ROCKALL CLO B.V. - Irish Stock Exchange

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the possibility that a third-party co-venturer or partner may at any time have economic or business interests or goals which are inconsistent with those of the Issuer, or may be in a position to take action contrary to the investment objective of the Issuer. In addition, the Issuer may in certain circumstances be liable for actions of its third-party co-venturer or partner. 1.11 Third-Party Litigation The Issuer's investment activities subject it to the normal risks of becoming involved in litigation by third parties. The expense of defending against claims by third parties and paying any amounts pursuant to settlements or judgments would generally be borne by the Issuer and would reduce net assets. 2. RELATING TO THE COLLATERAL 2.1 Risks associated with a Leveraged Structure and Sale of Collateral The Issuer will be substantially leveraged. The pro forma fully-funded indebtedness of the Issuer under the VF-1 Notes and the Specified Notes (collectively, the "Initial Borrowing Arrangements") is expected to be €625,000,000. In addition to indebtedness under the Initial Borrowing Arrangements, the Initial Borrowing Arrangements permit the Issuer to (i) incur certain other indebtedness secured by the Collateral and (ii) engage in Hedging and Short-Sale Transactions. Utilisation of leverage is a speculative investment technique and involves certain risks to investors. The leverage provided to the Issuer under the Initial Borrowing Arrangements and any other Issuer Indebtedness will result in interest expense and other costs incurred in connection with such borrowings that may not be covered by the net interest income, dividends and appreciation of Issuer Investments. The Initial Borrowing Arrangements permit the Issuer to issue additional VF Notes and Notes, without the consent of any VF Noteholders or Noteholders, as applicable. Depending on the terms and conditions of any such future additional VF Notes or Notes, the Issuer may be more or less leveraged than the Issuer would be with the Initial Borrowing Arrangements alone. The terms of any such additional VF Notes or Notes may provide for a higher or lower interest rate than the interest rate under the Initial Borrowing Arrangements. The issue of such additional VF Notes or Notes will result in interest expense and other costs incurred in connection with such financing(s) that may not be covered by the net interest income, dividends and appreciation of Issuer Investments. The use of leverage will increase the volatility of the Net Asset Value from time to time. While the use of borrowed funds will increase returns to the Issuer if the Issuer earns a greater return on the incremental investments purchased with borrowed funds than it pays for such funds, the use of leverage will decrease returns if the Issuer fails to earn as much on such incremental investments as it pays for such funds. The effect of leverage may therefore result in a greater decrease in the Net Asset Value than if the Issuer was not so leveraged. The extent of the Issuer's permitted leveraging at any time will be determined by reference to the Market Value of the Issuer's investments established in accordance with the Market Valuation Manual. As a consequence, if there is a substantial decline in the Market Value of the Issuer's investments, the Issuer (or the Collateral Manager on its behalf) may be required to liquidate investments in order to maintain compliance with its debt covenants and, as a result, the occurrence of a sudden, precipitous drop in value of Issuer Investments could force the Issuer (or the Collateral Manager on its behalf) to liquidate the same quickly, and not for fair value, in order to maintain compliance with such debt covenants. The VF Instrument will contain events of default which, under certain circumstances, could result in early amortisation or in the acceleration of the maturities of these obligations. In the event of acceleration of any debt under a VF Instrument in whole or in part, the Issuer may be required to dispose of all or a significant portion of the Issuer Investments. Depending upon the liquidity of the Issuer Investment, such a forced disposal of Issuer Investments could result in realisation of value of such investments significantly below the anticipated Market Values for such Issuer Investments. The substantial indebtedness of the Issuer could limit its ability to respond to changing business conditions or to execute its investment programme. The VF Instrument imposes operating and financing restrictions on the Issuer. Therefore, no assurance can be given that additional debt financing will be available when needed or, if available, will be obtainable on terms that are favourable to the Issuer. It is possible that the Issuer would need to sell Issuer Investments to repay indebtedness in order to meet such restrictions, and these sales could occur when the value of the Issuer Investments is depressed. If an event of default occurs under the VF Notes or the Trust Deed and the Collateral is sold, there can be no assurance that the proceeds of such sale will be sufficient to pay in full the principal of and accrued interest on the VF Notes (or amounts payable under any Secured Hedging Transactions) and the Notes. In addition, under such circumstances, pursuant to the subordination provisions contained in the Security Documents and the Intercreditor Arrangements, no payment on the Class B Notes will be made until payment in full of obligations senior thereto, no payment on the Class C Notes will be made until payment in full of obligations senior thereto, no payment on the Class D Notes will be made until payment in full of obligations senior thereto and no payment on the Class E Subordinated Notes will be - 17 -
