VALLAURIS II CLO PLC - Irish Stock Exchange

Prospectus dated 26 July 2006 

VALLAURIS II CLO PLC 

(a public company with limited liability incorporated under the laws of Ireland, under number 420288) 

A187,800,000 Class I Senior Floating Rate Notes due 2022 

A52,300,000 Class II Senior Floating Rate Notes due 2022 

A25,400,000 Class III Mezzanine Deferrable Interest Floating Rate Notes due 2022 

A8,900,000 Class IV Mezzanine Deferrable Interest Floating Rate Notes due 2022 

A18,000,000 Class V Structured Combination Notes due 2022* 

A3,500,000 Class VI Structured Combination Notes due 2022* 

A32,200,000 Subordinated Notes due 2022 

*Each Structured Combination Note consists of two Components (as defined below). Each Class V Structured Combination Note is comprised of an OAT Security Component and a Class V 

Subordinated Component. Each Class VI Structured Combination Note is comprised of a Natexis Zero Coupon Security Component and a Class VI Subordinated Component. The initial 

principal amount of each Subordinated Component is included in (and not additional to) the initial principal amounts of the Subordinated Notes. 

Secured by a Portfolio of Collateral Debt Obligations (as defined herein) 

managed by Natexis Banques Populaires together with its affiliate Natexis Asset Management. 

Vallauris II CLO PLC (the ‘‘Issuer’’) will issue A187,800,000 Class I Senior Floating Rate Notes due 2022 (the ‘‘Class I Senior Notes’’), A52,300,000 Class II Senior Floating Rate Notes 

due 2022 (the ‘‘Class II Senior Notes’’ and, together with the Class I Senior Notes, the ‘‘Senior Notes’’), A25,400,000 Class III Mezzanine Deferrable Interest Floating Rate Notes due 

2022 (the ‘‘Class III Mezzanine Notes’’), A8,900,000 Class IV Mezzanine Deferrable Interest Floating Rate Notes due 2022 (the ‘‘Class IV Mezzanine Notes’’ and, together with the Class 

III Mezzanine Notes, the ‘‘Mezzanine Notes’’), A18,000,000 Class V Structured Combination Notes due 2022 (the ‘‘Class V Structured Combination Notes’’), A3,500,000 Class VI 

Structured Combination Notes due 2022 (the ‘‘Class VI Structured Combination Notes’’ and together with the Class V Structured Combination Notes, the ‘‘Structured Combination 

Notes’’) and A32,200,000 Subordinated Notes due 2022 (the ‘‘Subordinated Notes’’). The Senior Notes and the Mezzanine Notes are together referred to herein as the ‘‘Rated Notes’’. The 

Structured Combination Notes, the Senior Notes, the Mezzanine Notes and the Subordinated Notes, are together referred to as the ‘‘Notes’’. 

The Notes will be issued and secured pursuant to a Trust Deed, to be dated on or about 26 July 2006 (the ‘‘Closing Date’’) between (amongst others) the Issuer and ABN AMRO 

Trustees Limited as trustee (the ‘‘Trustee’’). The terms and conditions of the Notes (the ‘‘Conditions’’) are set out herein under ‘‘Conditions of the Notes’’. Holders of the Structured 

Combination Notes will not be granted any security interest in any of the collateral pledged to secure the other Classes of Notes (except to the extent of the Subordinated Component). 

The Class V Structured Combination Notes will be secured by the OAT Strips comprising the OAT Strip Security Component of such Structured Combination Notes and any proceeds 

thereon. The OAT Strips pledged to secure the holders of the Class V Structured Combination Notes will not be available as security for any of the other Classes of Notes. The Class 

VI Structured Combination Notes will be secured by the Natexis Zero Coupon Notes comprising the Natexis Zero Coupon Security Component of such Structured Combination Notes 

and any proceeds thereon. The Natexis Zero Coupon Notes pledged to secured the holders of Class VI Structured Combination Notes will not be available as security for any of the 

other Classes of Notes. It is a condition of issuance of the Notes that the Notes of each Class (as defined below) be issued concurrently. 

Interest on the Class I Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes (each term as defined below) will accrue from the 

Closing Date and be payable semi-annually in arrear on 26 March and 26 September of each year (each a ‘‘Payment Date’’) commencing 26 March 2007 and ending on the Maturity 

Date (as defined below). Interest on the Subordinated Notes (as defined below) will be payable on each Payment Date subject to available funds. 

The Rated Notes will bear interest from the Closing Date at a margin, being 0.25 per cent. per annum in respect of the Class I Senior Notes, 0.40 per cent. per annum in respect of the 

Class II Senior Notes, 1.45 per cent. per annum in respect of the Class III Mezzanine Notes and 4.10 per cent. per annum in respect of the Class IV Mezzanine Notes, in each case 

above the euro-zone interbank offered rate for six month euro deposits (6-month EURIBOR). Interest on the Subordinated Notes will be payable on each Payment Date on an available 

funds basis. 

The Notes will be limited recourse debt obligations of the Issuer. Payments of interest and principal on the Class I Senior Notes will be senior in right of payment to payments of 

interest and principal respectively on the Class II Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine Notes and the Subordinated Notes. Payments of interest and 

principal on the Class II Senior Notes will be subordinated in right of payment to payments of interest and principal respectively on the Class I Senior Notes but senior in right of 

payment to payments of interest and principal respectively on the Class III Mezzanine Notes, the Class IV Mezzanine Notes and the Subordinated Notes. Payments of interest and 

principal on the Class III Mezzanine Notes will be subordinated in right of payment to payments of interest and principal respectively on the Class I Senior Notes and the Class II 

Senior Notes but senior in right of payment to payments of interest and principal respectively on the Class IV Mezzanine Notes and the Subordinated Notes. Payments of interest and 

principal on the Class IV Mezzanine Notes will be subordinated in right of payment to payments of interest and principal respectively on the Class I Senior Notes, the Class II Senior 

Notes and the Class III Mezzanine Notes but senior in right of payment to payments of interest and principal respectively on the Subordinated Notes. Payments of principal and interest 

in respect of the Subordinated Notes will be paid out of available Interest Proceeds and Principal Proceeds (each such term as defined herein), and such payments will be subordinated in 

right of payment to payments in respect of each of the other Classes of Notes. Each Subordinated Component of the Structured Combination Notes shall rank in accordance with the 

Subordinated Notes related thereto. 

Application has been made to the Irish Financial Services Regulatory Authority (the ‘‘IFSRA’’), as competent authority (the ‘‘Competent Authority’’) under Directive 2003/71/EC of the 

European Parliament and of the Council of 4 November 2003 (the ‘‘Prospectus Directive’’), 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 26 July 2006. There can be no assurance that such listing will be granted. Upon approval by the Competent Authority, this 

Prospectus will be filed with the Irish Companies Registration 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 the Prospectus Directive in connection with the application for the Notes to be admitted to the Official List of the Irish Stock Exchange. 

This document is not intended to be a prospectus for the purposes of the Securities Act. 

