Although the
Department of Labor has not specified how to determine the proportion of an insurance company
general account that represents plan assets for purposes of the 25 per cent. threshold, they have, in the
case of PTCE 95-60, provided a method for determining the percentage of an insurance company's
general account held by the benefit plans of an employer and its Affiliates by comparing the reserves
and liabilities for the general account contracts held by such plans to the total reserves and liabilities of
the general account (exclusive of separate account liabilities) plus surplus. However, there is no
assurance that a similar measurement would be used for purposes of the 25 per cent. threshold.
Any insurance company proposing to invest assets of its general account in the Notes should consider
the extent to which such investment would be subject to the requirements of ERISA in light of the U.S.
Supreme Court's decision in Harris Trust and under any subsequent guidance that may become
available relating to that decision. In particular, such an insurance company should consider the
retroactive and prospective exemptive relief granted by the Department of Labor for transactions
involving insurance company general accounts in Prohibited Transaction Class Exemption 95-60 and
the enactment of Section 401(c) of ERISA by the Small Business Job Protection Act of 1996 and the
Department of Labor's regulations issued thereunder.
The Class E Notes, the Combination Notes and the Class F Subordinated Notes, the "ERISA Limited
Notes", would likely be considered to have substantial equity features under the Plan Assets
Regulations and, accordingly, should not be acquired by any benefit plan investor other than an
insurance company general account, provided that in the case of the ERISA Limited Notes, less than 25
per cent. of the assets in such general account constitute "plan assets" (as defined in the Plan Asset
Regulation) for purposes of ERISA and/or Section 4975 of the Code. There are no assurances that any
of the exceptions to the look-through rule (other than the exception for equity participation in an entity by
benefit plan investors that is less than 25 per cent.) applies to the investment by investors in the ERISA
Limited Notes of the Issuer. Furthermore, there can be no assurance that, despite the transfer
restrictions relating to purchases by benefit plan investors and procedures to be employed to attempt to
limit the ownership by benefit plan investors of the ERISA Limited Notes to less than 25 per cent. of the
ERISA Limited Notes, benefit plan investors will not in actuality own 25 per cent. or more of the value of
the ERISA Limited Notes.
BY ITS PURCHASE OR HOLDING OF AN ERISA LIMITED NOTE OR ANY INTEREST THEREIN, THE
PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE
PERIOD THAT IT HOLDS SUCH ERISA LIMITED NOTE OR INTEREST THEREIN, THAT EITHER (A)
IT IS NOT A BENEFIT PLAN INVESTOR OR (B) IT IS AN INSURANCE COMPANY ACTING ON
BEHALF OF ITS GENERAL ACCOUNT AND, (I) IT IS NOT A CONTROLLING PERSON, (II) AS OF
THE DATE IT ACQUIRES ANY ERISA LIMITED NOTE, OR ANY INTEREST THEREIN, LESS THAN
25 PER CENT. OF THE ASSETS OF SUCH GENERAL ACCOUNT CONSTITUTES "PLAN ASSETS"
(AS DEFINED IN THE "PLAN ASSETS REGULATION") FOR PURPOSES OF ERISA AND/OR
SECTION 4975 OF THE CODE, (III) IT AGREES THAT IF, AFTER ITS INITIAL ACQUISITION OF ANY
CLASS OF THE ERISA LIMITED NOTES OR ANY INTEREST THEREIN, AT ANY TIME DURING ANY
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MONTH, 25 PER CENT. OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT
CONSTITUTES "PLAN ASSETS", THEN SUCH INSURANCE COMPANY SHALL, IN A MANNER
CONSISTENT WITH THE RESTRICTIONS ON TRANSFER SET FORTH HEREIN, DISPOSE OF ALL
OF SUCH ERISA LIMITED NOTE, OR ANY OTHER CLASS OF EQUITY INTEREST IN THE ISSUER,
AND ANY INTEREST THEREIN, HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT
FOLLOWING MONTH AND (IV) THE ACQUISITION OR HOLDING OF ANY SUCH ERISA LIMITED
NOTES, OR ANY INTEREST THEREIN, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WHICH IS NOT
COVERED UNDER PTCE 95-60 OR SOME OTHER APPLICABLE EXEMPTION OR (C) IF IT IS A
GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS SUBJECT TO ANY FEDERAL,
STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR
SECTION 4975 OF THE CODE, ITS PURCHASE AND/OR HOLDING OF SUCH ERISA LIMITED
NOTES WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION UNDER SUCH
SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL OR NON-U.S. LAW.
The Issuer believes that the Class A Notes, Class B Notes, Class C Notes and Class D Notes, the
"ERISA Debt Notes", should not be considered "equity interests" for purposes of the Plan Assets
Regulation. This determination is based in part upon (i) the classification of the ERISA Debt Notes
(including additional issuances of the ERISA Debt Notes) as debt for U.S. federal income tax purposes
when issued and (ii) the traditional debt features of the ERISA Debt Notes, including the reasonable
expectation of purchasers of the ERISA Debt Notes that they will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. However, changes of the
applicable law or the facts and circumstances may adversely the classification of additional issuances of
the ERISA Debt Notes as debt without substantial equity features for purposes of the Plan Asset
Regulation. Nevertheless, prohibited transactions within the meaning of Section 406 of ERISA or
Section 4975 of the Code may arise if the ERISA Debt Notes are acquired by a Plan with respect to
which the Issuer or the Initial Purchaser or any of their respective Affiliates, is a party in interest or a
disqualified person. Similarly, prohibited transactions within the meaning of Section 406 of ERISA or
Section 4975 of the Code may arise if a person or entity which is a party in interest or disqualified
person with respect to a Plan acquires or holds 50 per cent. or more of the aggregate equity interest in
the Issuer. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and
Section 4975 of the Code may apply depending in part on the type of Plan fiduciary making the decision
to acquire an ERISA Debt Note and the circumstances under which such decision is made. Included
among these exemptions are PTCE 91-38 (relating to investments by bank collective investment funds),
PTCE 84-14 (relating to transactions effected by a "qualified professional asset manager"), PTCE 90-1
(relating to investments by insurance company pooled separate accounts), PTCE 95-60 (relating to
transactions involving insurance company general accounts) and PTCE 96-23 (relating to transactions
determined by an in-house asset manager). There is also a statutory exemption that may be available
under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code to a party in interest that is a
service provider to a Plan investing in the Notes for adequate consideration, provided such service
provider is not (i) the fiduciary with respect to the Plan’s assets used to acquire the Notes or an affiliate
of such fiduciary or (ii) an affiliate of the employer sponsoring the Plan. Adequate consideration means
fair market as determined in good faith by the Plan fiduciary pursuant to regulations to be promulgated
by the U.S. Department of Labor. There can be no assurance that any of these class exemptions or any
other exemption will be available with respect to any particular transaction involving the ERISA Debt
Note. The purchase and holding of the ERISA Debt Note could also result in a violation of U.S. federal,
state, local or non U.S. law which is substantially similar to Section 406 of ERISA or Section 4975 of the
Code.
BY ITS PURCHASE OR HOLDING OF AN ERISA DEBT NOTE, THE PURCHASER AND/OR HOLDER
THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE REPRESENTED AND
WARRANTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN AS DESCRIBED IN
SECTION 3(3) OF ERISA AND SUBJECT TO TITLE I OF ERISA, OR A PLAN AS DEFINED IN
SECTION 4975(e)(1) OF THE CODE THAT IS SUBJECT TO SECTION 4975 OF THE CODE, OR A
GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS SUBJECT TO ANY FEDERAL,
STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR AN ENTITY WHOSE ASSETS ARE
TREATED AS ASSETS OF ANY SUCH PLAN OR (B) ITS PURCHASE AND/OR HOLDING OF AN
ERISA DEBT NOTE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE
CASE OF A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN, A NON-EXEMPT
VIOLATION UNDER ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL OR NON-U.S.
LAW).
If for any reason the assets of the Issuer are deemed to be "plan assets" of an ERISA Plan because one
or more ERISA Plans is an owner of an ERISA Limited Note (or of an ERISA Debt Note characterised
as an "equity interest" in the Issuer), certain transactions that the Investment Manager might enter into,
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or may have entered into, on behalf of the Issuer in the ordinary course of its business might constitute
non-exempt "prohibited transactions" under Section 406 of ERISA or Section 4975 of the Code and
might have to be rescinded at significant cost to the Issuer. The Investment Manager could be deemed
to be an ERISA fiduciary and therefore may be prevented from engaging in certain investments (as not
being deemed consistent with the ERISA prudent investment standards) or engaging in certain
transactions or fee arrangements because they might be deemed to cause non-exempt prohibited
transactions. It also is not clear that Section 403(a) of ERISA, which generally requires that all of the
assets of an ERISA Plan be held in trust and limits delegation of investment management
responsibilities by fiduciaries of ERISA Plans, would be satisfied. In addition, it is unclear whether
Section 404(b) of ERISA, which generally provides that no fiduciary may maintain the indicia of
ownership of any assets of a plan outside the jurisdiction of the district courts of the United States,
would be satisfied or any of the exceptions to the requirement set forth in 29 C.F.R. Section 2550.404b-
1 would be available.
Any Plan fiduciary that proposes to cause a Plan to purchase any Notes should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA
and Section 4975 of the Code to such an investment, and to confirm that such investment will not
constitute or result in a prohibited transaction or any other violation of an applicable requirement of
ERISA or any substantially similar law.
The sale of any Notes to a Plan is in no respect a representation by the Issuer, the Initial Purchaser or
the Investment Manager that such an investment meets all relevant legal requirements with respect to
investments by Plans generally or any particular Plan, or that such an investment is appropriate for
Plans generally or any particular Plan.
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PLAN OF DISTRIBUTION
Deutsche Bank AG, London Branch (in its capacity as initial purchaser, the "Initial Purchaser") has
agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe and pay for the
Notes (other than the Class A1 Notes and the AI Notes), in each case at the issue price of 100 per cent.
(less underwriting fees to be agreed between the Issuer and Initial Purchaser). The Subscription
Agreement entitles the Initial Purchaser to terminate it in certain circumstances prior to payment being
made to the Issuer. The Initial Purchaser may, in its discretion, retain or on sell the Notes purchased by
it in individually negotiated transactions.
The initial Class A1 Noteholders have agreed to purchase the Class A1 Notes in accordance with, and
subject to, the terms of the Class A1 Note Purchase Agreement.
Octagon Credit Investors LLC has agreed to purchase certain of the Class F Subordinated Notes (the
"AI Notes") in accordance with, and subject to, the terms of a Class F Subordinated Note Purchase
Agreement.
In connection with the offering, Deutsche Bank AG, London Branch, in its capacity as Stabilising
Manager (or persons acting on behalf of the Stabilising Manager), may over-allot Notes (provided that
the aggregate principal amount of Notes allotted does not exceed 105 per cent. of the aggregate
principal amount of the Notes) or effect transactions with a view to supporting the market price of the
Notes at a level higher than that which might otherwise prevail. However there is no assurance that the
Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilisation
action. Any stabilisation action may begin on or after the Issue Date and, if begun may be ended at any
time, but it must end no later than the earlier of 30 days after the Issue Date and 60 days after the date
of the allotment of the Notes.
It is a condition of the issue of the Notes of each Class that the Notes of each other Class be issued in
the following principal amounts: Class A1 Notes: €52,500,000, Class A2 Notes: €145,000,000, Class A3
Notes: €49,500,000, Class B Notes: €21,000,000, Class C Notes: €21,000,000, Class D Notes:
€19,000,000, Class E Notes: €22,000,000, Class F Subordinated Notes: €26,500,000 (which shall
include, and not be in addition to the Class F Subordinated Component), Class P Combination Notes:
€15,000,000 (being €7,100,000 in respect of the Class P OAT Security Component and €7,900,000 in
respect of the Class F Subordinated Component).
The Issuer has agreed to indemnify the Initial Purchaser, the Investment Manager, the Collateral
Administrator, the Trustee and certain other participants against certain liabilities or to contribute to
payments they may be required to make in respect thereof.
Certain of the Collateral Debt Obligations may have been originally underwritten or placed by the Initial
Purchaser. In addition, the Initial Purchaser may have in the past performed and may in the future
perform investment banking services or other services for issuers of the Collateral Debt Obligations. In
addition, the Initial Purchaser and its Affiliates may from time to time as a principal or through one or
more investment funds that it or they manage, make investments in the equity securities of one or more
of the issuers of the Collateral Debt Obligations, with a result that one or more of such issuers may be or
may become controlled by the Initial Purchaser or its Affiliates.
No action has been or will be taken by the Issuer or the Initial Purchaser that would permit a public
offering of the Notes or possession or distribution of this Prospectus or any other offering material in
relation to the Notes in any jurisdiction where action for the purpose is required. No offers, sales or
deliveries of any Notes, or distribution of this Prospectus or any other offering material relating to the
Notes, may be made in or from any jurisdiction, except in circumstances which will result in compliance
with any applicable laws and regulations and will not impose any obligations on the Issuer or the Initial
Purchaser.
(a)
United States
The Notes have not been and will not be registered under the Securities Act and may not be offered,
sold or delivered within the United States or to, or for the account or benefit of, U.S. Persons except in
certain transactions exempt from, or not subject to, the registration requirements of the Securities Act
and in the manner so as not to require the registration of the Issuer as an "investment company"
pursuant to the Investment Company Act.
The Issuer has been advised by the Initial Purchaser that (1) (a) the Initial Purchaser proposes to resell
the Notes outside the United States to non-U.S. Persons in offshore transactions in reliance on
Regulation S and (b) the Initial Purchaser proposes to resell the Notes in the United States (directly or
through its U.S. broker-dealer affiliate) in reliance on Rule 144A only to purchasers for their own account
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or for the accounts of QIBs, each of which purchasers or accountholders is a QP for purposes of Section
3(c)(7) of the Investment Company Act and (2) in each case, in accordance with all applicable securities
law of any states of the United States and other applicable jurisdictions.
The Notes sold in reliance on Rule 144A will be issued in minimum denominations of €250,000 and
integral multiples of €1,000 in excess thereof. Any offer or sale of Rule 144A Notes in reliance on Rule
144A will be made by broker-dealers who are registered as such under the Exchange Act. After the
Notes are released for sale, the offering price and other selling terms may from time to time be varied by
the Initial Purchaser.
The Initial Purchaser has acknowledged and agreed that it will not offer, sell or deliver any Regulation S
Notes to, or for the account or benefit of, any U.S. Person or U.S. Resident as part of their distribution at
any time and that it will send to each distributor, dealer or person receiving a selling concession, fee or
other remuneration to which it sells Regulation S Notes a confirmation or other notice setting forth the
prohibition on offers and sales of the Regulation S Notes within the United States or to, or for the
account or benefit of, any U.S. Person or U.S. Resident.
This Prospectus has been prepared by the Issuer for use in connection with the offer and sale of the
Notes and for the listing of the Notes on the Irish Stock Exchange. The Issuer and the Initial Purchaser
reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than
the principal amount of Notes which may be offered. This Prospectus does not constitute an offer to any
person in the United States or to any U.S. Person except as provided herein. Distribution of this
Prospectus to any such U.S. Person or to any person within the United States, other than in accordance
with the procedures described above, is unauthorised and any disclosure of any of its contents, without
the prior written consent of the Issuer, is prohibited.