made until payment in full of all other liabilities of the Issuer. Relative rights of Holders of the Senior Indebtedness, the Class B Notes, the Class C Notes and the Class D Notes with respect to the Collateral will be governed by the provisions of the Intercreditor Arrangements. 2.2 The Portfolio The decision by any prospective Holder of VF Notes or Notes to invest in such VF Notes or Notes should be based, among other things, on an evaluation of the Market Valuation Manual and the Over-Collateralisation Tests. This Offering Circular does not contain any information regarding the individual Issuer Investments on which the VF Notes and Notes will be secured from time to time, however the Market Valuation Manual is set out in full herein. Neither the Issuer nor the Placement Agent has made, or will make, any investigation into the obligors under the Issuer Investments. The value of Issuer Investments comprised in the Issuer's portfolio of the same (the "Portfolio") may fluctuate from time to time and none of the Issuer, the Trustee, the Security Trustee, the Placement Agent, the Custodian, the Collateral Administrator, any Secured Hedging Counterparty or any of their Affiliates are under any obligation to maintain the value of the Issuer Investments at any particular level, although under the Collateral Management Agreement the Collateral Manager is obliged to use reasonable care to ensure compliance by the Issuer with the Over-Collateralisation Tests. On breach of the Over-Collateralisation Tests, the Collateral Manager is obliged to ensure that one or more of the Under-Collateralisation Cure Methodologies is employed in accordance with the Conditions. None of the Issuer, the Trustee, the Security Trustee, the Custodian, the Collateral Manager, the Collateral Administrator, any Secured Hedging Counterparty, the Placement Agent or any of their Affiliates has any liability to the VF Noteholders or Noteholders as to the amount or value of, or any decrease in the value of, the Issuer Investments from time to time. Purchasers of any of the VF Notes or Notes will not have an opportunity to evaluate for themselves the relevant economic, financial and other information regarding the investments to be made by the Collateral Manager, acting on behalf of the Issuer, and accordingly will be dependent upon the judgment and ability of the Collateral Manager in acquiring investments for purchase on behalf of the Issuer over time. No assurance can be given that the Collateral Manager, acting on behalf of the Issuer, will be successful in obtaining suitable investments or that, if such investments are made, the objectives of the Issuer will be achieved. 2.3 Concentration of Issuer Investments The diversification and concentration restrictions applicable to the Issuer Investments operate only indirectly by causing Issuer Investments in excess of applicable diversification or concentration restrictions to be excluded from the calculation of the Over-Collateralisation Tests. The Issuer is not prohibited from holding Issuer Investments in excess of diversification and concentration restrictions subject to such exclusion. 2.4 Nature of the Collateral The Issuer will invest in a portfolio of Issuer Investments consisting at the time of acquisition of predominantly below investment-grade loans and, to a lesser extent, High Yield Securities as well as certain other investments, all of which will have greater credit and liquidity risk than investment-grade sovereign or corporate bonds or loans. The Collateral is subject to credit, liquidity, interest rate and currency risks. The prices of financial instruments in which the Issuer may invest can be highly volatile. Price movements of High Yield Securities and other instruments in which the Issuer's assets may be invested are influenced by, among other things, interest rates and currencies, changing supply and demand relationships, trade, fiscal, monetary and exchange control programmes and policies of governments, and national and international political and economic events and policies. In addition, governments from time to time intervene, directly and by regulation, in certain markets, particularly those in currencies and financial instrument options. Such intervention is often intended to influence prices directly and may, together with other factors, cause all of such markets to move rapidly in the same direction because of, among other things, interest rate fluctuations. The Issuer Investments are also subject to the risk of the failure of any exchange on which its positions trade or of their clearing houses. 2.5 Nature of Below Investment-Grade Collateral The Market Value of the Issuer Investments may be volatile and may fluctuate with, among other things, changes in prevailing interest rates (particularly in the case of fixed rate Issuer Investments), general economic conditions, the condition of certain financial markets, international political events, developments or trends in any particular industry and the financial condition of the borrowers or issuers, as the case may be, of the Issuer Investments. The rating of below investment-grade loans reflects a greater possibility that adverse changes in the financial condition of a borrower or an issuer or in general economic conditions or both may impair the ability of the relevant borrower or issuer, as the case may be, to make payments of principal or interest. Such investments may be speculative. A decrease in the Market Value of the Issuer Investments would adversely affect the proceeds that could be obtained upon the sale of the Issuer Investments and could, ultimately, affect the ability of the - 18 -
Page 1 and 2: ROCKALL CLO B.V. (a private limited
Page 3 and 4: OFFER/INVITATION/DISTRIBUTION RESTR
Page 5 and 6: Each purchaser of VF Notes and Note
Page 7 and 8: NOTES AND NOTES HAVE NOT BEEN OFFER
Page 9 and 10: CONTENTS Page SUMMARY..............