The Notes have not been registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) and will be offered only: (a) to non-U.S. persons outside the 

United States in compliance with Regulation S under the Securities Act (‘‘Regulation S Notes’’) and (b) within the United States to Qualified Institutional Buyers (‘‘Qualified institutional 

Buyers’’)(as defined in Rule 144A under the Securities Act) in reliance on Rule 144A under the Securities Act who are also qualified purchasers (‘‘Qualified Purchasers’’) for the purposes 

of Section 3(c)(7) of the Investment Company Act of 1940, as amended (the ‘‘Investment Company Act’’) (‘‘Rule 144A Notes’’). The Issuer will not be registered under the Investment 

Company Act. Interests in the Notes will be subject to certain restrictions on transfer. See ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions’’. Each purchaser of Notes offered hereby 

in making its purchase will be deemed to have made certain acknowledgements, representations and agreements as set out under ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions’’. 

It is a condition of the issue and sale of the Notes that the Notes (except for the Subordinated Notes and the Structured Combination Notes) be issued with at least the following 

ratings from Moody’s Investors Service, Inc. (‘‘Moody’s’’) and Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (‘‘S&P’’): the Class I Senior Notes: 

‘‘Aaa’’ from Moody’s and ‘‘AAA’’ from S&P; the Class II Senior Notes: ‘‘Aa2’’ from Moody’s and ‘‘AA’’ from S&P; the Class III Mezzanine Notes: ‘‘Baa2’’ from Moody’s and ‘‘BBB’’ 

from S&P; and the Class IV Mezzanine Notes: ‘‘Ba2’’ from Moody’s and ‘‘BB’’ from S&P. It is expected that the Class V Structured Combination Notes be rated ‘‘AAA’’ from S&P 

only, but such rating is not a condition of the issue and sale of the Notes. The Subordinated Notes and the Class VI Structured Combination 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. 

See ‘‘Risk Factors’’ on page 23 for a discussion of certain factors to be considered in connection with an investment in the Notes. 

CERTAIN SECURED ASSETS OF THE ISSUER ARE THE SOLE SOURCE OF PAYMENTS ON THE NOTES. THE NOTES DO NOT REPRESENT AN INTEREST IN, OR 

OBLIGATIONS OF, AND ARE NOT INSURED OR GUARANTEED BY, ANY OF THE NOTEHOLDERS, THE COLLATERAL MANAGER, THE COLLATERAL 

ADMINISTRATOR, THE JOINT LEAD MANAGERS (AS DEFINED BELOW), THE LEAD MANAGER (AS DEFINED BELOW), THE TRUSTEE OR ANY OF THEIR 

RESPECTIVE AFFILIATES. 

Natexis Banques Populaires as sole lead manager of the offering of the Rated Notes, the (‘‘Lead Manager’’) and Natexis Banques Populaires and Dresdner Bank AG London Branch 

(together, in their capacity as joint lead managers of the offering of the Subordinated Notes, the ‘‘Joint Lead Managers’’) expect to deliver the Notes to purchasers on or about 26 July 

2006. The Lead Manager shall underwrite the Rated Notes and the Joint Lead Managers shall underwrite the Subordinated Notes and may sell any of the Notes to subsequent 

purchasers in individually negotiated transactions at prices other than the initial issue prices set out above. 

NATEXIS BANQUES POPULAIRES 

The date of this Prospectus is 26 July 2006 

DRESDNER KLEINWORT

Regulation S Notes of each Class (with each of the Class I Senior Notes, the Class II Senior 

Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes constituting a separate 

‘‘Class’’ for this purpose) will each be represented on issue by beneficial interests in one or more 

permanent global notes of such Class (each, a ‘‘Regulation S Global Note’’ and together, the 

‘‘Regulation S Global Notes’’) in bearer form, without interest coupons or principal receipts attached, 

which will be deposited on or about 26 July 2006 (the ‘‘Closing Date’’) with LaSalle Bank National 

Association as book-entry depositary (in such capacity, the ‘‘Depositary’’) pursuant to a depositary 

agreement (the ‘‘Depositary Agreement’’) expected to be dated the Closing Date between the Issuer, 

the Depositary and the Trustee and, on the basis of the depositary arrangements described below, will 

be treated as being issued in registered form for U.S. federal income tax purposes. Neither U.S. 

Persons (as defined in Regulation S under the Securities Act) nor U.S. residents (as determined for 

the purposes of the Investment Company Act) may hold an interest in a Regulation S Global Note at 

any time. Rule 144A Notes of each Class will each be represented on issue by beneficial interests in 

one or more permanent notes of such Class (each a ‘‘Rule 144A Global Note’’ and, together the ‘‘Rule 

144A Global Notes’’ and, together with the Regulation S Global Notes, the ‘‘Global Notes’’), in bearer 

form, without interest coupons or principal receipts attached, which will be deposited on or about the 

Closing Date with the Depositary and, on the basis of the depositary arrangements described below, 

will be treated as being issued in registered form for U.S. federal income tax purposes. See ‘‘Form of 

the Notes’’ and ‘‘Description of the Depositary Agreement’’ below. 

It is anticipated that the Depositary will (i) issue a certificated depositary interest (each, a 

‘‘CDI’’) in respect of each Regulation S Global Note to HSBC Bank plc as common depositary (the 

‘‘Common Depositary’’) for Euroclear Bank S.A./N.V., as operator of the Euroclear System 

(‘‘Euroclear’’) and Clearstream Banking, société anonyme (‘‘Clearstream, Luxembourg’’), and their 

respective participants and (ii) issue a CDI in respect of each Rule 144A Global Note to HSBC Bank 

plc as Common Depositary for Euroclear and Clearstream, Luxembourg and their respective 

participants. Each of Euroclear and Clearstream, Luxembourg will record the beneficial interests in 

the CDIs representing the Regulation S Global Notes and the Rule 144A Global Notes, as the case 

may be (‘‘Book-Entry Interests’’). Book-Entry Interests in such CDIs will be shown on, and transfers 

thereof will be effected only through, records maintained in book-entry form by Euroclear and/or 

Clearstream, Luxembourg, and their respective participants. See ‘‘Book-Entry Clearance Procedures 

and Certain Relevant Provisions of the Depositary Agreement’’. Except in the limited circumstances 

described under ‘‘Form of the Notes – 2. Exchange for Definitive Certificates’’, Notes in definitive 

fully registered form (each, a ‘‘Definitive Certificate’’) will not be issued in exchange for beneficial 

interests in the Global Notes. 

The Issuer accepts responsibility for the information contained in this document (save for the 

information contained in the sections of this document headed ‘‘Description of the Collateral 

Managers’’ and ‘‘Description of the Collateral Administrator’’ and ‘‘Description of the Depositary and 

Registrar’’). 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. 