(b)
United Kingdom
The Initial Purchaser has represented, warranted and agreed that:
(a)
(b)
(c)
(c)
(i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of its business and (ii) it has not offered
or sold and will not offer or sell the Notes other than to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or who it is reasonable to expect will acquire, hold,
manage or dispose of investments (as principal or agent) for the purposes of their businesses
where the issue of the Notes would otherwise constitute a contravention of section 19 of the
Financial Services and Markets Act 2000 (the "FSMA") by the Issuer;
it has only communicated or caused to be communicated and will only communicate or cause
to be communicated any invitation or inducement to engage in investment activity (within the
meaning of section 21 of the FSMA in connection with the issue or sale of any Notes in
circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and
it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
Ireland
The Initial Purchaser has agreed to comply with the following selling restrictions:
(a)
(b)
(c)
(d)
it will not underwrite the issue of, or place, or offer, or sell the Notes otherwise than in
conformity with the provisions of the Irish Investment Intermediaries Act 1995, as amended,
including without limitation, Sections 9 and 23 thereof and any codes of conduct rules made
under Section 37 thereof and the provisions of the Investor Compensation Act 1998;
it will not underwrite the issue of, or place, or offer, or sell the Notes, except in conformity with
EC Directive 2003/71/EC, the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 and
the Irish Companies Acts 1963 to 2005 (as amended); and
it has not and will not underwrite the issue of, or place, or offer, or sell the Notes otherwise than
in conformity with the Irish Market Abuse (Directive 2003/6/EC) Regulations 2005.
Germany
Pursuant to the Subscription Agreement, the Initial Purchaser has agreed that it shall not offer or sell the
Notes in the Federal Republic of Germany other than in compliance with the restrictions contained in the
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German Securities Prospectus Act (Wertpapierprospektgesetz), the German Investment Act
(Investmentgesetz), respectively, and any other laws and regulations applicable in the Federal Republic
of Germany governing the issue, the offering and the sale of securities.
The Notes may not actually be, or intended to be, distributed by way of public offering, public
advertisement or in a similar manner within the meaning of the German Securities Prospectus Act and
the German Investment Act nor shall the distribution of this Prospectus or any other document relating
to the Notes constitute such public offer. In addition, the Initial Purchaser has agreed that it has offered,
sold or advertised and that it will offer, sell or advertise the Notes only to permitted institutional investors
("Institutional Investors") within the meaning of the leaflet of the German Federal Financial
Supervisory Agency (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) dated April 2005 in the
Federal Republic of Germany and this Prospectus may not be passed on to any other person or entity in
the Federal Republic of Germany. Furthermore, each subsequent transferee/purchaser of the Notes will
be deemed to represent that if it is a person or entity in the Federal Republic of Germany it is an
Institutional Investor and to agree not to offer, sell or advertise the Notes to any person or entity in the
Federal Republic of Germany who is not an Institutional Investor.
The distribution of the Notes has not been notified and the Notes are not registered or authorised for
public distribution in the Federal Republic of Germany. This Prospectus has not been filed or deposited
with the German Federal Financial Supervisory Agency.
(e)
Japan
The Notes have not been and will not be registered under the Securities and Exchange Law of Japan
("Securities and Exchange Law") and each of the Initial Purchaser and the Issuer has represented,
warranted and agreed that it has not, directly or indirectly, offered or sold and will not, directly or
indirectly, offer or sell any of the Notes in Japan or to, or for the benefit of, any resident of Japan (which
term as used herein means any person resident in Japan, including any corporation or other entity
organised under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or
to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration
requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other
applicable laws, regulations and ministerial guidelines of Japan.
(f)
France
No Prospectus has been prepared in connection with the placement of the Notes that has been
approved by the Autorité des marchés financiers. This Prospectus has been made available in France
only to permitted investors consisting of qualified investors (investisseurs qualifiés) acting for their own
account and/or corporate investors meeting one of the four criteria provided in Article D 341-1 of the
French Code Monétaire et Financier and belonging to a limited circle of less than 100 investors.
Permitted investors may only invest in the Notes for their own account. The direct or indirect resale to
the public in France of the Notes acquired by any permitted investors may be made only as provided by
Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the French Code Monétaire et
Financier and applicable regulations thereunder.
(g)
Italy
The Notes shall not be offered or sold in Italy.
(h)
Luxembourg
The Initial Purchaser has agreed to comply with the following selling restrictions applicable to
Luxembourg:
No action has or will be undertaken by the Initial Purchaser or any other entity that would permit a public
offer of the Notes in the Grand Duchy of Luxembourg. Accordingly, no action has or will be undertaken
that would permit the Notes to be offered or sold to the public in the Grand Duchy of Luxembourg,
directly or indirectly, and neither this Prospectus nor any other circular, prospectus, form of application,
advertisement or other material may be distributed or otherwise made available in or from, or published
in, the Grand Duchy of Luxembourg, unless the requirements of Luxembourg law concerning public
offering of securities have first been met.
(i)
Taiwan
The Notes may not be offered, sold or delivered, directly or indirectly, in Taiwan or to any resident of
Taiwan or to others for reoffering or resale directly or indirectly in Taiwan or to any resident of Taiwan,
except as otherwise permitted by applicable laws and regulations in Taiwan.
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(j)
Israel
This offer is intended solely for investors listed in the first supplement of the Israeli Securities Law, 1968
as amended. A prospectus has not been prepared or filed, and will not be prepared or filed, in Israel
relating to the securities hereunder. The Notes cannot be resold in Israel other than to entities who
qualify for an exemption under section 15a(b) of the Israeli Securities Law, 1968.
(k)
Denmark
This Prospectus has not been and will not be filed with or approved by the Danish Financial Supervisory
Authority or any other regulatory authority in the Kingdom of Denmark.
The Notes have not been offered or sold and may not be offered, sold or delivered directly or indirectly
in Denmark, unless in compliance with chapters 6 or 12 of the Danish Act on trading in securities and
executive orders issued pursuant hereto as amended from time to time. Accordingly, this Prospectus
may not be made available nor may notes otherwise be marketed and offered for sale in Denmark other
than in circumstances which are deemed not to be a marketing or an offer to the public in Denmark.
(l)
General
The Initial Purchaser has also agreed to comply with the following selling restrictions:
(a) This Prospectus is furnished to you solely for your information and may not be reproduced or
redistributed to any other person. It is solely destined for persons or institutions to which it was initially
supplied. This document does not constitute an offer or an invitation to subscribe for or to purchase any
securities and neither this document nor anything contained herein shall form the basis of any contract
or commitment whatsoever.
(b) No action has been or will be taken in any jurisdiction that would permit a public offering of the
Notes, or the possession, circulation or distribution of this Prospectus or any other material relating to
the Issuer or the Notes, in any jurisdiction where action for such purpose is required. Accordingly, the
Notes may not be offered or sold, directly or indirectly, and neither this Prospectus nor any other offering
material or advertisements in connection with the Notes may be distributed or published, in or from any
country or jurisdiction except under circumstances that will result in compliance with any applicable rules
and regulations of any such country or jurisdiction.
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TRANSFER RESTRICTIONS
Because of the following restrictions, purchasers are advised to consult legal counsel prior to making
any offer, resale, pledge or transfer of the Notes.
A beneficial interest in a Regulation S Global Certificate may be transferred to a person who wishes to
take delivery of such interest through a Rule 144A Global Certificate only upon receipt by the Registrar
of a written certification (in the applicable form provided in the Trust Deed) to the effect that such
transfer is being made to a person that is a QIB/QP and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction. U.S. Persons may not hold an interest in
a Regulation S Global Certificate at any time. A beneficial interest in a Rule 144A Global Certificate may
be transferred to a person who wishes to take delivery of such interest through a Regulation S Global
Certificate of such Class only upon receipt by the Registrar of a written certification from the transferor
(in the applicable form provided in the Trust Deed) to the effect that such transfer is being made in
accordance with Regulation S. Additional transfer requirements in respect of the Class A1 Notes are set
out in the Class A1 Note Purchase Agreement.
Rule 144A Notes
Each prospective purchaser of Rule 144A Notes, by accepting delivery of this Prospectus, will be
deemed to have represented and agreed (or in the case of a Class A1 Note shall be required to
represent and agree) as follows:
(a)
(b)
(c)
(d)
(e)
The purchaser acknowledges that this Prospectus is personal to it and does not constitute an
offer to any other person or to the public generally to subscribe for or otherwise acquire Notes
other than pursuant to Rule 144A ("Rule 144A") under the Securities Act, in offshore
transactions in accordance with Regulation S under the Securities Act. Distribution of this
Prospectus, or disclosure of any of its contents to any person other than such offeree and
those persons, if any, retained to advise it with respect thereto is unauthorised and any
disclosure of any of its contents, without the prior written consent of the Issuer, is prohibited.
The purchaser agrees not to make any photocopies of this Prospectus or any documents
referred to herein and, if such person does not purchase such Notes or the offering is
terminated, to return this Prospectus and all documents referred to herein to the Initial
Purchaser or the Affiliate thereof who furnished this Prospectus and those documents.
The purchaser (a) is a qualified institutional buyer ("QIB") as defined in Rule 144A, (b) is aware
that the sale of such Rule 144A Notes to it is being made in reliance on Rule 144A, (c) is
acquiring such Notes for its own account or for the account of a QIB as to which the purchaser
exercises sole investment discretion, and in a principal amount of not less than €250,000 for
the purchaser and for each such account and (d) will provide notice of the transfer restrictions
and representations set forth herein to any subsequent transferees.
The purchaser understands that such Rule 144A Notes have not been and will not be
registered under the Securities Act, and may be reoffered, resold or pledged or otherwise
transferred only (a)(i) to a person whom the purchaser reasonably believes is a QIB purchasing
for its own account or for the account of a QIB as to which the purchaser exercises sole
investment discretion in a transaction meeting the requirements of Rule 144A or (ii) in an
offshore transaction complying with Rule 903 or Rule 904 of Regulation S and (b) in
accordance with all applicable securities laws including the securities laws of any state of the
United States and any other applicable jurisdiction. The purchaser understands that the Issuer
has not been registered under the Investment Company Act, and that the Issuer is exempt from
registration as such by virtue of Section 3(c)(7) of the Investment Company Act. The purchaser
understands that before any interest in a Rule 144A Note may be offered, sold, pledged or
otherwise transferred to a person who takes delivery in the form of an interest in the Regulation
S Notes, the Registrar is required to receive a written certification from the purchaser (in the
form provided in the Trust Deed) as to compliance with the transfer restrictions described
herein. The purchaser understands and agrees that any purported transfer of the Rule 144A
Notes to a purchaser that does not comply with the requirements of this paragraph (d) shall be
null and void ab initio.
The purchaser and each account for which the purchaser is acquiring such Rule 144A Notes is
a qualified purchaser ("QP") for purposes of Section 3(c)(7) of the Investment Company Act.
The purchaser is acquiring the Rule 144A Notes in a principal amount of not less than
€250,000. The purchaser and each such account is acquiring the Rule 144A Notes as principal
for its own account for investment and not for sale in connection with any distribution thereof.
The purchaser and each such account: (a) was not formed for the specific purpose of investing
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in the Rule 144A Notes (except when each beneficial owner of the purchaser and each such
account is a QP; (b) to the extent the purchaser is a private investment company formed before
April 30, 1996, the purchaser has received the necessary consent from its beneficial owners;
(c) is not a pension, profit-sharing or other retirement trust fund or plan in which the partners,
beneficiaries or participants, as applicable, may designate the particular investments to be
made; and (d) is not a broker-dealer that owns and invests on a discretionary basis less than
U.S.$25,000,000 in securities of unaffiliated issues. Further, the purchaser agrees with respect
to itself and each such account: (x) that it shall not hold such Rule 144A Notes for the benefit of
any other person and shall be the sole beneficial owner thereof for all purposes; (y) that it shall
not sell participation interests in the Rule 144A Notes or enter into any other arrangement
pursuant to which any other person shall be entitled to a beneficial interest in the distributions
on the Rule 144A Notes; and (z) that the Rule 144A Notes purchased directly or indirectly by it
constitute an investment of no more than 40 per cent. of the purchaser's and each such
account's assets (except when each beneficial owner of the purchaser and each such account
is a QP for purposes of Section 3(c)(7) of the Investment Company Act). The purchaser
understands and agrees that any purported transfer of the Rule 144A Notes to a purchaser that
does not comply with the requirements of this paragraph (e) will be of no force and effect, will
be void ab initio and the Issuer will have the right to direct the purchaser to transfer its Rule
144A Notes to a Person who meets the foregoing criteria.
(f)
The purchaser understands that pursuant to the terms of the Trust Deed, the Issuer has agreed
that the Rule 144A Notes offered in reliance on Rule 144A will bear the legend set forth below,
and, will issue will be represented by one or more Rule 144A Notes. The Rule 144A Notes
may not at any time be held by or on behalf of, within the United States, persons, or outside the
United States, U.S. Persons that are not QIB/QPs. Before any interest in a Rule 144A Notes
may be offered, resold, pledged or otherwise transferred to a person who takes delivery in the
form of an interest in a Regulation S Notes, the transferor will be required to provide the
Trustee with a written certification (in the form provided in the Trust Deed) as to compliance
with the transfer restrictions.
THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE ISSUER HAS NOT
BEEN REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "INVESTMENT COMPANY ACT"). THE HOLDER HEREOF, BY PURCHASING THE
NOTES IN RESPECT OF WHICH THIS NOTE HAS BEEN ISSUED, AGREES FOR THE BENEFIT OF
THE ISSUER THAT THE NOTES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER, IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT IN A PRINCIPAL AMOUNT OUTSTANDING OF NOT
LESS THAN €250,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR WHICH IT IS
ACTING, OR (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF
REGULATION S OF THE SECURITIES ACT IN A PRINCIPAL AMOUNT OUTSTANDING OF NOT
LESS THAN €250,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR WHICH IT IS
ACTING AND, IN THE CASE OF CLAUSE (1), TO A PURCHASER THAT (V) IS A QUALIFIED
PURCHASER FOR PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT, (W)
WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER (EXCEPT WHEN EACH
BENEFICIAL OWNER OF THE PURCHASER IS A QUALIFIED PURCHASER), (X) HAS RECEIVED
THE NECESSARY CONSENT FROM ITS BENEFICIAL OWNERS WHEN THE PURCHASER IS A
PRIVATE INVESTMENT COMPANY FORMED BEFORE 30 APRIL 1996, (Y) IS NOT A BROKER-
DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000
IN SECURITIES OF UNAFFILIATED ISSUERS AND (Z) IS NOT A PENSION, PROFIT SHARING OR
OTHER RETIREMENT TRUST FUND OR PLAN IN WHICH THE PARTNERS, BENEFICIARIES OR
PARTICIPANTS, AS APPLICABLE, MAY DESIGNATE THE PARTICULAR INVESTMENTS TO BE
MADE, AND IN A TRANSACTION THAT MAY BE EFFECTED WITHOUT LOSS OF ANY APPLICABLE
INVESTMENT COMPANY ACT EXEMPTION AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTIONS. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE
AND EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS
TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE
ISSUER, THE TRUSTEE OR ANY INTERMEDIARY. IN ADDITION TO THE FOREGOING, THE
ISSUER MAINTAINS THE RIGHT TO DIRECT THE RESALE OF ANY NOTES PREVIOUSLY
TRANSFERRED TO NON-PERMITTED HOLDERS (AS DEFINED IN THE TRUST DEED) IN
ACCORDANCE WITH AND SUBJECT TO THE TERMS OF THE TRUST DEED. EACH
TRANSFEROR OF THIS NOTE WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND IN THE TRUST DEED TO ITS TRANSFEREE.
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ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, THE NOMINEE OF
THE DEPOSITORY TRUST COMPANY ("DTC"), NEW YORK, NEW YORK, HAS AN INTEREST
HEREIN, UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF THE NOMINEE OF DTC OR OF SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO THE NOMINEE OF DTC).
EACH PURCHASER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN UNDERSTANDS
THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN THE
NOTES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES.
TRANSFERS OF THIS NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF PORTIONS OF THIS NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE TRUST DEED REFERRED TO
HEREIN.
PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
PRINCIPAL AMOUNT OUTSTANDING OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF. ANY PERSON ACQUIRING THIS NOTE MAY
ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT OUTSTANDING BY INQUIRY OF THE
REGISTRAR.
BY ITS PURCHASE OR HOLDING OF ANY CLASS A NOTES, CLASS B NOTES, CLASS C NOTES
OR CLASS D NOTES, OR ANY INTEREST THEREIN (THE "ERISA DEBT NOTES"), THE
PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE
PERIOD THAT IT HOLDS SUCH ERISA DEBT NOTE THAT EITHER (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN AS DESCRIBED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND SUBJECT TO TITLE I OF ERISA, OR A
PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, OR A
GOVERNMENTAL, CHURCH, NON-U.S., OR OTHER PLAN WHICH IS SUBJECT TO ANY FEDERAL,
STATE, LOCAL LAW OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS
OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR AN ENTITY WHOSE ASSETS
ARE TREATED AS ASSETS OF ANY SUCH PLAN OR (B) ITS PURCHASE AND/OR HOLDING OF
AN ERISA DEBT NOTE, OR ANY INTEREST THEREIN, WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN,
A NON-EXEMPT VIOLATION UNDER ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL
OR NON-U.S. LAW). ANY ACQUISITION OR TRANSFER OF AN ERISA DEBT NOTE IN VIOLATION
OF THE ABOVE RESTRICTIONS SHALL BE VOID AB INITIO.
BY ITS PURCHASE OR HOLDING OF A CLASS E NOTE OR CLASS F SUBORDINATED NOTE OR
COMBINATION NOTE, OR ANY INTEREST THEREIN (THE "ERISA LIMITED NOTES"), THE
PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE
PERIOD THAT IT HOLDS SUCH ERISA LIMITED NOTE THAT EITHER (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA, A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THAT IS SUBJECT TO
SECTION 4975 OF THE CODE, ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" BY REASON OF ANY SUCH PLAN'S INVESTMENT IN THE ENTITY OR A "BENEFIT PLAN
INVESTOR" AS SUCH TERM IS OTHERWISE DEFINED IN ANY REGULATIONS PROMULGATED
BY THE U.S. DEPARTMENT OF LABOR UNDER SECTION 3(42) OF ERISA OR (B) IT IS AN
INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) IT IS NOT A
PERSON WHO HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE
ASSETS OF THE ISSUER OR A PERSON WHO PROVIDES INVESTMENT ADVICE FOR A FEE
(DIRECT OR INDIRECT) WITH RESPECT TO SUCH ASSETS OR AN AFFILIATE OF SUCH A
PERSON, (II) AS OF THE DATE IT ACQUIRES AN ERISA LIMITED NOTE OR ANY INTEREST
THEREIN, LESS THAN 25 PER CENT. OF THE ASSETS OF SUCH GENERAL ACCOUNT
CONSTITUTES "PLAN ASSETS" (AS DEFINED IN THE "PLAN ASSETS REGULATION"), (III) IT
AGREES THAT IF, AFTER ITS INITIAL ACQUISITION OF AN ERISA LIMITED NOTE, OR ANY
INTEREST THEREIN, AT ANY TIME DURING ANY MONTH, 25 PER CENT. OR MORE OF THE
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ASSETS OF SUCH GENERAL ACCOUNT CONSTITUTES "PLAN ASSETS", THEN SUCH
INSURANCE COMPANY SHALL, IN A MANNER CONSISTENT WITH THE RESTRICTIONS ON
TRANSFER SET FORTH HEREIN, DISPOSE OF ALL OF THE ERISA LIMITED NOTES, OR ANY
INTEREST THEREIN, HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING
MONTH AND (IV) THE ACQUISITION OR HOLDING OF SUCH ERISA LIMITED NOTE, OR ANY
INTEREST THEREIN, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WHICH IS NOT COVERED
UNDER PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 OR SOME OTHER APPLICABLE
EXEMPTION OR (C) IF IT IS A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, ITS
PURCHASE AND/OR HOLDING OF SUCH ERISA LIMITED NOTES WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT VIOLATION UNDER SUCH SUBSTANTIALLY SIMILAR FEDERAL,
STATE, LOCAL OR NON-U.S. LAW. ANY PURPORTED TRANSFER OF THE ERISA LIMITED
NOTES, OR ANY INTEREST THEREIN, TO A PURCHASER OR TRANSFEREE THAT DOES NOT
COMPLY WITH THE FOREGOING REQUIREMENTS WILL BE OF NO FORCE AND EFFECT, SHALL
BE NULL AND VOID AB INITIO AND THE ISSUER WILL HAVE THE RIGHT TO DIRECT THE
PURCHASER TO TRANSFER THE ERISA LIMITED NOTES, OR ANY INTEREST THEREIN, AS
APPLICABLE, TO A PERSON WHO MEETS THE FOREGOING CRITERIA.
THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY PAYING AGENT WITH THE
APPLICABLE U.S. FEDERAL INCOME TAX CERTIFICATIONS (GENERALLY, AN INTERNAL
REVENUE SERVICE FORM W-9 (OR SUCCESSOR APPLICABLE FORM) IN THE CASE OF A
PERSON THAT IS A "UNITED STATES PERSON" WITHIN THE MEANING OF SECTION 7701(A)(30)
OF THE CODE OR AN APPLICABLE INTERNAL REVENUE SERVICE FORM W-8 (OR SUCCESSOR
APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS NOT A "UNITED STATES PERSON"
WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE) MAY RESULT IN U.S. FEDERAL
BACK-UP WITHHOLDING FROM PAYMENTS TO THE HOLDER IN RESPECT OF THIS NOTE.
THE NOTES REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT ("OID") THE ISSUE PRICE, TOTAL AMOUNT OF OID, ISSUE DATE AND YIELD TO
MATURITY MAY BE OBTAINED BY CONTACTING THE REGISTRAR.
BY ITS PURCHASE OR HOLDING OF ANY CLASS OF COMBINATION NOTES, OR ANY INTEREST
THEREIN, THE PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE
DEEMED TO HAVE REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND
THROUGHOUT THE PERIOD THAT IT HOLDS SUCH NOTE OR INTEREST THEREIN THAT IT WILL
TREAT EACH CLASS OF COMBINATION NOTES AS ITS RESPECTIVE COMPONENTS RATHER
THAN A SINGLE UNIT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES.
EACH HOLDER AND EACH BENEFICIAL OWNER OF A NOTE (OTHER THAN A CLASS F
SUBORDINATED NOTE), BY ACCEPTANCE OF SUCH NOTE, OR ITS INTEREST IN A NOTE
(OTHER THAN A CLASS F SUBORDINATED NOTE), AS THE CASE MAY BE, SHALL BE DEEMED
TO HAVE AGREED TO TREAT, AND SHALL TREAT, SUCH NOTE (OTHER THAN A CLASS F
SUBORDINATED NOTE) AS DEBT OF THE ISSUER FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES EXCEPT (X) AS OTHERWISE REQUIRED BY APPLICABLE LAW, (Y) TO THE EXTENT
A HOLDER MAKES A PROTECTIVE QEF ELECTION OR (Z) TO THE EXTENT THAT A HOLDER
FILES CERTAIN UNITED STATES TAX INFORMATION RETURNS REQUIRED OF ONLY CERTAIN
EQUITY OWNERS WITH RESPECT TO VARIOUS REPORTING REQUIREMENTS UNDER THE
CODE.
(g)
(h)
(i)
The purchaser will not, at any time, offer to buy or offer to sell the Rule 144A Notes by any form
of general solicitation or advertising, including, but not limited to, any advertisement, article,
notice or other communication published in any newspaper, magazine or similar medium or
broadcast over television or radio or seminar or meeting whose attendees have been invited by
general solicitations or advertising.
The purchaser is not purchasing the Rule 144A Notes with the intent or purpose of evading,
either alone or in conjunction with any other person, the provisions of the Investment Company
Act.
The purchaser is not purchasing such Rule 144A Notes with a view toward the resale,
distribution or other disposition thereof in violation of the Securities Act. It has such knowledge
and experience in financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Rule 144A Notes, and the purchaser and any accounts for which it
is acting are each able to bear the economic risk of its investment. The purchaser understands
that an investment in the Rule 144A Notes involves certain risks, including the risk of loss of all
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or a substantial part of its investment under certain circumstances. The purchaser has had
access to such financial and other information concerning the Issuer and the Rule 144A Notes
as it deemed necessary or appropriate in order to make an informed investment decision with
respect to its purchase of the Rule 144A Notes, including an opportunity to ask questions of,
and request information from, the Issuer.
(j)
(k)
(l)
(m)
In connection with the purchase of the Rule 144A Notes (provided that no such representation
is made with respect to the Investment Manager by any affiliate of the Investment Manager or
any purchaser over whose investment account the Investment Manager exercises discretionary
authority): (i) none of the Issuer, the Initial Purchaser or the Investment Manager is acting as a
fiduciary or financial or investment adviser for the purchaser; (ii) the purchaser is not relying (for
purposes of making any investment decision or otherwise) upon any advice, counsel or
representations (whether written or oral) of the Issuer, the Initial Purchaser or the Investment
Manager other than in this Prospectus for such Rule 144A Notes and any representations
expressly set forth in a written agreement with such party; (iii) none of the Issuer, the Initial
Purchaser or the Investment Manager has given to the purchaser (directly or indirectly through
any other person) any assurance, guarantee, or representation whatsoever as to the expected
or projected success, profitability, return, performance, result, effect, consequence, or benefit
(including legal, regulatory, tax, financial, accounting, or otherwise) as to an investment in the
Rule 144A Notes; (iv) the purchaser has consulted with its own legal, regulatory, tax, business,
investment, financial, and accounting advisers to the extent it has deemed necessary, and it
has made its own investment decisions (including decisions regarding the suitability of any
transaction pursuant to the Trust Deed) based upon its own judgement and upon any advice
from such advisers as it has deemed necessary and not upon any view expressed by the
Issuer, the Initial Purchaser or the Collateral Manager; (v) the purchaser has evaluated the
rates, prices or amounts and other terms and conditions of the purchase and sale of the Rule
144A Notes with a full understanding of all of the risks thereof (economic and otherwise), and it
is capable of assuming and willing to assume (financially and otherwise) those risks; and (vii)
the purchaser is a sophisticated investor.
Prospective purchasers are hereby notified that sellers of the Notes may be relying on the
exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.
With respect to the purchase, holding and disposition of any ERISA Debt Note, or any interest
therein, either (I) it is not an employee benefit plan as described in section 3(3) of ERISA and
subject to Title I of ERISA, or a plan as defined in section 4975(e)(1) of the Code that is subject
to Section 4975 of the Code, or a governmental, church, non-U.S. or other plan which is
subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions
of section 406 of ERISA or section 4975 of the Code, or any entity whose assets are treated as
assets of any such plan, or (II) its purchase and/or holding of an ERISA Debt Note, or any
interest therein, will not constitute or result in a non-exempt prohibited transaction under
section 406 of ERISA or section 4975 of the Code (or, in the case of a governmental, church,
non-U.S. or other plan, a non-exempt violation under any substantially similar federal, state,
local or non-U.S. law). Any purported transfer of an ERISA Debt Note, or any interest therein,
to a purchaser that does not comply with the requirements of this paragraph will be of no force
and effect and shall be null and void ab initio.
With respect to the ERISA Limited Notes, or any interest therein, the purchaser is either (1) not
a Benefit Plan Investor or (2) is an insurance company acting on behalf of its general account
and (A) it is not a Controlling Person, (B) as of the date it acquires and throughout the period it
holds the ERISA Limited Notes, or any interest therein, less than 25 per cent. of the assets of
such general account constitutes "plan assets" (as defined in the "plan asset regulation") for
purposes of ERISA and/or section 4975 of the Code, (C) it agrees that if, after its initial
acquisition of the ERISA Limited Notes, or any interest therein, at any time during any month,
25 per cent. or more of the assets of such general account constitute "plan assets", then such
insurance company shall, in a manner consistent with the restrictions on transfer set forth
herein, dispose of all of the ERISA Limited Notes, or any other class of equity interest in the
Issuer, and any interest therein, held in its general account by the end of the next following
month and (D) the acquisition and holding of the ERISA Limited Notes, or any interest therein,
will not constitute or result in a prohibited transaction under ERISA or section 4975 of the Code
which is not covered under PTCE 95-60 or some other applicable exemption or (3) if it is a
governmental, church, non-U.S. or other plan which is subject to any federal, state, local or
non-U.S. law substantially similar to the provision of Section 406 of ERISA or Section 4975 of
the Code, its purchase and holding of such ERISA Limited Notes will not constitute or result in
a non-exempt violation under any such substantially similar federal, state, local or non-U.S.
law. Any purported transfer of the ERISA Limited Notes, or any interest therein, to a purchaser
that does not comply with the requirements of this paragraph will be of no force and effect, shall
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e null and void ab initio and the Issuer will have the right to direct the purchaser to transfer the
ERISA Limited Notes, or any interest therein, as applicable, to a person who meets the
foregoing criteria.
(n)
(o)
(p)
(q)
Each holder and beneficial owner of a Rule 144 Note, by acceptance of its Rule 144 Note or its
interest in a Note, shall be deemed to understand and acknowledge that failure to provide the
Issuer, the Trustee or any Paying Agent with the applicable U.S. federal income tax
certifications (generally, a United States Internal Revenue Service Form W-9 (or successor
applicable form) in the case of a person that is a "United States person" within the meaning of
Section 7701(a)(30) of the Code or an appropriate United States Internal Revenue Service
Form W-8 (or successor applicable form) in the case of a person that is not a "United States
person" within the meaning of Section 7701(a)(30) of the Code) may result in U.S. federal
back-up withholding from payments in respect of such Note.
Each Non-U.S. Holder and beneficial owner of a Class A1 Note, a Class E Note or a Class F
Subordinated Note (including the Class F Subordinated Component of any applicable Class of
Combination Notes) that is acquiring, directly or in conjunction with affiliates, more than 33 per
cent. of the aggregate principal amount outstanding of any such Class of Notes will make, or
will be deemed to make, a representation to the effect that it is not an Affected Bank.
Each person purchasing Rule 144A Notes from the Initial Purchaser or through an Affiliate of
the Initial Purchaser acknowledges that (i) it has been afforded an opportunity to request from
the Issuer thereof and to review, and it has received, all additional information considered by it
to be necessary to verify the accuracy of the information herein; (ii) it has not relied on the
Initial Purchaser or any person affiliated with the Initial Purchaser in connection with its
investigation of the accuracy of the information contained in this Prospectus or its investment
decision; and (iii) no person has been authorised to give any information or to make any
representation concerning the Issuer or the Rule 144A Notes other than those contained in this
Prospectus and, if given or made, such other information or representation should not be relied
upon as having been authorised by the Issuer or the Initial Purchaser.
The purchaser acknowledges that the Issuer, the Registrar, the Initial Purchaser and their
respective Affiliates, and others will rely upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements. If it is acquiring the Rule 144A Notes for
the account of a QIB, it represents that it has sole investment discretion with respect to such
account and that it has full power to make the foregoing acknowledgements, representations
and agreements on behalf of such account.
Regulation S Notes
Each purchaser of Regulation S Notes will be deemed to have represented and agreed (or in the case
of a Class A1 Note shall be required to represent and agree) as follows:
(a)
(b)
(c)
The purchaser is located outside the United States and is not a U.S. Person or a U.S. resident.
