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

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.
10:21\10 July 2007\LONDON\CWM\4369396.02
30