Natexis Banques Populaires in its capacity as Collateral Manager accepts responsibility for the 

information contained in the section of this document headed ‘‘Description of the Collateral 

Managers’’ and Natexis Asset Management accepts responsibility for the information contained in the 

sub-section of this document headed ‘‘Description of the Collateral Managers – Description of 

Natexis Asset Management’’. To the best of the knowledge and belief of Natexis Banques Populaires 

and Natexis Asset Management (each of which has taken all reasonable care to ensure that such is 

the case), such information for which each is responsible as provided above is in accordance with the 

facts and does not omit anything likely to affect the import of such information. The Collateral 

Administrator accepts responsibility for the information contained in the section of this document 

headed ‘‘Description of the Collateral Administrator’’. 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 

ii

information is in accordance with the facts and does not omit anything likely to affect the import of 

the information. Each of the Depositary and Registrar accepts responsibility for the information 

contained in the section of this document headed ‘‘Description of the Depositary and Registrar’’ in 

respect of itself. To the best of the knowledge and belief of the Depositary and Registrar (each of 

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 section of this document headed ‘‘Description of the Collateral Managers’’ in the case of Natexis 

Banques Populaires in its capacity as Collateral Manager, the sub-section of this document headed 

‘‘Description of the Collateral Managers – Natexis Asset Management’’ in the case of Natexis Asset 

Management, the section of this document headed ‘‘Description of the Collateral Administrator’’ in 

the case of the Collateral Administrator and the section of this document headed ‘‘Description of the 

Depositary and Registrar’’ in the case of the Depositary and Registrar, none of the Collateral 

Managers, the Collateral Administrator, the Depositary or the Registrar accepts any responsibility for 

the accuracy and completeness of any other information contained in this Prospectus nor otherwise 

for the structuring and operation of any arrangements relating to the Notes (save in their capacities 

as Collateral Managers, Collateral Administrator, Depositary and Registrar, respectively) referred to 

herein. 

None of Natexis Banques Populaires in its capacity as Lead Manager, Natexis Banques 

Populaires and Dresdner Bank AG London Branch in their respective capacities as Joint Lead 

Managers, the Trustee or (save for the information described in the preceding paragraph) the 

Collateral Managers has separately verified the information contained in this Prospectus and 

accordingly none of the Lead Manager, the Joint Lead Managers, the Trustee or (save for the 

information described in the preceding paragraph) the Collateral Managers make 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 Lead Manager, the Joint Lead Managers, 

the Trustee or the Collateral Managers undertakes to review the financial condition or affairs of the 

Issuer during the life of the arrangements contemplated by this Prospectus nor to advise any investor 

or potential investor in the Notes of any information coming to the attention of the Lead Manager, 

the Joint Lead Managers, the Trustee or the Collateral Managers which is not included in this 

Prospectus. 

This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, 

the Lead Manager or the Joint Lead Manager or any of their affiliates, the Collateral Manager, the 

Depository, 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, 

Lead Manager and the Joint Lead Managers 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 (‘‘FSMA’’) 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 ‘‘subscription and sale’’ 

and ‘‘transfer restrictions’’ below. 

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, 

iii

such information or representation must not be relied upon as having been authorised by or on 

behalf of the Issuer. 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. 

Notwithstanding anything herein to the contrary, each potential investor (and each employee, 

representative, or other agent of the potential investor) may disclose to any and all other persons, 

without limitations of any kind, the U.S. tax treatment and U.S. 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 U.S. tax analyses) that are provided to the potential investor relating to 

such U.S. tax treatment and U.S. tax structure. However any such information relating to the U.S. 

tax treatment or U.S. tax structure is required to be kept confidential to the extent reasonably 

necessary to comply with applicable U.S. federal or state securities law. For purposes of this 

paragraph, the terms ‘‘U.S. tax treatment’’ and ‘‘U.S. tax structure’’ have the meaning given to such 

terms under United States Treasury Regulation Section 1.6011-4(c). 

IRS CIRCULAR 230 NOTICE. THIS OFFERING MEMORANDUM WAS NOT INTENDED 

OR WRITTEN TO BE USED AND CANNOT BE USED, FOR THE PURPOSES OF AVOIDING 

U.S. FEDERAL, STATE OR LOCAL TAX PENALTIES. THIS OFFERING MEMORANDUM 

WAS WRITTEN AND PROVIDED BY THE ISSUER IN CONNECTION WITH THE 

PROMOTION OR MARKETING BY THE ISSUER AND/OR THE LEAD MANAGER AND THE 

JOINT LEAD MANAGERS OF THE NOTES. EACH HOLDER OF THE NOTES SHOULD 

SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT 

TAX ADVISOR. 

Unless otherwise specified or the context requires, references to ‘‘Euro’’ and ‘‘A’’ are to 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, references to ‘‘U.S. 

dollars’’ and ‘‘$’’ are to United States dollars and references to ‘‘pounds sterling’’ and ‘‘£’’ are to the 

lawful currency of the United Kingdom. 

INFORMATION AS TO PLACEMENT WITHIN THE UNITED STATES 

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 NOTES 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 THE 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’’). Each of the Issuer, the Lead Manager and the Joint 

Lead Managers reserves the right to reject any offer to purchase Notes in whole or in part for any 

reason, or 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 Lead 

Manager, the Joint Lead Managers 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. Each prospective purchaser in the United States, 

by accepting delivery of this Prospectus, agrees to the foregoing and to make no photocopies of this 

Prospectus or any documents related hereto and, if the offeree does not purchase the Notes of any 

Class or the Offering is terminated, to return this Prospectus and all documents attached hereto to 

Natexis Banques Populaires, 45, rue Saint-Dominique, 75007 Paris France. 

iv

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 pursuant to the Trust Deed to furnish, upon request of a 

holder of a Note, to such holder and a prospective purchaser designated by such holder, 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 not a reporting company under Section 13 or Section 15(d) of the United 

States Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), or 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 Transfer Agent in Ireland. 

NOTICE TO NEW HAMPSHIRE RESIDENTS 

FOR NEW HAMPSHIRE RESIDENTS ONLY: 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. 

See ‘‘Glossary of Defined Terms’’ for details of the pages on which capitalised terms used herein 

are defined. 

In connection with this issue, Natexis Banques Populaires (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 Closing Date and, if begun may be ended at any time, but it must end no 

later than the earlier of 30 days after the Closing Date and 60 days after the date of the allotment of 

the Notes. 

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TABLE OF CONTENTS 

Page 

SUMMARY OF TERMS ....................................................................................................... 1 

RISK FACTORS ..................................................................................................................... 23 

1. General............................................................................................................................ 23 

2. Relating to the Collateral............................................................................................... 24 

3. Relating to the Notes ..................................................................................................... 36 

4. Certain Conflicts of Interest........................................................................................... 44 

5. Taxation of the Issuer .................................................................................................... 47 

6. Certain Provisions of Irish Law..................................................................................... 47 

7. Certain ERISA Considerations ...................................................................................... 48 

8. Investment Company Act............................................................................................... 49 

9. Forced Transfer .............................................................................................................. 49 

10. Investment Tax Act (Germany) ..................................................................................... 49 

11. Withholding Tax on the Notes ...................................................................................... 50 

12. Book-Entry Interests....................................................................................................... 50 

13. Not a bank deposit ........................................................................................................ 51 

14. Proposed changes to the Basel Capital Accord (‘‘Basel II’’ ) ...................................... 51 

15. European Union Savings Directive................................................................................ 51 

CONDITIONS OF THE NOTES .......................................................................................... 53 

1. Definitions....................................................................................................................... 55 

2. Form and Denomination, Title, Transfer and Exchange of Notes .............................. 84 

3. Status............................................................................................................................... 86 

4. Security............................................................................................................................ 104 

5. Covenants of and Restrictions on the Issuer ................................................................ 109 

6. Interest ............................................................................................................................ 111 

7. Redemption and Purchase.............................................................................................. 116 

8. Payments ......................................................................................................................... 123 

9. Taxation .......................................................................................................................... 125 

10. Events of Default ........................................................................................................... 125 

11. Enforcement .................................................................................................................... 128 

12. Prescription ..................................................................................................................... 129 