The purchaser understands that the Regulation S Notes have not been and will not be
registered under the Securities Act and that the Issuer has not registered and will not register
under the Investment Company Act. It agrees, for the benefit of the Issuer, the Initial Purchaser
and any of their affiliates, that, if it decides to resell, pledge or otherwise transfer such
Regulation S Notes (or any beneficial interest or participation therein) purchased by it, any
offer, sale or transfer of such Regulation S Notes (or any beneficial interest or participation
therein) will be made in compliance with the Securities Act and only (i) to U.S. Person (A)(1) it
reasonably believes is a QIB that is not a broker-dealer that owns and invests on a
discretionary basis less than U.S. $25 million in securities of issuers that are not affiliated
persons of the dealer and is not a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of
Rule 144A or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the
assets of such a plan, if investment decisions with respect to the plan are made by the
beneficiaries of the plan, purchasing for its own account or for the account of a QIB in a
principal amount of not less than €250,000 for it and each such account, in a transaction that
meets the requirements of Rule 144A and takes delivery in the form of Rule 144A Note, and (B)
that constitutes a QP; or (ii) to a non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 (as applicable) under Regulation S.
The purchaser understands that pursuant to the terms of the Trust Deed, the Issuer has agreed
that the Regulation S Notes offered in reliance on Regulation S will bear the legend set forth
below, and, on issue, will be represented by one or more Regulation S Notes. The Regulation
S Notes may not at any time be held by or on behalf of U.S. Persons. Before any interest in a
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Regulation S Notes may be offered, resold, pledged or otherwise transferred to a person who
takes delivery in the form of an interest in a Rule 144A Notes, the transferor will be required to
provide the Trustee with a written certification (in the form provided in the Trust Deed) as to
compliance with the transfer restrictions.
THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE ISSUER HAS NOT
BEEN REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "INVESTMENT COMPANY ACT"). THE HOLDER HEREOF, BY PURCHASING THE
NOTES IN RESPECT OF WHICH THIS NOTE HAS BEEN ISSUED, AGREES FOR THE BENEFIT OF
THE ISSUER THAT THIS NOTE MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER, IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT IN A PRINCIPAL AMOUNT OUTSTANDING OF NOT
LESS THAN €100,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR WHICH IT IS
ACTING, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF
REGULATION S OF THE SECURITIES ACT IN A PRINCIPAL AMOUNT OUTSTANDING OF NOT
LESS THAN €100,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR WHICH IT IS
ACTING, AND IN THE CASE OF CLAUSES (1), TO A PURCHASER THAT (V) IS A QUALIFIED
PURCHASER FOR PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT, (W)
WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER (EXCEPT WHEN EACH
BENEFICIAL OWNER OF THE PURCHASER IS A QUALIFIED PURCHASER), (X) HAS RECEIVED
THE NECESSARY CONSENT FROM ITS BENEFICIAL OWNERS WHEN THE PURCHASER IS A
PRIVATE INVESTMENT COMPANY FORMED BEFORE APRIL 30, 1996, (Y) IS NOT A BROKER-
DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000
IN SECURITIES OF UNAFFILIATED ISSUERS AND (Z) IS NOT A PENSION, PROFIT SHARING OR
OTHER RETIREMENT TRUST FUND OR PLAN IN WHICH THE PARTNERS, BENEFICIARIES OR
PARTICIPANTS, AS APPLICABLE, MAY DESIGNATE THE PARTICULAR INVESTMENTS TO BE
MADE, AND IN A TRANSACTION THAT MAY BE EFFECTED WITHOUT LOSS OF ANY APPLICABLE
INVESTMENT COMPANY ACT EXEMPTION AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE
AND EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS
TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE
ISSUER, THE TRUSTEE OR ANY INTERMEDIARY. IN ADDITION TO THE FOREGOING, THE
ISSUER MAINTAINS THE RIGHT TO DIRECT THE RESALE OF ANY NOTES PREVIOUSLY
TRANSFERRED TO NON-PERMITTED HOLDERS (AS DEFINED IN THE TRUST DEED) IN
ACCORDANCE WITH AND SUBJECT TO THE TERMS OF THE TRUST DEED. EACH
TRANSFEROR OF THIS NOTE WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND IN THE TRUST DEED TO ITS TRANSFEREE.
EACH PURCHASER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN UNDERSTANDS
THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN THE
NOTES FROM ONE OR MORE BOOK ENTRY DEPOSITORIES.
TRANSFERS OF THIS NOTE OR OF PORTIONS OF THIS NOTE SHOULD BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE TRUST
DEED REFERRED TO HEREIN.
PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
PRINCIPAL AMOUNT OUTSTANDING OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF. ANY PERSON ACQUIRING THIS NOTE MAY
ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE REGISTRAR.
BY ITS PURCHASE OR HOLDING OF ANY CLASS A NOTES, CLASS B NOTES, CLASS C NOTES
OR CLASS D NOTES, OR ANY INTEREST THEREIN (THE "ERISA DEBT NOTES"), THE
PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE
PERIOD THAT IT HOLDS SUCH ERISA DEBT NOTE THAT EITHER (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN AS DESCRIBED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND SUBJECT TO TITLE I OF ERISA, OR A
PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") THAT IS SUBJECT TO SECTION 4975 OF THE CODE, OR A
GOVERNMENTAL, CHURCH, NON-U.S., OR OTHER PLAN WHICH IS SUBJECT TO ANY FEDERAL,
STATE, LOCAL LAW OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS
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OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, OR AN ENTITY WHOSE ASSETS
ARE TREATED AS ASSETS OF ANY SUCH PLAN OR (B) ITS PURCHASE AND/OR HOLDING OF
AN ERISA DEBT NOTE, OR ANY INTEREST THEREIN, WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN,
A NON-EXEMPT VIOLATION UNDER ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL
OR NON-U.S. LAW). ANY ACQUISITION OR TRANSFER OF AN ERISA DEBT NOTE IN VIOLATION
OF THE ABOVE RESTRICTIONS SHALL BE VOID AB INITIO.
BY ITS PURCHASE OR HOLDING OF A CLASS E NOTE OR CLASS F SUBORDINATED NOTE OR
COMBINATION NOTE, OR ANY INTEREST THEREIN (THE "ERISA LIMITED NOTES"), THE
PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE
PERIOD THAT IT HOLDS SUCH ERISA LIMITED NOTE THAT EITHER (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA, A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THAT IS SUBJECT TO
SECTION 4975 OF THE CODE, ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" BY REASON OF ANY SUCH PLAN'S INVESTMENT IN THE ENTITY OR A "BENEFIT PLAN
INVESTOR" AS SUCH TERM IS OTHERWISE DEFINED IN ANY REGULATIONS PROMULGATED
BY THE U.S. DEPARTMENT OF LABOR UNDER SECTION 3(42) OF ERISA OR (B) IT IS AN
INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) IT IS NOT A
PERSON WHO HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE
ASSETS OF THE ISSUER OR A PERSON WHO PROVIDES INVESTMENT ADVICE FOR A FEE
(DIRECT OR INDIRECT) WITH RESPECT TO SUCH ASSETS OR AN AFFILIATE OF SUCH A
PERSON, (II) AS OF THE DATE IT ACQUIRES AN ERISA LIMITED NOTE OR ANY INTEREST
THEREIN, LESS THAN 25 PER CENT. OF THE ASSETS OF SUCH GENERAL ACCOUNT
CONSTITUTES "PLAN ASSETS" (AS DEFINED IN THE "PLAN ASSETS REGULATION"), (III) IT
AGREES THAT IF, AFTER ITS INITIAL ACQUISITION OF AN ERISA LIMITED NOTE, OR ANY
INTEREST THEREIN, AT ANY TIME DURING ANY MONTH, 25 PER CENT. OR MORE OF THE
ASSETS OF SUCH GENERAL ACCOUNT CONSTITUTES "PLAN ASSETS", THEN SUCH
INSURANCE COMPANY SHALL, IN A MANNER CONSISTENT WITH THE RESTRICTIONS ON
TRANSFER SET FORTH HEREIN, DISPOSE OF ALL OF THE ERISA LIMITED NOTES, OR ANY
INTEREST THEREIN, HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING
MONTH AND (IV) THE ACQUISITION OR HOLDING OF SUCH ERISA LIMITED NOTE, OR ANY
INTEREST THEREIN, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WHICH IS NOT COVERED
UNDER PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 OR SOME OTHER APPLICABLE
EXEMPTION OR (C) IF IT IS A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, ITS
PURCHASE AND/OR HOLDING OF SUCH ERISA LIMITED NOTES WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT VIOLATION UNDER SUCH SUBSTANTIALLY SIMILAR FEDERAL,
STATE, LOCAL OR NON-U.S. LAW. ANY PURPORTED TRANSFER OF THE ERISA LIMITED
NOTES, OR ANY INTEREST THEREIN, TO A PURCHASER OR TRANSFEREE THAT DOES NOT
COMPLY WITH THE FOREGOING REQUIREMENTS WILL BE OF NO FORCE AND EFFECT, SHALL
BE NULL AND VOID AB INITIO AND THE ISSUER WILL HAVE THE RIGHT TO DIRECT THE
PURCHASER TO TRANSFER THE ERISA LIMITED NOTES, OR ANY INTEREST THEREIN, AS
APPLICABLE, TO A PERSON WHO MEETS THE FOREGOING CRITERIA.
THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY PAYING AGENT WITH THE
APPLICABLE U.S. FEDERAL INCOME TAX CERTIFICATIONS (GENERALLY, AN INTERNAL
REVENUE SERVICE FORM W-9 (OR SUCCESSOR APPLICABLE FORM)) IN THE CASE OF A
PERSON THAT IS A "UNITED STATES PERSON" WITHIN THE MEANING OF SECTION 7701(A)(30)
OF THE CODE OR AN APPLICABLE INTERNAL REVENUE SERVICE FORM W-8 (OR SUCCESSOR
APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS NOT A "UNITED STATES PERSON"
WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE) MAY RESULT IN U.S. FEDERAL
BACK-UP WITHHOLDING FROM PAYMENTS TO THE HOLDER IN RESPECT OF THIS NOTE.
THE NOTES REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT ("OID") THE ISSUE PRICE, TOTAL AMOUNT OF OID, ISSUE DATE AND YIELD TO
MATURITY MAY BE OBTAINED BY CONTACTING THE REGISTRAR.
BY ITS PURCHASE OR HOLDING OF ANY CLASS OF COMBINATION NOTES, OR ANY INTEREST
THEREIN, THE PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE
DEEMED TO HAVE REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND
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THROUGHOUT THE PERIOD THAT IT HOLDS SUCH NOTE OR INTEREST THEREIN THAT IT WILL
TREAT EACH CLASS OF COMBINATION NOTES AS ITS RESPECTIVE COMPONENTS RATHER
THAN A SINGLE UNIT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES.
EACH HOLDER AND EACH BENEFICIAL OWNER OF A NOTE (OTHER THAN A SUBORDINATED
NOTE), BY ACCEPTANCE OF SUCH NOTE, OR ITS INTEREST IN A NOTE (OTHER THAN A
SUBORDINATED NOTE), AS THE CASE MAY BE, SHALL BE DEEMED TO HAVE AGREED TO
TREAT, AND SHALL TREAT, SUCH NOTE (OTHER THAN A SUBORDINATED NOTE) AS DEBT OF
THE ISSUER FOR UNITED STATES FEDERAL INCOME TAX PURPOSES EXCEPT (X) AS
OTHERWISE REQUIRED BY APPLICABLE LAW, (Y) TO THE EXTENT A HOLDER MAKES A
PROTECTIVE QEF ELECTION OR (Z) TO THE EXTENT THAT A HOLDER FILES CERTAIN UNITED
STATES TAX INFORMATION RETURNS REQUIRED OF ONLY CERTAIN EQUITY OWNERS WITH
RESPECT TO VARIOUS REPORTING REQUIREMENTS UNDER THE CODE.
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
The purchaser is not purchasing such Regulation S Notes with a view to the resale, distribution
or other disposition thereof in violation of the Securities Act.
The purchaser is aware that the sale of Regulation S Notes to it is being made in reliance on
the exemption from registration provided by Regulation S.
The purchaser understands that the Regulation S Notes may not, at any time, be held by, or on
behalf of, U.S. Persons or U.S. residents.
The purchaser understands that an investment in the Regulation S Notes involves certain risks,
including the risk of loss of all or a substantial part of its investment under certain
circumstances. The purchaser has had access to such financial and other information
concerning the Issuer and the Regulation S Notes as it deemed necessary or appropriate in
order to make an informed investment decision with respect to its acquisition of the Regulation
S Notes, including an opportunity to ask questions of and request information from the Issuer.
In connection with the purchase of the Regulation S Notes (provided that no such
representation is made with respect to the Collateral Manager by any affiliate of the Collateral
Manager or any purchaser over whose investment account the Collateral Manager exercises
discretionary authority): (i) none of the Issuer, the Initial Purchaser or the Collateral Manager is
acting as a fiduciary or financial or investment adviser for the purchaser; (ii) the purchaser is
not relying (for purposes of making any investment decision or otherwise) upon any advice,
counsel or representations (whether written or oral) of the Issuer, the Initial Purchaser or the
Collateral Manager other than this Prospectus for such Regulation S Notes and any
representations expressly set forth in a written agreement with such party; (iii) none of the
Issuer, the Initial Purchaser or the Collateral Manager has given to the purchaser (directly or
indirectly through any other person) any assurance, guarantee, or representation whatsoever
as to the expected or projected success, profitability, return, performance, result, effect,
consequence, or benefit (including legal, regulatory, tax, financial, accounting, or otherwise) as
to an investment in the Regulation S Notes; (iv) the purchaser has consulted with its own legal,
regulatory, tax, business, investment, financial, and accounting advisers to the extent it has
deemed necessary, and it has made its own investment decisions (including decisions
regarding the suitability of any transaction pursuant to the Trust Deed) based upon its own
judgement and upon any advice from such advisers as it has deemed necessary and not upon
any view expressed by the Issuer, the Initial Purchaser or the Collateral Manager; (v) the
purchaser has evaluated that the rates, prices or amounts and other terms of the purchase and
sale of the Regulation S Notes with a full understanding of all of the risks thereof (economic
and otherwise), and it is capable of assuming and willing to assume (financially and otherwise)
those risks; and (vi) the purchaser is a sophisticated investor.
The purchaser will not, at any time, offer to buy or offer to sell the Regulation S Notes by any
form of general solicitation or advertising, including, but not limited to, any advertisement,
article, notice or other communication published in any newspaper, magazine or similar
medium or broadcast over television or radio or seminar or meeting whose attendees have
been invited by general solicitations or advertising.
The purchaser will provide notice to each person to whom it proposes to transfer any interest in
the Regulation S Notes of the transfer restrictions and representations set forth herein.
With respect to the purchase, holding and disposition of any ERISA Debt Note, or any interest
therein, either (I) it is not an employee benefit plan as described in section 3(3) of ERISA and
subject to Title I of ERISA, or a plan as defined in section 4975(e)(1) of the Code that is subject
to Section 4975 of the Code, or a governmental, church, non-U.S. or other plan which is
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subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions
of section 406 of ERISA or section 4975 of the Code, or any entity whose assets are treated as
assets of any such plan, or (II) its purchase and/or holding of an ERISA Debt Note, or any
interest therein, will not constitute or result in a non-exempt prohibited transaction under
section 406 of ERISA or section 4975 of the Code (or, in the case of a governmental, church,
non-U.S. or other plan, a non-exempt violation under any substantially similar federal, state,
local or non-U.S. law). Any purported transfer of an ERISA Debt Note, or any interest therein,
to a purchaser that does not comply with the requirements of this paragraph will be of no force
and effect and shall be null and void ab initio.