Page 11 and 12: 6 Holders of the Class E-1b Subordi
Page 13 and 14: Principal Payments on the Notes Red
Page 15 and 16: Payments (see the section of this O
Page 17 and 18: for each calendar week and (y) to t
Page 19 and 20: the Security Trustee shall, if dire
Page 21 and 22: with the Over-Collateralisation Tes
Page 23 and 24: ERISA Considerations Limited Recour
Page 25: 1.7 Removal of Credit Enhancement T
Page 29 and 30: inter-company guarantees such a pro
Page 31 and 32: orrower. A Selling Institution voti
Page 33 and 34: may have an associated Secured Hedg
Page 35 and 36: will be to enable the Custodian, on
Page 37 and 38: 2.25 Disclosure of Portfolio The Is
Page 39 and 40: Investments to properly plan for ex
Page 41 and 42: 3.12 Volatility of the Class E Subo
Page 43 and 44: sections of these Risk Factors head
Page 45 and 46: may also act as counterparty with r
Page 47 and 48: "Account-Holding Bank" means (a) in
Page 49 and 50: "Class C Notes" means the Initial I
Page 51 and 52: (c) (d) (e) (f) Noteholders represe
Page 53 and 54: "Exchange Date" means a day falling
Page 55 and 56: "Ledger" means the ledger maintaine
Page 57 and 58: "Permitted Short-Sale Exposure" mea
Page 59 and 60: the ratio of (i) the number of days
Page 61 and 62: accounts so as to effect payment of
Page 63 and 64: (b) "Unused Class D Notes Commitmen
Page 65 and 66: and, as the case may be, the Truste
Page 67 and 68: (c) (d) (iii) Ledger If: (xx) (yy)
Page 69 and 70: (ii) (iii) Class B Notes Blockage U
Page 71 and 72: 4. Security made with respect to th
Page 73 and 74: entitled at any time to institute a
Page 75 and 76: interest rate hedging transactions
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paragraph (a)(vii) of Condition 10
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interest payable in respect of each
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Intercreditor Arrangements shall be
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Redemption Date") provided that Cla
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until all outstanding Senior Indebt
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on the Noteholders. Upon the expiry
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otherwise be due but for the imposi
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(b) (xii) (xiii) (xiv) Final judgme
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(c) (d) 12. Prescription Notes and
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Resolution represents of the aggreg
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(x) (xi) (xii) (xiii) (xiv) (xv) to
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management or operation of the Coll
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20. Specific Conditions Specific Co
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DESCRIPTION OF THE PORTFOLIO AND MA
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(Definitions)) or (2) the Issuer ha
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"Market Value Price" "Advance Rate"
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espect to which Rating Agency Confi
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"Class B Notes Advance Amount" "Cla
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“Dutch Ineligible Securities” "
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"Excluded Issuer Investments" (xi)
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“High Yield Security” “Intere
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“Net Accrual Amount” (vi) (vii)
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Over-Collateralisation Test, the Cl
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of “Caa1” for the purposes of c
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instrumentality thereof. “Pound S
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Purchase Contracts, Short-Sale Cont
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elated Permitted Short-Sale Obligat
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Collateral Manager on its behalf) r
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Asset Category S&P Senior Advance R
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Asset Category Less than or equal t
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Asset Category Less than or equal t
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FORM OF THE VF NOTES AND THE NOTES
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five years (in the case of interest
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2. Book-Entry Ownership (a) (b) DTC
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Closing Date will be required, by v
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RATINGS OF THE NOTES It is a condit
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Mrs Maria Chr. van der Sluijs Plant
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There may be circumstances where de
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International Business from Northea
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DESCRIPTION OF THE COLLATERAL ADMIN
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DESCRIPTION OF THE COLLATERAL MANAG
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Automatic Termination of the Collat
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DESCRIPTION OF THE TERMS AND CONDIT
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Replacement of VF-1 Noteholders In
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"Interbank Rate Advance" means an A
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DESCRIPTION OF THE SECURITY AND INT
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Senior Indebtedness or Class B Note
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dealings (including in the case of
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"Minor Trade" means a sale or other
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Specified Notes The conditions cons
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any), provided that in relation to
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TAX CONSIDERATIONS General For purp
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the marketing of the Specified Note
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non-contingent principal payments o
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discussion below assumes that the I
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CERTAIN ERISA CONSIDERATIONS The U.
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meets all relevant legal requiremen
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This Offering Circular has been pre
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TRANSFER RESTRICTIONS Because of th
Page 195 and 196:
in a Regulation S Global Note, the
Page 197 and 198:
eliminates United States federal in
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(4) It acknowledges that the Issuer
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GENERAL INFORMATION 1. Clearing Sys
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GLOSSARY € ......................
Page 205 and 206:
Initial Issuance Class B Notes ....
Page 207 and 208:
Short-Sale Contract ...............
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ROCKALL CLO B.V. - Irish Stock Exchange

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