13. Replacement of Definitive Certificates ........................................................................... 129 

14. Meetings of Noteholders, Modification, Waiver and Substitution ............................... 130 

15. Indemnification of the Trustee....................................................................................... 134 

16. Notices ............................................................................................................................ 134 

17. Further Issues ................................................................................................................. 135 

18. Structured Combination Notes ...................................................................................... 135 

19. Governing Law ............................................................................................................... 135 

20. Third Party Rights ......................................................................................................... 136 

USE OF PROCEEDS ............................................................................................................. 137 

FORM OF THE NOTES ....................................................................................................... 138 

1. Initial Issue of Notes...................................................................................................... 138 

2. Exchange for Definitive Certificates............................................................................... 139 

3. Exchange of Structured Combination Notes................................................................. 140 

BOOK-ENTRY CLEARANCE PROCEDURES AND CERTAIN RELEVANT 

PROVISIONS OF THE DEPOSITARY AGREEMENT...................................................... 142 

RATINGS OF THE NOTES.................................................................................................. 148 

EXPECTED AVERAGE LIVES OF THE NOTES .............................................................. 150 

THE ISSUER.......................................................................................................................... 151 

DESCRIPTION OF THE COLLATERAL MANAGERS .................................................... 154 

DESCRIPTION OF THE PORTFOLIO ............................................................................... 163 

1. Introduction .................................................................................................................... 163 

2. Investment Period ........................................................................................................... 164 

3. Initial Effective Date ...................................................................................................... 164 

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Page 

4. Final Effective Date ....................................................................................................... 165 

5. Eligibility Criteria ........................................................................................................... 166 

6. Portfolio Profile Tests..................................................................................................... 168 

7. Management of the Portfolio......................................................................................... 169 

8. Currency Swap Obligations............................................................................................ 180 

9. Interest Rate Hedging .................................................................................................... 184 

10. Standard Terms of Hedge Agreements.......................................................................... 186 

11. The Collateral Quality Tests .......................................................................................... 190 

12. The Coverage Tests ........................................................................................................ 204 

DESCRIPTION OF THE COLLATERAL MANAGEMENT AGREEMENT .................... 206 

DESCRIPTION OF THE COLLATERAL ADMINISTRATOR ......................................... 210 

DESCRIPTION OF THE DEPOSITARY AND REGISTRAR............................................ 211 

DESCRIPTION OF THE REPORTS.................................................................................... 212 

TAX CONSIDERATIONS ..................................................................................................... 217 

CERTAIN ERISA CONSIDERATIONS ............................................................................... 237 

SUBSCRIPTION AND SALE................................................................................................ 241 

TRANSFER RESTRICTIONS ............................................................................................... 247 

GENERAL INFORMATION.................................................................................................. 256 

GLOSSARY OF DEFINED TERMS..................................................................................... 259 

vii

SUMMARY OF TERMS 

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. 

The Issuer: 

The Collateral Managers: 

Vallauris II CLO PLC, a public company with limited liability 

incorporated under the laws of Ireland with the principal object of 

acquiring the Portfolio, issuing the Notes and engaging in certain 

related transactions. 

The Issuer has issued 40,000 ordinary shares with a nominal value 

of A1, all of which are fully paid. Deutsche International Finance 

(Ireland) Limited holds 39,994 of the issued shares and six 

nominees hold one issued share each on behalf of Deutsche 

International Finance (Ireland) Limited which holds its legal and 

beneficial interest in the share capital on trust for certain charitable 

purposes. 

The Issuer will not have any assets other than the Portfolio, the 

OAT Strips, the Natexis Zero Coupon Notes, the Accounts and 

certain rights under the Collateral Management Agreement, the 

Agency Agreement, the Depositary Agreement, each Interest Rate 

Hedge Agreement, each Currency Swap Agreement and each 

Collateral Acquisition Document and certain other incidental 

rights and assets in connection with the Portfolio and/or the 

Notes. The rights and assets of the Issuer referred to above (other 

than in respect of the OAT Strips and Natexis Zero Coupon Notes 

and excluding the Issuer Irish Account) will be charged or assigned 

by way of Security to the Trustee as security for the Issuer’s 

obligations under the Notes. See ‘‘Security for the Notes’’. 

The OAT Strips will be the subject of a Belgian law pledge, for the 

benefit of the Class V Structured Combination Noteholders only. 

The Natexis Zero Coupon Notes will be the subject of a Belgian law 

pledge, for the benefit of the Class VI Structured Combination 

Noteholders only. 

Natexis Banques Populaires (together with any of its successors in 

interest) shall be appointed to act as collateral manager in relation 

to all investment and management functions with respect to the 

Collateral (with the exception of the Financial Instruments (as 

defined below)) and Natexis Asset Management shall be appointed 

to act as collateral manager in relation to all investment and 

management functions in respect of Financial Instruments only 

pursuant to a collateral management agreement dated on or about 

the Closing Date between Vallauris II CLO PLC as Issuer, Natexis 

Banques Populaires as Collateral Manager, Natexis Asset 

Management as Collateral Manager, ABN AMRO Trustees 

Limited as Trustee and ABN AMRO Bank N.V. (London 

1

The Collateral Administrator: 

Branch) as Custodian and Collateral Administrator (the 

‘‘Collateral Management Agreement’’). Accordingly, the term 

‘‘Collateral Manager’’ means, as the context requires, Natexis 

Banques Populaires (other than in respect of Financial Instruments 

only) or, as the case may be, Natexis Asset Management (in respect 

of Financial Instruments) and the term ‘‘Collateral Managers’’ 

refers collectively to both of them. See ‘‘Description of the 

Collateral Management Agreement’’. 

‘‘Financial Instruments’’ means any financial instrument (instrument 

financier) within the meaning of article L. 211-1 of the French Code 

Monétaire et Financier including any Mezzanine Obligations held in 

the form of debt securities, Synthetic Securities (subject as provided 

herein), Collateral Enhancement Obligations, Structured Finance 

Securities held in the form of debt securities, Currency Swap 

Transactions and any Interest Rate Hedge Transactions. 

The Collateral Managers will receive certain fees for such 

investment and management functions payable (subject to the 

Priorities of Payment) on each Payment Date, including, but not 

limited to, a Senior Collateral Management Fee, a Subordinated 

Collateral Management Fee and, if applicable, an Incentive 

Collateral Management Fee. The distribution of such fees 

between the Collateral Managers is specified in the Collateral 

Management Agreement. See ‘‘Description of the Collateral 

Management Agreement’’. 

Certain administrative functions with respect to the Collateral, 

including the calculation of the Collateral Quality Tests, the 

Portfolio Profile Tests and Coverage Tests and the preparation of 

Reports in respect of the Collateral will be performed by ABN 

AMRO Bank N.V. (London Branch) (in such capacity, the 

‘‘Collateral Administrator’’). 