(l)
(m)
(n)
(o)
With respect to the ERISA Limited Notes, or any interest therein, the purchaser is either (1) not
a Benefit Plan Investor or (2) is an insurance company acting on behalf of its general account
and (A) it is not a Controlling Person, (B) as of the date it acquires and throughout the period it
holds the ERISA Limited Notes, or any interest therein, less than 25 per cent. of the assets of
such general account constitutes "plan assets" (as defined in the "plan asset regulation") for
purposes of ERISA and/or section 4975 of the Code, (C) it agrees that if, after its initial
acquisition of the ERISA Limited Notes, or any interest therein, at any time during any month,
25 per cent. or more of the assets of such general account constitute "plan assets", then such
insurance company shall, in a manner consistent with the restrictions on transfer set forth
herein, dispose of all of the ERISA Limited Notes, or any other class of equity interest in the
Issuer, and any interest therein, held in its general account by the end of the next following
month and (D) the acquisition and holding of the ERISA Limited Notes, or any interest therein,
will not constitute or result in a prohibited transaction under ERISA or section 4975 of the Code
which is not covered under PTCE 95-60 or some other applicable exemption or (3) if it is a
governmental, church, non-U.S. or other plan which is subject to any federal, state, local or
non-U.S. law substantially similar to the provision of Section 406 of ERISA or Section 4975 of
the Code, its purchase and holding of such ERISA Limited Notes will not constitute or result in
a non-exempt violation under any such substantially similar federal, state, local or non-U.S.
law. Any purported transfer of the ERISA Limited Notes, or any interest therein, to a purchaser
that does not comply with the requirements of this paragraph will be of no force and effect, shall
be null and void ab initio and the Issuer will have the right to direct the purchaser to transfer the
ERISA Limited Notes, or any interest therein, as applicable, to a person who meets the
foregoing criteria.
Each holder and beneficial owner of a Regulation S Note, by acceptance of its Regulation S
Note or its interest in a Regulation S Note, shall be deemed to understand and acknowledge
that failure to provide the Issuer, the Trustee or any Paying Agent with the applicable U.S.
federal income tax certifications (generally, a United States Internal Revenue Service Form W-
9 (or successor applicable form)) in the case of a person that is a "United States person" within
the meaning of Section 7701(a)(30) of the Code or an applicable United States Internal
Revenue Service Form W-8 (or successor applicable form) in the case of a person that is not a
"United States person" within the meaning of Section 7701(a)(30) of the Code) may result in
U.S. federal back-up withholding from payments in respect of such Note.
Each Non-U.S. Holder and beneficial owner of a Class A1 Note, a Class E Note or a Class F
Subordinated Note (including the Class F Subordinated Note Component of any applicable
Class of Combination Notes) that is acquiring, directly or in conjunction with affiliates, more
than 33 per cent. of the aggregate principal amount outstanding of any such Class of Notes will
make, or will be deemed to make, a representation to the effect that it is not an Affected Bank.
The purchaser acknowledges that the Issuer, the Registrar, the Initial Purchaser and their
affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements,
representations and agreements.
The AI Notes
Each prospective purchaser of AI Notes, by accepting delivery of this Prospectus, will have represented
and agreed that such person acknowledges that this Prospectus is personal to it and does not constitute
an offer to any other person or to the public generally to subscribe for or otherwise acquire Notes other
than pursuant to Rule 144A, Regulation D or another exemption from registration under the Securities
Act. Distribution of this Prospectus, or disclosure of any of its contents to any person other than such
offeree and those persons, if any, retained to advise it with respect thereto is unauthorised and any
disclosure of any of its contents, without the prior written consent of the Issuer, is prohibited.
Each purchaser of an AI Note will represent and agree as follows:
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(a) The purchaser is an institutional "accredited investor" within the meaning of sections 5.01(a), 1,
2, 3, 7 and 8 of Regulation D under the Securities Act, which is also a QP, purchasing for its
own account or for the account of an institutional "accredited investor" which is also a QP, in a
transaction exempt from registration under the Securities Act.
(b)
(c)
(d)
(e)
(f)
The purchaser is acquiring such Notes for its own account and in a principal amount of not less
than €250,000.
The purchaser understands that such AI Notes have not been and will not be registered under
the Securities Act, and may be reoffered, resold or pledged or otherwise transferred only to (a)
a QIB or an institutional "accredited investor" within the meaning of Sections 5.01(a) 1, 2, 3, 7
and 8 of Regulation D under the Securities Act, which, in either case, is also a QP or a
company owned exclusively by QPs and/or "knowledgeable employees" with respect to the
Issuer as defined in Rule 3c-5 of the Investment Company Act ("Knowledgeable
Employees"), purchasing for its own account or for the account of a QIB or an institutional
"accredited investor" which, in either case, is also a QP or a company owned exclusively by
QPs and/or "knowledgeable employees" with respect to the Issuer as defined in Rule 3c-5 of
the Investment Company Act, in a transaction exempt from registration under the Securities Act
and (b) in accordance with all applicable securities laws including the securities laws of any
state of the United States. The purchaser understands that the Issuer has not been registered
under the Investment Company Act. The purchaser understands and agrees that any
purported transfer of the AI Notes to a purchaser that does not comply with the requirements of
this paragraph (c) shall be null and void ab initio.
The purchaser is not purchasing such AI Notes with a view toward the resale, distribution or
other disposition thereof in violation of the Securities Act. The purchaser understands that an
investment in the AI Notes involves certain risks, including the risk of loss of its entire
investment in the AI Notes under certain circumstances. The purchaser has had access to
such financial and other information concerning the Issuer and the Notes as it deemed
necessary or appropriate in order to make an informed investment decision with respect to its
purchase of the AI Notes including an opportunity to ask questions of, and request information
from, the Issuer.
In connection with the purchase of the AI Notes: (a) none of the Issuer, the Initial Purchaser,
the Trustee, the Investment Manager or the Collateral Administrator is acting as a fiduciary or
financial or collateral manager for the purchaser; (b) the purchaser is not relying (for purposes
of making any investment decision or otherwise) upon any advice, counsel or representations
(whether written or oral) of the Issuer, the Initial Purchaser, the Trustee, the Investment
Manager or the Collateral Administrator other than in this Prospectus for such Notes and any
representations expressly set forth in a written agreement with such party; (c) none of the
Issuer, the Initial Purchaser, the Trustee, the Investment Manager or the Collateral
Administrator has given to the purchaser (directly or indirectly through any other person) any
assurance, guarantee or representation whatsoever as to the expected or projected success,
profitability, return, performance, result, effect, consequence or benefit (including legal,
regulatory, tax, financial, accounting or otherwise) as to an investment in the AI Notes; (d) the
purchaser has consulted with its own legal, regulatory, tax, business, investment, financial and
accounting advisors to the extent it has deemed necessary, and it has made its own investment
decisions (including decisions regarding the suitability of any transaction pursuant to the Trust
Deed) based upon its own judgement and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by the Issuer, the Initial Purchaser, the
Trustee, the Investment Manager or the Collateral Administrator; (e) the purchaser has
evaluated the rates, prices or amounts and other terms and conditions of the purchase and
sale of the AI Notes with a full understanding of all of the risks thereof (economic and
otherwise), and it is capable of assuming and willing to assume (financially and otherwise)
those risks; and (f) the purchaser is a sophisticated investor.
With respect to the purchase, holding and disposition of any ERISA Debt Note, or any interest
therein, either (I) it is not an employee benefit plan as described in section 3(3) of ERISA and
subject to Title I of ERISA, or a plan as defined in section 4975(e)(1) of the Code that is subject
to Section 4975 of the Code, or a governmental, church, non-U.S. or other plan which is
subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions
of section 406 of ERISA or section 4975 of the Code, or any entity whose assets are treated as
assets of any such plan, or (II) its purchase and/or holding of an ERISA Debt Note, or any
interest therein, will not constitute or result in a non-exempt prohibited transaction under
section 406 of ERISA or section 4975 of the Code (or, in the case of a governmental, church,
non-U.S. or other plan, a non-exempt violation under any substantially similar federal, state,
local or non-U.S. law). Any purported transfer of an ERISA Debt Note, or any interest therein,
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to a purchaser that does not comply with the requirements of this paragraph will be of no force
and effect and shall be null and void ab initio.
(g)
(h)
With respect to the ERISA Limited Notes, or any interest therein, the purchaser is either (1) not
a Benefit Plan Investor or (2) is an insurance company acting on behalf of its general account
and (A) it is not a Controlling Person, (B) as of the date it acquires and throughout the period it
holds the ERISA Limited Notes, or any interest therein, less than 25 per cent. of the assets of
such general account constitutes "plan assets" (as defined in the "plan asset regulation") for
purposes of ERISA and/or section 4975 of the Code, (C) it agrees that if, after its initial
acquisition of the ERISA Limited Notes, or any interest therein, at any time during any month,
25 per cent. or more of the assets of such general account constitute "plan assets", then such
insurance company shall, in a manner consistent with the restrictions on transfer set forth
herein, dispose of all of the ERISA Limited Notes, or any other class of equity interest in the
Issuer, and any interest therein, held in its general account by the end of the next following
month and (D) the acquisition and holding of the ERISA Limited Notes, or any interest therein,
will not constitute or result in a prohibited transaction under ERISA or section 4975 of the Code
which is not covered under PTCE 95-60 or some other applicable exemption or (3) if it is a
governmental, church, non-U.S. or other plan which is subject to any federal, state, local or
non-U.S. law substantially similar to the provision of section 406 of ERISA or section 4975 of
the Code, its purchase and holding of such ERISA Limited Notes will not constitute or result in
a non-exempt violation under any such substantially similar federal, state, local or non-U.S.
law. Any purported transfer of the ERISA Limited Notes, or any interest therein, to a purchaser
that does not comply with the requirements of this paragraph will be of no force and effect, shall
be null and void ab initio and the Issuer will have the right to direct the purchaser to transfer the
ERISA Limited Notes, or any interest therein, as applicable, to a person who meets the
foregoing criteria.
The purchaser understands that pursuant to the terms of the Trust Deed, the Issuer has agreed
that the AI Notes will bear the legend set forth below. The AI Note may not at any time be held
by or on behalf of U.S. Persons that are not institutional "accredited investors" within the
meaning of Sections 5.01(a), 1, 2, 3, 7 or 8 of Regulation D under the Securities Act which are
also QPs. Before any interest in an AI Note may be offered, resold, pledged or otherwise
transferred to a person who takes delivery in the form of an interest in a Regulation S Global
Certificate, the transferor will be required to provide the Trustee with a written certification (in
the form provided in the Trust Deed) as to compliance with the transfer restrictions.
THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE ISSUER HAS NOT
BEEN REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "INVESTMENT COMPANY ACT"). THE HOLDER HEREOF, BY PURCHASING THE
NOTES IN RESPECT OF WHICH THIS NOTE HAS BEEN ISSUED, AGREES FOR THE BENEFIT OF
THE ISSUER THAT THE NOTES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
EITHER (A) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER
THE SECURITIES ACT, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT OR (B) AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SECTION 5.01(a) 1, 2, 3, 7 OR 8 OF REGULATION D UNDER THE
SECURITIES ACT, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN
"ACCREDITED INVESTOR", IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT, WHICH, IN THE CASE OF (A) AND (B), IS ALSO A QUALIFIED PURCHASER
FOR THE PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT OR A
COMPANY OWNED EXCLUSIVELY BY QUALIFIED PURCHASERS AND/OR KNOWLEDGEABLE
EMPLOYEES WITH RESPECT TO THE ISSUER AS DEFINED IN RULE 3c5 OF THE INVESTMENT
COMPANY ACT, WHICH PURCHASER (a) WAS NOT FORMED FOR THE PURPOSE OF INVESTING
IN THE ISSUER (EXCEPT WHEN EACH BENEFICIAL OWNER OF THE PURCHASER IS EITHER A
QUALIFIED PURCHASER OR A KNOWLEDGEABLE EMPLOYEE WITH RESPECT TO THE ISSUER),
(b) HAS RECEIVED THE NECESSARY CONSENT FROM ITS BENEFICIAL OWNERS WHEN THE
PURCHASER IS A PRIVATE INVESTMENT COMPANY FORMED BEFORE 30 APRIL 1996, (c) IS
NOT A BROKER-DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN
U.S.$25,000,000 IN SECURITIES OF UNAFFILIATED ISSUERS AND (d) IS NOT A PENSION,
PROFIT SHARING OR OTHER RETIREMENT TRUST FUND OR PLAN IN WHICH THE PARTNERS,
BENEFICIARIES OR PARTICIPANTS, AS APPLICABLE, MAY DESIGNATE THE PARTICULAR
INVESTMENTS TO BE MADE, AND IN A TRANSACTION THAT MAY BE EFFECTED WITHOUT
LOSS OF ANY APPLICABLE INVESTMENT COMPANY ACT EXEMPTION; (2) IN A PRINCIPAL
AMOUNT OF NOT LESS THAN $250,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR
WHICH IT IS ACTING, AND (3) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
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THE STATES OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION. ANY
TRANSFER IN VIOLATION OF THE RESTRICTIONS SET FORTH HEREIN WILL BE OF NO FORCE
AND EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS
TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE
ISSUER, THE TRUSTEE OR ANY INTERMEDIARY. IN ADDITION TO THE FOREGOING, THE
ISSUER MAINTAINS THE RIGHT TO DIRECT THE RESALE OF ANY NOTES PREVIOUSLY
TRANSFERRED TO NON-PERMITTED HOLDERS (AS DEFINED IN THE TRUST DEED) IN
ACCORDANCE WITH AND SUBJECT TO THE TERMS OF THE TRUST DEED. EACH
TRANSFEROR OF THIS NOTE WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND IN THE TRUST DEED TO ITS TRANSFEREE.
EACH PURCHASER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN UNDERSTANDS
THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN THE
NOTES FROM ONE OR MORE BOOK ENTRY DEPOSITORIES.
TRANSFERS OF THIS NOTE OR OF PORTIONS OF THIS NOTE SHOULD BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE TRUST
DEED REFERRED TO HEREIN.
PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
PRINCIPAL AMOUNT OUTSTANDING OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF. ANY PERSON ACQUIRING THIS NOTE MAY
ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE REGISTRAR.
BY ITS PURCHASE OR HOLDING OF A CLASS E NOTE OR CLASS F SUBORDINATED NOTE OR
COMBINATION NOTE, OR ANY INTEREST THEREIN (THE "ERISA LIMITED NOTES"), THE
PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE
PERIOD THAT IT HOLDS SUCH ERISA LIMITED NOTE THAT EITHER (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA, A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THAT IS SUBJECT TO
SECTION 4975 OF THE CODE, ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" BY REASON OF ANY SUCH PLAN'S INVESTMENT IN THE ENTITY OR A "BENEFIT PLAN
INVESTOR" AS SUCH TERM IS OTHERWISE DEFINED IN ANY REGULATIONS PROMULGATED
BY THE U.S. DEPARTMENT OF LABOR UNDER SECTION 3(42) OF ERISA OR (B) IT IS AN
INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) IT IS NOT A
PERSON WHO HAS DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE
ASSETS OF THE ISSUER OR A PERSON WHO PROVIDES INVESTMENT ADVICE FOR A FEE
(DIRECT OR INDIRECT) WITH RESPECT TO SUCH ASSETS OR AN AFFILIATE OF SUCH A
PERSON, (II) AS OF THE DATE IT ACQUIRES AN ERISA LIMITED NOTE OR ANY INTEREST
THEREIN, LESS THAN 25 PER CENT. OF THE ASSETS OF SUCH GENERAL ACCOUNT
CONSTITUTES "PLAN ASSETS" (AS DEFINED IN THE "PLAN ASSETS REGULATION"), (III) IT
AGREES THAT IF, AFTER ITS INITIAL ACQUISITION OF AN ERISA LIMITED NOTE, OR ANY
INTEREST THEREIN, AT ANY TIME DURING ANY MONTH, 25 PER CENT. OR MORE OF THE
ASSETS OF SUCH GENERAL ACCOUNT CONSTITUTES "PLAN ASSETS", THEN SUCH
INSURANCE COMPANY SHALL, IN A MANNER CONSISTENT WITH THE RESTRICTIONS ON
TRANSFER SET FORTH HEREIN, DISPOSE OF ALL OF THE ERISA LIMITED NOTES, OR ANY
INTEREST THEREIN, HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING
MONTH AND (IV) THE ACQUISITION OR HOLDING OF SUCH ERISA LIMITED NOTE, OR ANY
INTEREST THEREIN, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WHICH IS NOT COVERED
UNDER PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 OR SOME OTHER APPLICABLE
EXEMPTION OR (C) IF IT IS A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE, ITS
PURCHASE AND/OR HOLDING OF SUCH ERISA LIMITED NOTES WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT VIOLATION UNDER SUCH SUBSTANTIALLY SIMILAR FEDERAL,
STATE, LOCAL OR NON-U.S. LAW. ANY PURPORTED TRANSFER OF THE ERISA LIMITED
NOTES, OR ANY INTEREST THEREIN, TO A PURCHASER OR TRANSFEREE THAT DOES NOT
COMPLY WITH THE FOREGOING REQUIREMENTS WILL BE OF NO FORCE AND EFFECT, SHALL
BE NULL AND VOID AB INITIO AND THE ISSUER WILL HAVE THE RIGHT TO DIRECT THE
PURCHASER TO TRANSFER THE ERISA LIMITED NOTES, OR ANY INTEREST THEREIN, AS
APPLICABLE, TO A PERSON WHO MEETS THE FOREGOING CRITERIA.
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THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY PAYING AGENT WITH THE
APPLICABLE U.S. FEDERAL INCOME TAX CERTIFICATIONS (GENERALLY, AN INTERNAL
REVENUE SERVICE FORM W-9 (OR SUCCESSOR APPLICABLE FORM)) IN THE CASE OF A
PERSON THAT IS A "UNITED STATES PERSON" WITHIN THE MEANING OF SECTION 7701(A)(30)
OF THE CODE OR AN APPLICABLE INTERNAL REVENUE SERVICE FORM W-8 (OR SUCCESSOR
APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS NOT A "UNITED STATES PERSON"
WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE) MAY RESULT IN U.S. FEDERAL
BACK-UP WITHHOLDING FROM PAYMENTS TO THE HOLDER IN RESPECT OF THIS NOTE.
THE NOTES REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT ("OID") THE ISSUE PRICE, TOTAL AMOUNT OF OID, ISSUE DATE AND YIELD TO
MATURITY MAY BE OBTAINED BY CONTACTING THE REGISTRAR.
BY ITS PURCHASE OR HOLDING OF ANY CLASS OF COMBINATION NOTES, OR ANY INTEREST
THEREIN, THE PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE
DEEMED TO HAVE REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND
THROUGHOUT THE PERIOD THAT IT HOLDS SUCH NOTE OR INTEREST THEREIN THAT IT WILL
TREAT EACH CLASS OF COMBINATION NOTES AS ITS RESPECTIVE COMPONENTS RATHER
THAN A SINGLE UNIT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES.
(i)
(j)
Each Non-U.S. Holder and beneficial owner of a Class A1 Note, a Class E Note or a Class F
Subordinated Note (including the Class F Subordinated Note Component of any applicable
Class of Combination Notes) that is acquiring, directly or in conjunction with affiliates, more
than 33 per cent. of the aggregate principal amount outstanding of any such Class of Notes will
make, or will be deemed to make, a representation to the effect that it is not an Affected Bank.
The purchaser acknowledges that the Issuer, the Registrar, the Initial Purchaser and their
affiliates, and others will rely upon the truth and accuracy of the foregoing acknowledgements,
representations and agreements.
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GENERAL INFORMATION
1. Clearing Systems
The Regulations S Notes (other than the Class A1 Notes, the AI Notes) have been accepted for
clearance through Euroclear and Clearstream, Luxembourg with the following Common Codes and
International Securities Identification Numbers, and the Rule 144A Notes have been accepted for
clearance through DTC with the following CUSIPs, International Securities Identification Numbers and
Common Codes:
Rule 144A
ISIN Common Code CUSIP Number
Class A2 Notes US67086AAB98 30768906 67086AAB9
Class A3 Notes US67086AAC71 30769015 67086AAC7
Class B Notes US67086AAD54 30769031 67086AAD5
Class C Notes US67086AAE38 30769058 67086AAE3
Class D Notes US67086AAF03 30769066 67086AAF0
Class E Notes US67086AAG85 30769082 67086AAG8
Class F Subordinated Notes US67086AAH68 30769112 67086AAH6
Class P Combination Notes US67086AAJ25 30769139 67086AAJ2
Regulation S
ISIN
Common Code
Class A2 Notes XS0305644485 30564448
Class A3 Notes XS0305644642 30564464
Class B Notes XS0305645292 30564529
Class C Notes XS0305645458 30564545
Class D Notes XS0305645706 30564570
Class E Notes XS0305646183 30564618
Class F Subordinated Notes XS0305648981 30564898
Class P Combination Notes XS0305649526 30564952
2. Listing
The listing of the offered Notes on the Official List of the Irish Stock Exchange is expected to be on or
about the Issue Date.
3. Consents and Authorisations
The Issuer has obtained all necessary consents, approvals and authorisations in The Netherlands (if
any) in connection with the issue and performance of the Notes. The issue of the Notes was authorised
by resolution of the board of Directors of the Issuer passed on 4 July 2007.
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4. No Significant or Material Change
There has been no significant change in the financial or trading position or prospects of the Issuer (other
than the acquisition of assets for the purpose of this transaction) since the date of its incorporation and
there has been no material adverse change in the financial position or prospects of the Issuer since the
date of its incorporation.
5. No Litigation
The Issuer is not involved, and has not been involved, in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the Issuer is
aware) which may have or have had since the date of its incorporation a significant effect on the Issuer’s
financial position.
6. Accounts
Since the date of its incorporation the Issuer has not commenced operations other than in respect of
entering into transactions relating to the acquisition of the Portfolio on or prior to the Issue Date and has
not produced accounts.
So long as any Note remains outstanding, copies of the most recent annual audited financial statements
of the Issuer can be obtained at the specified offices of the Registrar and Transfer and Paying Agents
during normal business hours. The Issuer will publish financial statements on an annual basis. The
Issuer will not prepare interim financial statements.
The Trust Deed requires the Issuer to provide written confirmation to the Trustee on an annual basis
that no Event of Default or other matter which is required to be brought to the Trustee’s attention has
occurred.
7. Documents Available
Copies of the following documents may be inspected (and, in the case of each of (i) to (l) below, will be
available for collection free of charge) at the specified offices of the Irish Transfer and Paying Agent and
any Paying Agent during usual business hours on any weekday (Saturdays, Sundays and public
holidays excepted) for the term of the Notes:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
the currently effective Memorandum and Articles of Association of the Issuer;
the Issue Deed;
the Subscription Agreement;
the Master Trust Terms (which includes the form of each Note of each Class);
the Master Agency Terms;
the Master Investment Management Terms;
the Class A1 Note Purchase Agreement;
each Derivative Agreement;
each Monthly Report;
each Payment Date Report;
each Class F Subordinated Noteholder Report;
the Master Pledge Terms (if applicable);
the Class P OAT Strips Pledge Agreement;
the Management Agreement; and
the Class F Subordinated Note Purchase Agreement.
Copies of the above documents will be available electronically.
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8. Enforceability of Judgments
The Issuer is a company incorporated under the laws of The Netherlands. None of the Managing
Directors of the Issuer are residents of the United States, and all or a substantial portion of the assets of
the Issuer and such persons are located outside of the United States. As a result, it may not be possible
for investors to effect service of process within the United States upon the Issuer or such persons or to
enforce against any of them in the United States courts judgments obtained in United States courts,
including judgments predicated upon civil liability provisions of the securities laws of the United States or
any State or territory within the United States.
9. Irish Transfer and Paying Agent
Deutsche International Corporate Services (Ireland) Limited has been appointed as Irish Transfer and
Paying Agent for the Issuer and in such capacity will perform transfer and paying agency services in
relation to the Notes as set out in the Agency Agreement provided however that such duties and
responsibilities shall be performed:
(a)
(b)
only with respect to Notes held by residents of Ireland; and
only in the event that no entity is performing the duties of principal paying agent in relation to
the Notes.
10. Expenses
The total expenses related to the admission to trading on the Irish Stock Exchange will be approximately
€6,532.40.
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INDEX OF DEFINED TERMS
Page
€.......................................................................................................................................................... x, 71
Account Bank..........................................................................................................................................47
Accounts .................................................................................................................................................48
ACCREDITED INVESTOR ...................................................................................................................267
Accrual Period.........................................................................................................................................48
Additional Termination Event ................................................................................................................220
Administrative Expenses.........................................................................................................................48
Affected Bank........................................................................................................................................236
Affected Collateral.................................................................................................................................120
Affiliate ....................................................................................................................................................49
Affiliated ..................................................................................................................................................49
Affiliates ................................................................................................................................................209
Agency Agreement .................................................................................................................................47
Agent ......................................................................................................................................................50
Agents.....................................................................................................................................................50
Aggregate Collateral Balance .................................................................................................................50
Aggregate Industry Equivalent Unit Score ............................................................................................199
Aggregate Principal Balance...................................................................................................................50
AI Definitive Certificates..........................................................................................................................16
AI Notes .......................................................................................................................................... 50, 252
Applicable Exchange Rate......................................................................................................................50
Applicable Margin ........................................................................................................................... 50, 128
Approved Credit Support Document .....................................................................................................220
Asset Swap Agreement ..........................................................................................................................50
Asset Swap Counterparty .......................................................................................................................51
Asset Swap Counterparty Principal Exchange Amount ..........................................................................51
Asset Swap Counterparty Termination Payment ....................................................................................51
Asset Swap Issuer Principal Exchange Amount .....................................................................................51
Asset Swap Issuer Replacement Payment .............................................................................................51
Asset Swap Issuer Termination Payment ...............................................................................................51
Asset Swap Obligation............................................................................................................................51
Asset Swap Replacement Receipt..........................................................................................................51
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Asset Swap Transaction ................................................................................................................. 51, 217
Asset Swap Transaction Exchange Rate................................................................................................51
Assignment .............................................................................................................................................51
Assignments ...........................................................................................................................................33
Assumed Profits.............................................................................................................................. 25, 232
Authorised Denomination........................................................................................................................51
Authorised Integral Amount.....................................................................................................................51
Authorised Officer ...................................................................................................................................51
Average Principal Balance....................................................................................................................198
Balance...................................................................................................................................................51
Bank......................................................................................................................................................213
Beneficial Owner...................................................................................................................................160
Benefit Plan Investors ...........................................................................................................................249
Bivariate Risk Table ..............................................................................................................................187
Break Cost ..............................................................................................................................................52
Bridge Loan...........................................................................................................................................174
Business Day..........................................................................................................................................52
Calculation Agent....................................................................................................................................47
Capital Commitment Registrar................................................................................................................48
Capital Gains ........................................................................................................................................233
Cash Settlement Amount ........................................................................................................................52
Cause ...................................................................................................................................................209
CCC Market Value ..................................................................................................................................52
CCC Obligations .....................................................................................................................................52
CDO Monitor.........................................................................................................................................197
CDO Monitor Test.................................................................................................................................195
CDOs ....................................................................................................................................................167
CFC ......................................................................................................................................................242
Class.................................................................................................................................................46, 53
Class A Break-even Default Rate .........................................................................................................196
Class A Coverage Tests .........................................................................................................................53
Class A Default Differential ...................................................................................................................196
Class A Interest Coverage Ratio.............................................................................................................54
Class A Interest Coverage Test ..............................................................................................................54
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Class A Noteholders ...............................................................................................................................54
Class A Notes ..................................................................................................................................... ii, 46
Class A Par Value Ratio .........................................................................................................................54
Class A Par Value Test...........................................................................................................................54
Class A Scenario Default Rate..............................................................................................................196
Class A1 Aggregate Interest Amount......................................................................................................54
Class A1 Allocated Amount.....................................................................................................................54
Class A1 Available Commitment.............................................................................................................54
Class A1 Available Commitment Period .................................................................................................54
Class A1 Available Commitment Termination Date ................................................................................54
Class A1 Collateralising Noteholder Account..........................................................................................54
Class A1 Commitment ............................................................................................................................54
Class A1 Commitment Fee ............................................................................................................. 54, 133
Class A1 Conduit Noteholder................................................................................................................215
Class A1 Day Count Fraction..................................................................................................................54
Class A1 Definitive Certificates.............................................................................................................155
Class A1 Dollar Rate of Interest...................................................................................................... 55, 132
Class A1 Downgrade Draw.....................................................................................................................55
Class A1 Drawing ...................................................................................................................................55
Class A1 Drawing Date...........................................................................................................................55
Class A1 Drawing Repayment Date................................................................................................ 55, 137
Class A1 Drawing Request ............................................................................................................. 55, 186
Class A1 Drawn Amount.........................................................................................................................55
Class A1 EURIBOR ................................................................................................................................55
Class A1 Euro Rate of Interest........................................................................................................ 55, 132
Class A1 Interest Amount ....................................................................................................... 55, 132, 214
Class A1 LIBOR......................................................................................................................................55
Class A1 Note Agent.........................................................................................................................48, 56
Class A1 Note Commitment Accrual Period.................................................................................... 56, 126
Class A1 Note Interest Period.................................................................................................................56
Class A1 Note Purchase Agreement .................................................................................... 2, 48, 56, 214
Class A1 Noteholder Collateral...............................................................................................................56
Class A1 Noteholder(s)...........................................................................................................................48
Class A1 Noteholders .............................................................................................................................56
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Class A1 Notes ................................................................................................................................... ii, 46
Class A1 Rating Criteria........................................................................................................................215
Class A1 Reference Bank.......................................................................................................................56
Class A1 Regulation S Definitive Certificate ................................................................................... 56, 155
Class A1 Rule 144A Definitive Certificate ....................................................................................... 56, 155
Class A1 Sterling Rate of Interest................................................................................................... 56, 132
Class A1 USD LIBOR .............................................................................................................................56
Class A1/A2 Note Redemption Method ..................................................................................................53
Class A1/A2 Pro Rata Application...........................................................................................................53
Class A2 Floating Rate of Interest .................................................................................................. 57, 127
Class A2 Margin....................................................................................................................................128
Class A2 Notes ................................................................................................................................... ii, 46
Class A3 Floating Rate of Interest .................................................................................................. 57, 127
Class A3 Margin....................................................................................................................................128
Class A3 Notes ................................................................................................................................... ii, 46
Class B Break-even Default Rate .........................................................................................................196
Class B Coverage Tests .........................................................................................................................57
Class B Default Differential ...................................................................................................................196
Class B Floating Rate of Interest .................................................................................................... 57, 127
Class B Interest Coverage Ratio.............................................................................................................57
Class B Interest Coverage Test ..............................................................................................................57
Class B Margin......................................................................................................................................128
Class B Noteholders ...............................................................................................................................57
Class B Notes ..................................................................................................................................... ii, 46
Class B Par Value Ratio .........................................................................................................................57
Class B Par Value Test...........................................................................................................................57
Class B Scenario Default Rate..............................................................................................................196
Class C Break-even Default Rate .........................................................................................................196
Class C Coverage Tests .........................................................................................................................57
Class C Default Differential...................................................................................................................196
Class C Default Loss Rate....................................................................................................................196
Class C Floating Rate of Interest ..........................................................................................................127
Class C Interest Coverage Ratio.............................................................................................................57
Class C Interest Coverage Test..............................................................................................................57
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Class C Margin .....................................................................................................................................128
Class C Noteholders ...............................................................................................................................57
Class C Notes..................................................................................................................................... ii, 46
Class C Par Value Ratio .........................................................................................................................57
Class C Par Value Test...........................................................................................................................57
Class D Break-even Default Rate .........................................................................................................196
Class D Coverage Tests .........................................................................................................................57
Class D Default Differential...................................................................................................................196
Class D Floating Rate of Interest .................................................................................................... 57, 127
Class D Interest Coverage Ratio.............................................................................................................57
Class D Interest Coverage Test..............................................................................................................57
Class D Margin .....................................................................................................................................128
Class D Noteholders ...............................................................................................................................57
Class D Notes..................................................................................................................................... ii, 46
Class D Par Value Ratio .........................................................................................................................58
Class D Par Value Test...........................................................................................................................58
Class D Scenario Default Rate .............................................................................................................196
Class E Break-even Default Rate .........................................................................................................196
Class E Coverage Tests .........................................................................................................................58
Class E Default Differential ...................................................................................................................196
Class E Floating Rate of Interest .................................................................................................... 58, 127
Class E Interest Coverage Ratio.............................................................................................................58
Class E Interest Coverage Test ..............................................................................................................58
Class E Margin......................................................................................................................................128
Class E Noteholders ...............................................................................................................................58
Class E Notes ..................................................................................................................................... ii, 46
Class E Par Value Ratio .........................................................................................................................58
Class E Par Value Test...........................................................................................................................58
Class E Scenario Default Rate..............................................................................................................197
Class F Subordinated Component ................................................................................................2, 46, 58
Class F Subordinated Note Purchase Agreement ..................................................................................58
Class F Subordinated Noteholder Report ....................................................................................... 58, 226
Class F Subordinated Noteholders .........................................................................................................58
Class F Subordinated Notes ............................................................................................................... ii, 46
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Class of Noteholders...............................................................................................................................53
Class of Notes.........................................................................................................................................52
Class P Combination Noteholders ..........................................................................................................58
Class P Combination Notes ................................................................................................................ ii, 46
Class P Combination Notes Coupon Interest.................................................................................. 58, 130
Class P OAT Custody Account ...............................................................................................................58
Class P OAT Relevant Sale Portion........................................................................................................58
Class P OAT Sale Formula.....................................................................................................................59
Class P OAT Security Component................................................................................................2, 46, 59
Class P OAT Strip Collateral...................................................................................................................59
Class P OAT Strips .............................................................................................................................3, 59
Class P OAT Strips Pledge Agreement ............................................................................................10, 59
Class P OAT Strips Sale Proceeds.........................................................................................................59
Class P Residual Interest................................................................................................................ 59, 130
Clearing Systems............................................................................................................................ 59, 159
Code ................................................................................................................. 44, 59, 258, 262, 263, 268
Collateral.................................................................................................................................................59
Collateral Acquisition Agreements ..........................................................................................................59