The Trustee: 

Pursuant to the Trust Deed, ABN AMRO Trustees Limited (in 

such capacity, the ‘‘Trustee’’) will hold the Collateral on trust for 

the Secured Parties and will hold the Issuer’s payment and other 

covenants and obligations under the Trust Deed on trust for the 

Secured Parties. Under the Trust Deed, the Trustee may resign at 

any time on giving not less than 90 days’ prior written notice to the 

Issuer without giving any reason. The holders of the Controlling 

Class of Notes may by Extraordinary Resolution remove the 

Trustee on not less than 90 days’ written notice. The Issuer 

undertakes in the Trust Deed that in the event of the Trustee giving 

notice of resignation or being removed by Extraordinary 

Resolution of the holders of the Controlling Class of Notes it will 

use its best endeavours to procure that a new trustee is appointed as 

soon as reasonably practicable thereafter. The retirement or 

removal of any such Trustee shall not become effective until a 

successor trustee approved by an Extraordinary Resolution of the 

holders of the Controlling Class is appointed. 

Securities: A187,800,000 Class I Senior Floating Rate Notes due 2022 

A52,300,000 Class II Senior Floating Rate Notes due 2022 

A25,400,000 Class III Mezzanine Deferrable Interest Floating Rate 

Notes due 2022 

A8,900,000 Class IV Mezzanine Deferrable Interest Floating Rate 

Notes due 2022 

2

Structured Combination Notes: 

Class V Structured Combination 

Notes: 

OAT Strips: 

A32,200,000 Subordinated Notes due 2022 

A18,000,000 Class V Structured Combination Notes due 2022 

A3,500,000 Class VI Structured Combination Notes due 2022 

The Notes will be issued pursuant to the Trust Deed (as defined 

below) as entered into between (amongst others) the Issuer and 

ABN AMRO Trustees Limited, as Trustee. 

The Class I Senior Notes, the Class II Senior Notes, the Class III 

Mezzanine Notes and the Class IV Mezzanine Notes are together 

referred to herein as the ‘‘Rated Notes’’. 

Initial issue Price of each Class of Notes: 100 per cent. 

The Components of each Structured Combination Note are not 

separately transferable. However, a holder may exchange all or a 

portion of its Structured Combination Notes for proportional 

interests in the underlying Classes represented by the applicable 

Components, as described in Condition 2(h) (Exchange of 

Structured Combination Notes). 

The terms and conditions applicable to each Structured 

Combination Note shall be the same as those applicable to the 

relevant Underlying Notes (as defined below in the Conditions) 

(save, in each case, to the extent related to the issuance and transfer 

thereof and save, in respect of the Structured Combination Notes, 

with respect to the payment of interest and principal thereon) to the 

extent of each of the respective Components of which such 

Structured Combination Note is comprised. 

Each Class V Structured Combination Note consists of two 

Components: the ‘‘OAT Security Component’’ which comprises 

an interest in OAT Strips with an aggregate nominal face amount 

(at maturity) of A18,049,190 and acquired at an aggregate purchase 

price of A9,900,000 and the ‘‘Class V Subordinated Component’’ 

which comprises a proportional interest of each such Class V 

Structured Combination Note in an aggregate initial principal 

amount of A8,100,000, which represents an equal initial principal 

amount of the Subordinated Notes. 

The Issuer will collateralise the OAT Security Component of the 

Class V Structured Combination Notes by acquiring Obligation 

Assimilable du Trésor securities issued by the French treasury which 

have been stripped (‘‘OAT Strips’’) by Spécialistes 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. 

OAT Strips acquired by the Issuer with a maturity date of 25 April 

2021 in respect of the nominal principal amount of A18,049,190 will 

be held as security, that is, the OAT Security Component solely for 

the benefit of the holders of the Class V Structured Combination 

Notes and proceeds received in respect of such OAT Strips, either 

before or after enforcement of such security will not be available to 

any other Class of Noteholders. See ‘‘Security for the Notes’’. The 

OAT Strips will not be included in any calculation of the Coverage 

Tests or Collateral Quality Tests. 

3

Class VI Structured Combination 

Notes: 

Natexis Zero Coupon Notes: 

The holders of the Class V Structured Combination Notes (in 

respect of the OAT Security Component) shall have recourse only 

to the OAT Strips in relation to such Component and proceeds 

received in respect thereof as described above and shall not have 

any rights in or to 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 

Subordinated Notes is made in accordance with the Priorities of 

Payment the Issuer shall sell a portion of the OAT Strips 

representing the OAT Security Component of the Class V 

Structured Combination Notes. The portion of the OAT Strips to 

be sold shall be determined in accordance with the OAT Sale 

Formula and the Issuer shall apply the proceeds thereof in or 

towards the redemption of the principal amount outstanding of the 

Class V Structured Combination Notes. The Issuer shall apply all 

proceeds of the OAT Strips at their maturity in redemption of the 

Class V Structured Combination Notes in respect of the OAT 

Security Component on the next Payment Date following its receipt 

thereof. Once the principal amount outstanding of the Class V 

Structured Combination Note has been reduced to A1.00 (pursuant 

to the redemption of the OAT Security Component, the realisation 

of proceeds of the OAT Strips or otherwise), on any applicable 

Payment Date thereafter, all distributions received in respect of the 

Components shall be distributed as interest on The Class V 

Structured Combination Note without any redemption taking place 

(other than the A1.00 which shall be repaid at maturity of the Class 

V Structured Combination Note). 

The 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 Structured Combination Noteholders only. 

Each Class VI Structured Combination Note consists of two 

Components: the ‘‘Natexis Zero Coupon Security Component’’ 

which comprises an interest in Natexis Zero Coupon Notes with an 

aggregate nominal face amount (at maturity) of A3,500,000 (and 

acquired at an aggregate purchase price of A2,080,000 and the 

‘‘Class VI Subordinated Component’’ which comprises a 

proportional interest of each such Class VI Structured 

Combination Note in an aggregate initial principal amount of 

A1,420,000, which represents an equal initial principal amount of 

the Subordinated Notes. 

The Issuer will collateralise the Natexis Zero Coupon Security 

Component of the Class VI Structured Combination Notes by 

acquiring Natexis Zero Coupon Notes issued by Natexis Banques 

Populaires, pursuant to its Euro Medium Term Notes and Debt 

Instruments Programme. Copies of the Base Prospectus dated 

6 September 2005 and the Final Terms dated 21 July 2006 relating 

to the Natexis Zero Coupon Notes may be obtained free of charge 

from the Irish Listing Agent (but neither of them form a part of this 

Prospectus). Natexis Zero Coupon Notes acquired by the Issuer 

with a maturity date of 26 September 2018 in respect of the nominal 

principal amount of A3,500,000 will be held as security, that is, the 

Natexis Zero Coupon Security Component solely for the benefit of 

the holders of the Class VI Structured Combination Notes and 

proceeds received in respect of such Natexis Zero Coupon Notes, 

4

Status: 

either before or after enforcement of such security will not be 

available to any other Class of Noteholders. See ‘‘Security for the 

Notes’’. The Natexis Zero Coupon Notes will not be included in 

any calculation of the Coverage Tests or Collateral Quality Tests. 

The holders of the Class VI Structured Combination Notes (in 

respect of the Natexis Zero Coupon Security Component) shall 

have recourse only to the Natexis Zero Coupon Notes in relation to 

such Component and proceeds received in respect thereof as 

described above and shall not have any rights in or to the other 

security granted under the Trust Deed for the benefit of the Secured 

Parties generally. 

The Issuer shall apply all proceeds of theNatexis Zero Coupon 

Notes at their maturity in redemption of the Class VI Structured 

Combination Notes in respect of the Natexis Zero Coupon Security 

Component on the next Payment Date following its receipt thereof. 