Collateral Administrator...........................................................................................................................47
Collateral Debt Obligation .................................................................................................................45, 59
Collateral Enhancement Account............................................................................................................60
Collateral Enhancement Obligation.........................................................................................................60
Collateral Enhancement Obligation Proceeds...................................................................................35, 60
Collateral Enhancement Obligation Proceeds Priority of Payments........................................................60
Collateral Quality Tests...........................................................................................................................60
Collateral Tax Event................................................................................................................................60
Collateralised Credit Default Swap .........................................................................................................61
Combination Notes ................................................................................................................................... ii
Commitment Amount ..............................................................................................................................61
Competent Authority .................................................................................................................................. i
Component .............................................................................................................................................61
Components............................................................................................................................................... i
Condition...................................................................................................................................................1
Conditions...........................................................................................................................................1, 61
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Controlling Class.....................................................................................................................................61
Coverage Test ........................................................................................................................................61
Coverage Tests.....................................................................................................................................207
Credit Impaired Obligation ......................................................................................................................61
Credit Improved Obligation .....................................................................................................................62
Credit Short Obligation......................................................................................................................39, 62
Credit Short Obligation Agreement .........................................................................................................62
Credit Short Obligation Counterparty ......................................................................................................62
Credit Short Obligation Counterparty Termination Payment ...................................................................63
Credit Short Obligation Issuer Replacement Payment............................................................................63
Credit Short Obligation Issuer Termination Payment ..............................................................................63
Credit Short Obligation Replacement Receipt.........................................................................................63
Currency Funding Mismatch ...................................................................................................................63
Currency Hedge Agreement ............................................................................................... 10, 63, 64, 217
Currency Hedge Counterparty ................................................................................................................63
Currency Hedge Counterparty Initial Exchange Payment.......................................................................63
Currency Hedge Counterparty Termination Payment .............................................................................63
Currency Hedge Issuer (Principal) Payment...........................................................................................63
Currency Hedge Issuer (Principal) Receipt.............................................................................................63
Currency Hedge Issuer Initial Exchange Payment..................................................................................63
Currency Hedge Issuer Replacement Payment......................................................................................64
Currency Hedge Issuer Termination Payment ........................................................................................64
Currency Hedge Replacement Receipt...................................................................................................64
Currency Hedge Transaction ..................................................................................................................64
Current Pay Obligation............................................................................................................................64
Current Portfolio....................................................................................................................................197
Custodian................................................................................................................................................47
Custody Account.....................................................................................................................................64
Debtor .....................................................................................................................................................67
Defaulted Asset Swap Issuer Termination Payment ...............................................................................64
Defaulted Credit Short Obligation Issuer Termination Payment..............................................................64
Defaulted Derivative Issuer Termination Payment ..................................................................................65
Defaulted Interest Rate Hedge Issuer Termination Payments ................................................................65
Defaulted Obligation ...............................................................................................................................65
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Defaulted Offsetting Credit Default Swap Issuer Termination Payment..................................................65
Defaulting Class A1 Noteholder..............................................................................................................66
Deferrable Obligation ..............................................................................................................................66
Deferred Interest............................................................................................................................. 66, 127
Deferring Obligation ................................................................................................................................66
Definitive Certificate ................................................................................................................................66
Definitive Certificates ............................................................................................................................154
Definitive Exchange Date......................................................................................................................157
Delayed Drawdown Obligation................................................................................................................66
Delayed Settlement Compensation.........................................................................................................66
Deliverable Obligation.............................................................................................................................66
Derivative Agreement .............................................................................................................................66
Derivative Counterparty ..........................................................................................................................66
Derivative Counterparty Downgrade Collateral .......................................................................................67
Derivative Counterparty Downgrade Collateral Account .........................................................................67
Derivative Counterparty Termination Payments......................................................................................67
Derivative Issuer Replacement Payments ..............................................................................................67
Derivative Issuer Termination Payments.................................................................................................67
Derivative Replacement Receipts...........................................................................................................67
Derivative Termination Account ..............................................................................................................67
Derivative Transaction ............................................................................................................................67
Determination Date .................................................................................................................................67
Deutsche Bank......................................................................................................................................213
Deutsche Bank Group...........................................................................................................................213
DIP Loan.................................................................................................................................................67
Direct Participants.................................................................................................................................159
Discount Obligation.................................................................................................................................67
Distribution..............................................................................................................................................68
Diversity Score......................................................................................................................................198
Dollar Collateral Debt Obligation............................................................................................... 36, 68, 181
Dollar Denominated Drawing ...................................................................................................... 2, 68, 214
Dollar Funding Mismatch ........................................................................................................................68
Dollar Interest Account............................................................................................................................68
Dollar Interest Proceeds .........................................................................................................................68
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Dollar Margin...........................................................................................................................................68
Dollar Payment Account .........................................................................................................................68
Dollar Principal Account..........................................................................................................................68
Dollar Principal Proceeds........................................................................................................................68
Dollar Unfunded Reserve Account..........................................................................................................68
Dollars....................................................................................................................................................... x
DTC .......................................................................................................................................... 40, 68, 258
DTC Custodian .....................................................................................................................................160
Due Period..............................................................................................................................................68
Dutch Account.........................................................................................................................................68
Dutch Ineligible Securities.......................................................................................................................68
Effective Date..........................................................................................................................................69
Effective Date Rating Event ....................................................................................................................69
Effective Date Requirements ..................................................................................................................69
Eligibility Criteria ............................................................................................................................. 69, 171
Eligible Investments ................................................................................................................................69
Eligible Investments Minimum Long-Term Rating...................................................................................70
Eligible Investments Minimum Short-Term Rating ..................................................................................70
Enforcement Action......................................................................................................................... 71, 143
Enforcement Event .................................................................................................................................71
Enforcement Threshold Determination ........................................................................................... 24, 143
Equivalent Unit Score ...........................................................................................................................199
ERISA ....................................................................................................... 44, 71, 248, 258, 262, 263, 268
ERISA Debt Notes ................................................................................................................ 250, 258, 262
ERISA Limited Notes .................................................................................................... 249, 258, 263, 268
EUR ........................................................................................................................................................71
EURIBOR................................................................................................................................................71
Euro .................................................................................................................................................... x, 71
Euro Collateral Debt Obligations.............................................................................................................71
Euro Denominated Drawing..............................................................................................................2, 214
Euro Denominated Drawings ..................................................................................................................71
Euro Interest Account .............................................................................................................................71
Euro Interest Proceeds ...........................................................................................................................71
Euro Margin ............................................................................................................................................71
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Euro Payment Account ...........................................................................................................................71
Euro Principal Account............................................................................................................................71
Euro Principal Proceeds .........................................................................................................................71
Euro Unfunded Reserve Account............................................................................................................71
Euro Unused Proceeds Interest Account ................................................................................................71
Euro Unused Proceeds Principal Account ..............................................................................................71
Euroclear Account...................................................................................................................................40
Euroclear Pledge Agreement............................................................................................................40, 71
Euros ......................................................................................................................................................71
Euro-zone ...............................................................................................................................................71
Event of Default .............................................................................................................................. 71, 140
Events of Default.....................................................................................................................................71
Exchange Act............................................................................................................................................ x
Exchange Agent......................................................................................................................................47
Exchange Class....................................................................................................................................158
Exchanged Equity Security .....................................................................................................................71
Exchanged Global Certificate................................................................................................................157
Expected Net Proceeds ........................................................................................................................134
Expenses ..............................................................................................................................................211
Extraordinary Resolution.........................................................................................................................71
Finance Lease ......................................................................................................................................173
Financed Amount....................................................................................................................................71
Financed Amount Fee Letter...................................................................................................................72
Financed Amount Interest.......................................................................................................................72
Financed Amount Periodic Payment.......................................................................................................72
Financed Amount Threshold...................................................................................................................72
Financial Regulator .................................................................................................................................. iii
Fixed Rate Collateral Debt Obligation...................................................................................................204
Floating Interest Amount.......................................................................................................................129
Floating Rate Collateral Debt Obligation......................................................................................... 72, 204
Floating Rate Notes ..........................................................................................................................36, 72
Floating Rate of Interest..........................................................................................................................72
Foreign Investor ....................................................................................................................................234
Form-Approved Asset Swap ...................................................................................................................72
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Form-Approved Credit Short Obligation..................................................................................................72
Form-Approved Offsetting Credit Default Swap......................................................................................72
Form-Approved Synthetic Security .........................................................................................................73
Foundation............................................................................................................................................166
FSA.......................................................................................................................................................167
FSMA..............................................................................................................................................viii, 253
FSSA ....................................................................................................................................................... vi
Funded Amount ......................................................................................................................................73
FX Conversion Provisions.......................................................................................................................73
German Disbursing Agent............................................................................................................... 24, 232
German Investor ...................................................................................................................................232
Global Certificates.................................................................................................................................154
Harris Trust ...........................................................................................................................................249
Hedge Counterparty........................................................................................................................ 73, 219
High Yield Bond ......................................................................................................................................73
holders ....................................................................................................................................................78
IFSRA ........................................................................................................................................................ i
Implied Moody’s Rating.........................................................................................................................206
Incentive Investment Management Fee ..................................................................................................73
Incentive Investment Management Fee IRR Threshold ..........................................................................73
Indemnified Party..........................................................................................................................211, 212
Indemnifying Party ........................................................................................................................211, 212
Indirect Participants ..............................................................................................................................159
Individual Third Party Credit Exposure Limit .........................................................................................188
Industry Diversity Score ........................................................................................................................199
Initial Class A1 Noteholder................................................................................................................2, 214
Initial Investment Period..........................................................................................................................73
Initial Purchaser ........................................................................................................................ 48, 73, 252
Initial Rate of Exchange ..........................................................................................................................73
Initial Rating ............................................................................................................................................73
Initial Rating Event ................................................................................................................................221
Insolvency Law .....................................................................................................................................141
Institutional Investors .......................................................................................................................vii, 254
Institutionelle Anleger.............................................................................................................................. vii
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Interest Accounts ....................................................................................................................................73
Interest Accrual Period............................................................................................................................73
Interest Amount.......................................................................................................................................74
Interest Coverage Amount ......................................................................................................................74
Interest Coverage Ratio ..........................................................................................................................75
Interest Coverage Test ...........................................................................................................................75
Interest Determination Date ............................................................................................................ 75, 127
Interest Proceeds....................................................................................................................................75
Interest Proceeds Priority of Payments...................................................................................................76
Interest Rate Hedge Agreement .............................................................................................................76
Interest Rate Hedge Counterparty ..........................................................................................................76
Interest Rate Hedge Counterparty Termination Payment .......................................................................76
Interest Rate Hedge Issuer Termination Payment ..................................................................................76
Interest Rate Hedge Replacement Payment...........................................................................................76
Interest Rate Hedge Replacement Receipt.............................................................................................76
Interest Rate Hedge Transaction ............................................................................................................76
Intermediary Obligation...........................................................................................................................76
Internal Rate of Return............................................................................................................................76
Investment Company Act................................................................................................ 76, 257, 262, 267
Investment Grade ...................................................................................................................................76
Investment Management Agreement ......................................................................................................47
Investment Management Fee .................................................................................................................76
Investment Manager .................................................................................................................... i, 47, 167
Investment Manager Advance ................................................................................................................76
Investment Manager Breach.................................................................................................................212
Investment Manager Breaches .............................................................................................................211
Investment Tax Act .................................................................................................................................24
Investors Subject to the Investment Tax Act.........................................................................................232
Irish Stock Exchange ..............................................................................................................................76
Irish Transfer and Paying Agent..............................................................................................................47
IRS.......................................................................................................................................... 27, 228, 234
Issue Date............................................................................................................................................ i, 76
Issue Deed..............................................................................................................................................46
Issue Price ............................................................................................................................................234
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Issuer ................................................................................................................................................... i, 46
Issuer Shares........................................................................................................................................165
JPMorgan Chase ....................................................................................................................................43
JPMorgan Partners .................................................................................................................................43
Key Personnel Event ............................................................................................................................208
lender liability ..........................................................................................................................................38
Liabilities ...............................................................................................................................................211
Lower-Tier PFICs..................................................................................................................................243
Management Agreement ..................................................................................................................48, 77
Management Criteria Annex ...................................................................................................................47
Managing Director...................................................................................................................................77
Market Value................................................................................................................................... 77, 134
Master Agency Terms.............................................................................................................................47
Master Investment Management Terms .................................................................................................47
Master Trust Terms.................................................................................................................................46
Maturity Date...........................................................................................................................................77
Measurement Date .................................................................................................................................77
Mezzanine Obligation .............................................................................................................................77
Minimum Denomination ..........................................................................................................................77
Minimum Reporting Requirements.................................................................................................. 25, 232
Minimum Weighted Average Additional PIK Interest.............................................................................202
Minimum Weighted Average Spread ....................................................................................................202
Minimum Weighted Average Spread Test ............................................................................................202
Monthly Report................................................................................................................................ 77, 223
Moody’s................................................................................................................................................ i, 78
Moody’s Collateral Value ........................................................................................................................78
Moody’s Maximum Weighted Average Rating Factor Test ...................................................................201
Moody’s Minimum Diversity Test ..........................................................................................................198
Moody’s Minimum Weighted Average Recovery Rate Test ..................................................................202
Moody’s Rating .....................................................................................................................................205
Moody’s Rating Factor ..........................................................................................................................201
Moody’s Recovery Rate.................................................................................................................. 78, 202
Moody’s Test Matrices ..........................................................................................................................194
Moody’s Weighted Average Rating Factor............................................................................................201
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Moody's Weighted Average Recovery Rate..........................................................................................202
New York Business Day .......................................................................................................................162
Non-Call Period.......................................................................................................................................78
Non-Euro Account...................................................................................................................................78
Non-Euro Obligation .........................................................................................................................10, 78
Non-Permitted Holder .......................................................................................................................45, 94
Non-U.S. Dollar Currency .....................................................................................................................239
non-U.S. Holder ....................................................................................................................................246
Note Payment Sequence ........................................................................................................................78
Note Tax Event .......................................................................................................................................79
Noteholders.............................................................................................................................................78
Notes ................................................................................................................................................... i, 46
Notice of Default ...................................................................................................................................141
Obligor ....................................................................................................................................................79
Obligor Principal Balance......................................................................................................................198
Octagon ................................................................................................................................................167
Offer........................................................................................................................................................79
Offering ..................................................................................................................................................... v
Offsetting Credit Default Swap................................................................................................ 79, 185, 221
Offsetting Credit Default Swap Agreement .............................................................................................79
Offsetting Credit Default Swap Counterparty ..........................................................................................79
Offsetting Credit Default Swap Counterparty Termination Payment .......................................................79
Offsetting Credit Default Swap Issuer Replacement Payment................................................................79
Offsetting Credit Default Swap Issuer Termination Payment ..................................................................79
Offsetting Credit Default Swap Obligation...............................................................................................80
Offsetting Credit Default Swap Replacement Receipt.............................................................................80
OID ....................................................................................................................................... 237, 263, 269
Ordinary Resolution ................................................................................................................................80
Outstanding.............................................................................................................................................80
over-the-counter transaction ........................................................................................................... 24, 231
Par Value Ratio.......................................................................................................................................80
Par Value Test ........................................................................................................................................80
Par Value Test Excess Adjustment Amount............................................................................................80
Pari Passu Provisions ..................................................................................................................... 80, 104
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Participants ...........................................................................................................................................159
Participation ............................................................................................................................................80
Participation Agreement..........................................................................................................................80
Participations ..........................................................................................................................................33
Paying Agents.........................................................................................................................................47
Payment Accounts ..................................................................................................................................80
Payment Date .........................................................................................................................................80
Payment Date Report ..................................................................................................................... 81, 224
Permitted Class P Combination Coupon.................................................................................................81
Person ....................................................................................................................................................81
PFIC......................................................................................................................................................241
Physical Settlement Amount ...................................................................................................................81
Plan Assets Regulation.........................................................................................................................248
Plans............................................................................................................................................... 44, 248
Portfolio...................................................................................................................................................81
portfolio interest exemption...................................................................................................................236
Portfolio Profile Tests..............................................................................................................................81
Portfolio Weighted Average Life...................................................................................................... 81, 204
Portfolio Weighted Average Maturity.....................................................................................................204
Post Enforcement Priority of Payments ................................................................................................144
Post-Enforcement Priority of Payments ..................................................................................................81
Pre-Enforcement Priority of Payments..........................................................................................6, 81, 96
Presentation Date ...................................................................................................................................81
Principal Account ....................................................................................................................................81
Principal Amount Outstanding.................................................................................................................81
Principal Balance ....................................................................................................................................82
Principal Paying Agent............................................................................................................................47
Principal Proceeds ..................................................................................................................................82
Principal Proceeds Priority of Payments .................................................................................................83
Priorities of Payment...............................................................................................................................83
Pro Rata..................................................................................................................................................83
Pro Rated Obligations.............................................................................................................................83
Proceedings..........................................................................................................................................152
Project Finance Loan ............................................................................................................................174
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Proposed Portfolio ................................................................................................................................197
Prospectus Directive .................................................................................................................................. i
Prospectus Regulations ........................................................................................................................... iii
PTCE 95-60 ..........................................................................................................................................249
Purchased Accrued Interest....................................................................................................................83
Purposely Deferring Obligation ...............................................................................................................83
Put Option...............................................................................................................................................83
Put Option Counterparty .........................................................................................................................83
QBUs ............................................................................................................................................228, 235
QEF ......................................................................................................................................................241
QEF Information......................................................................................................................................26
QIB.................................................................................................................................................. 83, 256
QIB/QP....................................................................................................................................................83
QIBs........................................................................................................................................................15
QP................................................................................................................................................... 83, 256
QPs.........................................................................................................................................................15
qualified portion.....................................................................................................................................242
Qualified Stated Interest .......................................................................................................................237
Qualifying Country ..................................................................................................................................83
Ramp-Up Interim Targets......................................................................................................................170
Rated Balance ..................................................................................................................................2, 164
Rated Notes............................................................................................................................................83
Rating Agencies......................................................................................................................................... i
Rating Agency.........................................................................................................................................83
Rating Agency Confirmation ...................................................................................................................84
Rating Confirmation Plan ................................................................................................................ 84, 171
Rating Requirement ................................................................................................................................84
Receiver................................................................................................................................................141
Record Date..........................................................................................................................................139
Redemption Date....................................................................................................................................84
Redemption Determination Date...........................................................................................................134
Redemption Notice .................................................................................................................................85
Redemption Price ...................................................................................................................................85
Redemption Threshold Amount ..............................................................................................................85
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Reference Banks ............................................................................................................................ 85, 128
Reference Entity ............................................................................................................................. 85, 182
Reference Obligation ..............................................................................................................................85
Register.............................................................................................................................................85, 93
Registered Notes ....................................................................................................................................93
Registrar .................................................................................................................................................47
Regulation S ...........................................................................................................................................85
Regulation S Global Certificate....................................................................................................... 16, 154
Regulation S Global Certificates .......................................................................................................16, 85
Regulation S Notes .................................................................................................................................85
Reinvestment Criteria .............................................................................................................................85
Reinvestment Diversion Ratio.................................................................................................................86
Reinvestment Diversion Test ..................................................................................................................86
Reinvestment Period...............................................................................................................................86
Related CP Issuer.................................................................................................................................215
Relevant Date .........................................................................................................................................86
Relevant Persons..................................................................................................................................... iii
Replacement Asset Swap Agreement ....................................................................................................86
Replacement Credit Short Obligation......................................................................................................86
Replacement Currency Hedge Agreement .............................................................................................86
Replacement Derivative Agreement .......................................................................................................86
Replacement Interest Rate Hedge Agreement .......................................................................................86
Replacement Offsetting Credit Default Swap..........................................................................................86
Replacement Rating Agency...................................................................................................................83
Report .....................................................................................................................................................86
Required Collateral Amount..................................................................................................................221
Resolution...............................................................................................................................................86
Revolving Security ..................................................................................................................................87
Risk Factors............................................................................................................................................18
RSA ......................................................................................................................................................... iv
Rule 144A ................................................................................................................................. 15, 87, 256
Rule 144A Global Certificate..................................................................................................... 16, 87, 154
Rule 144A Global Certificates.................................................................................................................16
Rule 144A Notes.....................................................................................................................................87
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S&P...................................................................................................................................................... i, 87
S&P Break-even Rate Cases................................................................................................................190
S&P CDO Monitor.................................................................................................................................163
S&P Class A Recovery Rate.................................................................................................................198
S&P Class A Weighted Average Recovery Rate ..................................................................................197
S&P Class B Recovery Rate.................................................................................................................198
S&P Class B Weighted Average Recovery Rate ..................................................................................197
S&P Class C Recovery Rate.................................................................................................................198
S&P Class C Weighted Average Recovery Rate ..................................................................................198
S&P Class D Recovery Rate.................................................................................................................198
S&P Class D Weighted Average Recovery Rate ..................................................................................198
S&P Class E Recovery Rate.................................................................................................................198
S&P Class E Weighted Average Recovery Rate ..................................................................................198
S&P Collateral Value ..............................................................................................................................87
S&P Minimum Weighted Average Recovery Rate Test ........................................................................197
S&P Priority Category .............................................................................................................................87
S&P Rating ...........................................................................................................................................204
S&P Recovery Rate ................................................................................................................................87
S&P Tests Matrix ..................................................................................................................................190
Sale Proceeds.........................................................................................................................................87
Scheduled Currency Hedge (Income) Payment......................................................................................88
Scheduled Periodic Asset Swap Counterparty Payment ........................................................................88
Scheduled Periodic Asset Swap Issuer Payment ...................................................................................88
Scheduled Periodic Currency Hedge Counterparty Payment .................................................................88
Scheduled Periodic Interest Rate Hedge Counterparty Payments..........................................................88
Scheduled Periodic Interest Rate Hedge Issuer Payments ....................................................................88
Scheduled Periodic Issuer Credit Short Obligation Payment ..................................................................89
Scheduled Periodic Issuer Offsetting Credit Default Swap Payment ......................................................89
Scheduled Principal Proceeds ................................................................................................................89
SDFS ....................................................................................................................................................161
SEC ........................................................................................................................................................44
Secured Credit Linked Note..................................................................................................................182
Secured Party .........................................................................................................................................89
Secured Senior Loan ..............................................................................................................................89
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Securities Act.................................................................................................................. 89, 257, 262, 267
Securities and Exchange Law...............................................................................................................254
Selling Institution...............................................................................................................................33, 89
Senior Expenses Cap .............................................................................................................................89
Senior Investment Management Fee ......................................................................................................89
Senior Investment Management Fee Cap ..............................................................................................90
Senior Loan.............................................................................................................................................90
Senior Notes ....................................................................................................................................... ii, 46
Senior Unsecured Debt Security...........................................................................................................197
Special Redemption........................................................................................................................ 90, 136
Special Redemption Amount........................................................................................................... 90, 136
Special Redemption Date ............................................................................................................... 90, 136
Spot Rate................................................................................................................................................90
Stabilising Manager .................................................................................................................................. x
Stated Maturity........................................................................................................................................90
Sterling Collateral Debt Obligation ............................................................................................ 36, 90, 181
Sterling Denominated Drawing .........................................................................................................2, 214
Sterling Denominated Drawings..............................................................................................................90
Sterling Funding Mismatch......................................................................................................................90
Sterling Interest Account.........................................................................................................................90
Sterling Interest Proceeds.......................................................................................................................90
Sterling Margin........................................................................................................................................90
Sterling Payment Account.......................................................................................................................90
Sterling Principal Account .......................................................................................................................90
Sterling Principal Proceeds.....................................................................................................................90
Sterling Unfunded Reserve Account .......................................................................................................90
Structured Finance Obligation.................................................................................................................90
Subordinated Debt Security ..................................................................................................................197
Subordinated Investment Management Fee ...........................................................................................90
subpart F income ..................................................................................................................................242
Subscription Agreement..........................................................................................................................48
Subsequent Rating Event .....................................................................................................................221
Substitute Collateral Debt Obligation ......................................................................................................91
SVTs .........................................................................................................................................................3
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Swap Rate ............................................................................................................................................204
Synthetic Collateral .................................................................................................................................91
Synthetic Collateral Account ...................................................................................................................91
Synthetic Counterparty ...........................................................................................................................91
Synthetic Security ...................................................................................................................................91
Target Par Amount.................................................................................................................... 11, 92, 170
TARGET System ....................................................................................................................................92
Tax Structure ........................................................................................................................................... iv
Tax Treatment.......................................................................................................................................... iv
Tax-Exempt U.S. Holders .....................................................................................................................245
Termination Payment............................................................................................................................220
Third Party Credit Support Document ...................................................................................................221
Third Party Exposure ............................................................................................................................188
Transaction Documents ..........................................................................................................................92
Transaction-Specific Cash Flow Model.................................................................................................163
Transfer Agent ........................................................................................................................................47
Trust Collateral......................................................................................................................................120
Trust Deed ........................................................................................................................................... i, 46
Trustee................................................................................................................................................. i, 46
Trustee Fees and Expenses ...................................................................................................................92
U.S. business........................................................................................................................................235
U.S. GAAP............................................................................................................................................213
U.S. Holder ...................................................................................................................................228, 234
U.S. Person.......................................................................................................................................45, 93
U.S. Source Income................................................................................................................................93
U.S. Trade or Business...........................................................................................................................27
U.S.$......................................................................................................................................................... x
Uncollateralised CLN ..............................................................................................................................92
Underlying Instrument.............................................................................................................................92
Unfunded Amount ...................................................................................................................................92
Unfunded Reserve Accounts ..................................................................................................................92
Unscheduled Principal Proceeds ............................................................................................................92
Unsecured Senior Loan ..........................................................................................................................92
Unused Proceeds Accounts....................................................................................................................93
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Unused Proceeds Interest Account.........................................................................................................93
Unused Proceeds Principal Account.......................................................................................................93
Weighted Average Maturity Test...........................................................................................................204
Weighted Average Mezzanine Additional PIK Interest..........................................................................203
Weighted Average Spread....................................................................................................................202
Whole Business Securitisations..............................................................................................................93
Withholding Tax Event ............................................................................................................................93
Written Resolution...................................................................................................................................93
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REGISTERED OFFICE OF THE ISSUER
OCI Euro Fund I B.V.
Herengracht 450
1017 CA Amsterdam, The Netherlands
INVESTMENT MANAGER
Octagon Credit Investors (UK) Ltd
1 Liverpool Street
London EC2M 7QD
COLLATERAL ADMINISTRATOR,
CALCULATION AGENT, PRINCIPAL PAYING
AGENT, EXCHANGE AGENT, ACCOUNT BANK
AND CUSTODIAN
Deutsche Bank AG, London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
TRUSTEE
Deutsche Trustee Company Limited
Winchester House
1 Great Winchester Street
London EC2N 2DB
REGISTRAR, TRANSFER
AGENT AND DEPOSITARY
Deutsche Bank Trust
Company Americas
1761 East St. Andrew Place
Santa Ana, California 92705
United States of America
To the Initial Purchaser as to
English Law
Ashurst
Broadwalk House
5 Appold Street
London EC2H 2HA
INITIAL PURCHASER
Deutsche Bank AG, London
Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
LEGAL ADVISERS
To the Issuer and Initial
Purchaser as to Dutch Law
Allen & Overy
Apollolaan 15
1077 AB Amsterdam
The Netherlands
IRISH TRANSFER AND
PAYING AGENT
Deutsche International
Corporate Services (Ireland)
Limited
5 Harbourmaster Place
I.F.S.C.
Dublin 1
Ireland
To the Initial Purchaser as to
United States Law
McKee Nelson LLP
One Battery Park Plaza
New York
New York 10004
United States of America
To the Investment Manager as to English Law
Milbank, Tweed, Hadley & McCloy LLP
10 Gresham Street
London EC2V 7JD
AUDITORS TO THE ISSUER
KPMG Accountants N.V.
Rijnzathe 14
3454 PV De Meern
The Netherlands
To the Trustee as to English Law
Ashurst
Broadwalk House
5 Appold Street
London EC2H 2HA
IRISH LISTING AGENT
Deutsche Bank Luxembourg S.A.
2 Boulevard Konrad Adenaur
L-1115 Luxembourg
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