Once the principal amount outstanding of the Class VI Structured 

Combination Note has been reduced to A1.00 (pursuant to the 

redemption of the Natexis Zero Coupon Security Component, the 

realisation of proceeds of the Natexis Zero Coupon Notes or 

otherwise), on any applicable Payment Date thereafter, all 

distributions received in respect of the Components shall be 

distributed as interest on the Class VI Structured Combination 

Note (other than the A1.00 which shall be repaid at maturity of the 

Class VI Structured Combination Note) without any redemption 

taking place. 

The Natexis Zero Coupon Notes will be held for the Issuer in a 

segregated Euroclear custody account subject to a Belgian law 

pledge for the benefit of the Class VI Structured Combination 


Each Class of Notes will be limited recourse debt obligations of the 

Issuer ranking (save as otherwise provided below) pari passu 

amongst each of the other Notes of such Class. 

The Notes will be limited recourse debt obligations of the Issuer. 

Payments of interest and principal on the Class I Senior Notes will 

be senior in right of payment to payments of interest and principal 

respectively on the Class II Senior Notes, the Class III Mezzanine 

Notes, the Class IV Mezzanine Notes and the Subordinated Notes. 

Payments of interest and principal on the Class II Senior Notes will 

be subordinated in right of payment to payments of interest and 

principal respectively on the Class I Senior Notes but senior in right 

of payment to payments of interest and principal respectively on 

the Class III Mezzanine Notes, the Class IV Mezzanine Notes and 

the Subordinated Notes. Payments of interest and principal on the 

Class III Mezzanine Notes will be subordinated in right of payment 

to payments of interest and principal respectively on the Class I 

Senior Notes and the Class II Senior Notes but senior in right of 

payment to payments of interest and principal respectively on the 

Class IV Mezzanine Notes and the Subordinated Notes. Payments 

of interest and principal on the Class IV Mezzanine Notes will be 

subordinated in right of payment to payments of interest and 

principal respectively on the Class I Senior Notes, the Class II 

Senior Notes and the Class III Mezzanine Notes but senior in right 

of payment to payments of interest and principal respectively on 

the Subordinated Notes. Payments of principal and interest in 

5

Use of Proceeds: 

Priorities of Payment: 

Interest Payments: 

respect of the Subordinated Notes will be paid out of available 

Interest Proceeds and Principal Proceeds (each such term as defined 

herein), and such payments will be subordinated in right of 

payment to payments in respect of each of the other Classes of 

Notes. Each Subordinated Component of the Structured 

Combination Notes shall rank in accordance with the 

Subordinated Notes related thereto. 

The net proceeds from the issuance of the Notes on the Closing 

Date after payment of certain fees and expenses payable on the 

Closing Date (as set forth in the Subscription Agreement) are 

expected to be approximately A300,000,000. Such proceeds will be 

applied by the Issuer as follows: (a) in payment of all amounts due 

and payable in connection with the acquisition of certain Collateral 

Debt Obligations purchased by the Issuer on or about the Closing 

Date in the amount of approximately A200,000,000, (b) in payment 

of the costs of entry into (if any) the Interest Rate Hedge 

Transactions and the Currency Swap Transactions to be entered 

into on or about the Closing Date, (c) in payment of A195,000 into 

the Expense Reserve Account, (d) in payment of all amounts due 

and payable in connection with the acquisition of OAT Strips 

comprising the OAT Security Component of the Class V Structured 

Combination Notes, (e) in payment of all amounts due and payable 

in connection with the acquisition of Natexis Zero Coupon Notes 

comprising the Natexis Zero Coupon Security Component of the 

Class VI Structured Combination Notes and (f) any proceeds 

remaining, in payment into the Additional Collateral Account for 

application towards the purchase of Additional Collateral Debt 

Obligations from time to time. The Lead Manager’s and the Joint 

Lead Managers’ underwriting and placement fees and expenses will 

be deducted from the gross proceeds of the issue of the Notes. See 

‘‘Subscription and Sale’’ below. 

Interest Proceeds and Principal Proceeds will be applied in the 

payment of interest and principal payable on the Notes and 

amounts payable to the other creditors of the Issuer in accordance 

with the Priorities of Payment specified in Condition 3(c)(Priorities 

of Payment). 

Subject as set forth below, interest in respect of the Notes of each 

Class will be payable semi-annually in arrear on 26 March and 26 

September of each year (subject to adjustment for non-Business 

Days in accordance with the Conditions), commencing 26 March 

2007, at maturity and upon any redemption of the Notes (each a 

‘‘Payment Date’’). 

Class I Senior Notes: Six-month EURIBOR plus 0.25 per cent. per 

annum. 

Class II Senior Notes: Six-month EURIBOR plus 0.40 per cent. per 

annum. 

Class III Mezzanine Notes: Six-month EURIBOR plus 1.45 per 

cent. per annum. 

Class IV Mezzanine Notes: Six-month EURIBOR plus 4.10 per 

cent. per annum. 

In respect of the first Interest Accrual Period only, EURIBOR shall 

be determined by linear interpolation in respect of 6 month Euro 

deposits and 9 month Euro deposits. 

6

Diversion of Interest Proceeds: 

Subordinated Notes: Interest on the Subordinated Notes (the 

‘‘Subordinated Note Interest’’) will be treated as accruing from 

day to day and is payable on an available funds basis out of Interest 

Proceeds remaining following prior payment (in accordance with 

the Priorities of Payment) of certain fees and expenses and interest 

payable in respect of the Rated Notes. Amounts which would 

otherwise have been payable as interest on the Subordinated Notes 

in accordance with Condition 3(c)(i)(Application of Interest 

Proceeds) may, at any time and at the discretion of the Collateral 

Manager in accordance with the Collateral Management 

Agreement, be transferred to the Collateral Enhancement 

Account and applied by the relevant Collateral Manager, acting 

on behalf of the Issuer, in the exercise of rights under Collateral 

Enhancement Obligations. See Condition 6(g)(Interest on the 

Subordinated Notes) and paragraphs (Y) and (AA) of Condition 

3(c)(i)(Application of Interest Proceeds). 

Structured Combination Notes: On each Payment Date on which 

payments are made in respect of the Subordinated Notes (such 

Class of Notes having a corresponding Subordinated Component 

in respect of the Class V Structured Combination Notes and the 

Class VI Structured Combination Notes), a portion of such 

payment shall be allocated to the relevant Structured 

Combination Notes of which that Component is a part in the 

proportion that the principal amount of such Component bears to 

the principal amount of the Subordinated Notes as a whole 

(including the related Components for the purposes of such 

calculation). Subject as provided below, no other interest 

payments will be made on the Structured Combination Notes. 

Any amounts due on the Structured Combination Notes will be 

payable on the same terms as the Components thereof to the extent 

of the Components of which such Structured Combination Note is 

comprised. 

If either of the Senior Coverage Tests is not met on any 

Determination Date as calculated by the Collateral Administrator 

and confirmed by the Collateral Manager, Interest Proceeds which 

would otherwise be used to pay, among other things, interest on the 

Mezzanine Notes and the Subordinated Notes shall on the next 

Payment Date be used to redeem the Class I Senior Notes, in whole 

or in part, and following redemption in full thereof, to redeem the 

Class II Senior Notes, in whole or in part, to the extent required to 

cause the Senior Coverage Tests to be satisfied if recalculated 

following such redemption and as described in the Conditions, 

subject to payment of prior ranking amounts in accordance with 

the Priorities of Payment. See ‘‘Redemption upon Breach of 

Coverage Tests’’ below. 

If either of the Class III Coverage Tests is not met on any 


and confirmed by the Collateral Manager, Interest Proceeds which 

would otherwise be used to pay, among other things, interest on the 

Class IV Mezzanine Notes and the Subordinated Notes shall on the 

next Payment Date be used to redeem the Class I Senior Notes, in 

whole or in part, and following redemption in full thereof, to 

redeem the Class II Senior Notes, in whole or in part, and, 

following redemption in full thereof, to redeem the Class III 

Mezzanine Notes, in whole or in part to the extent required to 

7

Collateral Quality Tests 

Overcollateralisation Test 

Interest Coverage Test 

Reinvestment Test 

cause the Class III Coverage Tests to be satisfied if recalculated 

following such redemption and as described in the Conditions, 

subject, in each case, to payment of prior ranking amounts in 

accordance with the Priorities of Payment. See ‘‘Redemption upon 

Breach of Coverage Tests’’ below. If either of the Class IV Coverage 

Tests is not met on any Determination Date as calculated by the 

Collateral Administrator and confirmed by the Collateral Manager, 

Interest Proceeds which would otherwise be used to pay, among 

other things, interest on the Subordinated Notes shall on the next 

Payment Date be used to redeem the Class I Senior Notes, in whole 

or in part, and following redemption in full thereof, to redeem the 

Class II Senior Notes, in whole or in part, and, following 

redemption in full thereof, to redeem the Class III Mezzanine 

Notes, in whole or in part, and, following redemption in full 

thereof, to redeem the Class IV Mezzanine Notes, in whole or in 

part to the extent required to cause the Class IV Coverage Tests to 

be satisfied if recalculated following such redemption and as 

described in the Conditions, subject, in each case, to payment of 

prior ranking amounts in accordance with the Priorities of 

Payment. See ‘‘Redemption upon Breach of Coverage Tests’’ below. 

If the Interest Reinvestment Test is not met on any Determination 

Date, Interest Proceeds which would otherwise be available to the 

holders of the Subordinated Notes pursuant to the Priorities of 

Payment will be used for the acquisition of Substitute Collateral 

Debt Obligations or deposited in the Principal Account, pending 

reinvestment in Substitute Collateral Debt Obligations to the extent 

necessary to cause the Interest Reinvestment Test to be met if 

recalculated following such purchase or deposit, up to an amount 

up to but not exceeding 25 per cent. of the Interest Proceeds so 

available. 

Means the Collateral Quality Tests as set out in the Collateral 

Management Agreement being the Minimum Diversity Test, the 

Maximum Weighted Average Life Test, the Maximum Portfolio 

Rating Test, the Minimum Weighted Average Spread Test, the 

Moody’s Minimum Weighted Average Recovery Rate Test, the 

S&P Minimum Weighted Average Recovery Rate Test, the S&P 

CDO Monitor Test, and the S&P CDO Evaluator Test, each as 

defined herein. 

Means, as of any Measurement Date, the ratio (expressed as a 

percentage) obtained by dividing the Par Coverage Numerator by 

the aggregate principal amount outstanding for each relevant Class 

of Notes. 

Means, as at any Measurement Date, the ratio (expressed as a 

percentage) obtained by dividing (a) the Interest Coverage 

Numerator by (b) the sums of the scheduled interest payments 

due and payable on the next following payment date for each 

relevant Class of Notes. 

If the Interest Reinvestment Test is not met on any Determination 

Date, Interest Proceeds which would otherwise be available to the 

holders of the Subordinated Notes pursuant to the Priorities of 

Payment will be used for the acquisition of Substitute Collateral 

Debt Obligations or deposited in the Principal Account, pending 

reinvestment in Substitute Collateral Debt Obligations to the extent 


8

Consequences of Non-Payment of 

Interest: 


up to but not exceeding 25 per cent. of the Interest Proceeds so 

available. 

Senior Notes: Non-payment of interest in respect of the Class I 

Senior Notes or the Class II Senior Notes will (upon expiry of the 

applicable grace period) constitute an Event of Default pursuant to 

Condition 10 (Events of Default), following the occurrence of which 

the security over the Collateral may become enforceable pursuant 

to the terms of Condition 11 (Enforcement). 

Mezzanine Notes: For so long as any of the Senior Notes remain 

Outstanding, non-payment of interest on the Mezzanine Notes will 

not constitute an Event of Default under the Class III Mezzanine 

Notes or the Class IV Mezzanine Notes. 

To the extent that interest payments on the Class III Mezzanine 

Notes or the Class IV Mezzanine Notes are not made on the 

relevant Payment Date in such circumstances, an amount equal to 

such unpaid interest will be added to the principal amount 

outstanding of the Class III Mezzanine Notes or the Class IV 

Mezzanine Notes and, with effect from and including such Payment 

Date, interest will accrue on such unpaid amount at the rate of 

interest applicable to such Notes. 

Following redemption in full of the Senior Notes, non-payment of 

interest on the Class III Mezzanine Notes shall constitute an Event 

of Default and shall not be subject to any deferral. However, for so 

long as any of the Class III Mezzanine Notes remain Outstanding, 

non-payment of interest on the Class IV Mezzanine Notes shall not 

constitute an Event of Default and shall be subject to deferral. 

Following redemption in full of the Class III Mezzanine Notes, 

non-payment of interest on the Class IV Mezzanine Notes shall 

constitute an Event of Default and shall not be subject to any 

deferral. 

Non-payment of interest on the Mezzanine Notes could follow 

from: 

* the non-availability of Interest Proceeds and/or Principal 

Proceeds on the relevant Payment Date; or 

* a failure to satisfy one or more of the Coverage Tests 

applicable to each such Class of Notes and the diversion of 

Principal Proceeds and/or Interest Proceeds towards (x) 

redemption of the Class I Senior Notes and, thereafter, the 

Class II Senior Notes (in the case of the Senior Coverage 

Tests), or (y) redemption of the Class I Senior Notes and, 

thereafter, the Class II Senior Notes and, thereafter, the Class 

III Mezzanine Notes and, as the case may be, thereafter, the 

Class IV Mezzanine Notes (in the case of the Mezzanine 

Coverage Tests). 

See ‘‘Diversion of Interest Proceeds’’ above. 

Subordinated Notes: Non-payment of interest on the Subordinated 

Notes as a result of the non-availability of Interest Proceeds, 

including due to a failure to satisfy any Coverage Test will not 

constitute an Event of Default in any circumstances. 

Structured Combination Notes: Non-payment of such amount 

corresponding to interest on any of the Structured Combination 

9

Principal Repayments: 

Reinvestment Period: 

Non-Call Period: 

Redemption at Maturity: 

Redemption at the 

Option of the Subordinated 

Noteholders: 

Notes will only affect such Structured Combination Notes to the 

extent that the corresponding Components of such Structured 

Combination Notes are affected as described above. 

Principal repayments of the Notes will be made in the following 

circumstances: 

(a) on the Maturity Date of the Notes; 

(b) after the occurrence of an Effective Date Rating Event; 

(c) on the Rated Notes upon breach of any Coverage Test 

relating to such Notes; 

(d) after expiry of the Non-Call Period but prior to expiry of the 

Reinvestment Period, at the discretion of the Collateral 

Manager, acting on behalf of the Issuer, out of Principal 

Proceeds; 

(e) pursuant to an optional redemption of the Notes in full by the 

Subordinated Noteholders: 

(i) after expiry of the Non-Call Period; or 

(ii) following the occurrence of a Relevant Tax Event; 

(f) after the Reinvestment Period, out of Principal Proceeds 

other than in the case of either Unscheduled Principal 

Proceeds or Sale Proceeds designated for reinvestment in 

Substitute Collateral Debt Obligations by the Collateral 

Manager in accordance with the terms of the Collateral 

Management Agreement; and 

(g) upon failure to appoint a successor Collateral Manager 

within 90 days of the resignation or termination of the 

appointment of the Collateral Manager; 

each on a Payment Date (subject to the Priorities of Payment and 

save where provided herein) and as described in further detail 

below. See Condition 7 (Redemption and Purchase). The 

corresponding Components of the Structured Combination Notes 

will be redeemed on the same terms as the Classes of Notes of 

which they are comprised and the Structured Combination Notes 

will be redeemed on a pro rata basis. 

The period from the Closing Date to and including 26 July 2012 (or 

if such day is not a Business Day the next following Business Day). 

The period from the Closing Date to but excluding 26 July 2010 (or 

if such day is not a Business Day the next following Business Day). 

Each Class of the Rated Notes will mature at their principal 

amount outstanding, and the Subordinated Notes will be redeemed 

at their outstanding principal amount together with interest equal 

to the excess of the remaining Principal Proceeds over their 

outstanding principal amount to be applied towards such 

redemption pursuant to the Priorities of Payment, on 

26 September 2022 (subject to adjustment for non-Business Days 

in accordance with the Conditions) (the ‘‘Maturity Date’’), in each 

case, unless redeemed or repaid prior thereto. The average life of 

the Rated Notes of each Class is expected to be shorter than the 

number of years from the Closing Date until the Maturity Date. 

All (but not some only) of the Class I Senior Notes, the Class II 

Senior Notes, the Class III Mezzanine Notes, the Class IV 

Mezzanine Notes and the Subordinated Notes shall be redeemed, 

10

at their applicable Redemption Prices (set out below), by the Issuer 

acting at the direction of the holders of the Subordinated Notes 

acting by Extraordinary Resolution on any Payment Date after the 

end of the Non-Call Period, commencing on the Payment Date 

falling on or about 26 September 2010, or on any Payment Date, 

upon the occurrence of a Relevant Tax Event, in each case, subject 

to the satisfaction of certain conditions set out in Condition 7(b) 

(Optional Redemption). 

Redemption upon 

Breach of Coverage 

Tests: 

Redemption Prices upon Optional Redemption: 

Class I Senior Notes: Par, together with interest accrued thereon to 

the date of redemption. 

Class II Senior Notes: Par, together with interest accrued thereon to 

the date of redemption. 

Class III Mezzanine Notes: Par, together with interest accrued 

thereon to the date of redemption. 

Class IV Mezzanine Notes: Par, together with interest accrued 

thereon to the date of redemption. 

Subordinated Notes: Each Subordinated Note’s pro rata share of the 

amounts payable pursuant to paragraphs (Q) and (S) of Condition 

3(c)(ii) (Application of Principal Proceeds) with any excess of such 

amount over the then outstanding principal amount of such Note 

being treated as interest. 

Structured Combination Notes: The Redemption Price of the Class 

V Structured Combination Notes will be equal to the Redemption 

Price applicable to the Class V Subordinated Component and the 

OAT Security Component, the latter payable by delivery of the 

OAT Strips corresponding to the OAT Strips Component (or 

payment of the proceeds of any such OAT Strips, having already 

matured). 

The Redemption Price of the Class VI Structured Combination 

Notes will be equal to the Redemption Price applicable to the Class 

VI Subordinated Component and the Natexis Zero Coupon 

Security Component, the latter payable by delivery of the Natexis 

Zero Coupon Notes corresponding to such Component (or 

payment of the proceeds of any such Natexis Zero Coupon 

Notes, having already matured). 

In the event that either of the Senior Coverage Tests is not satisfied 

on any Determination Date as calculated by the Collateral 

Administrator and confirmed by the Collateral Manager, on the 

Payment Date next following such Determination Date, Interest 

Proceeds and thereafter Principal Proceeds will be used, subject to 

the Priorities of Payment, to the extent necessary and available, to 

redeem the Class I Senior Notes, in whole or in part, and following 

redemption in full thereof, to redeem the Class II Senior Notes, in 

whole or in part to the extent required to cause each Senior 

Coverage Test to be satisfied if recalculated following such 

redemption. If either of the Class III Coverage Tests is not 

satisfied on any Determination Date as calculated by the Collateral 

Administrator and confirmed by the Collateral Manager, on the 

Payment Date next following such Determination Date, Interest 

Proceeds, and thereafter Principal Proceeds will be used, subject to 

the Priorities of Payment, to the extent necessary and available, to 

11

Redemption upon an Effective Date 

Rating Event: 

Redemption upon 

Failure to Appoint a Replacement 

Collateral Manager: 

Repayments of Principal 

on and Rights under the Structured 

Combination Notes: 



whole or in part, and, following redemption in full thereof, to 

redeem the Class III Mezzanine Notes, in whole or in part, to the 

extent required to cause each Class III Coverage Test to be satisfied 

if recalculated following such redemption and repayment. If either 

of the Class IV Coverage Tests is not satisfied on any 


and confirmed by the Collateral Manager, on the Payment Date 

next following such Determination Date, Interest Proceeds, and 

thereafter Principal Proceeds will be used, subject to the Priorities 

of Payment, to the extent necessary and available, to redeem the 

Class I Senior Notes, in whole or in part, and following redemption 

in full thereof, to redeem the Class II Senior Notes, in whole or in 

part, and, following redemption in full thereof, to redeem the Class 

III Mezzanine Notes, in whole or in part, and, following 

redemption in full thereof, to redeem the Class IV Mezzanine 

Notes, in whole or in part, to the extent required to cause each 

Class IV Coverage Test to be satisfied if recalculated following such 

redemption and repayment. See Conditions 3(c) (Priorities of 

Payment) and 7(c) (Redemption upon Breach of Coverage Tests). 

In the event that an Effective Date Rating Event has occurred and 

is continuing on the first Business Day prior to the Payment Date 

(and each subsequent Payment Date thereafter to the extent 

required) next following the Initial Effective Date or the Final 

Effective Date (as applicable), Interest Proceeds and thereafter 

Principal Proceeds will be applied on such Payment Date to redeem 

the Class I Senior Notes, in whole or in part, and following 



redeem the Class III Mezzanine Notes, in whole or in part, and, 

following redemption in full thereof, to redeem the Class IV 

Mezzanine Notes, in whole or in part, until fully redeemed or, if 

earlier, until an Effective Date Rating Event is no longer 

continuing. See Condition 7(d) (Redemption upon an Effective 

Date Rating Event). 

In the event that either or both of the Collateral Managers resigns 

or its appointment is terminated pursuant to the Collateral 

Management Agreement and a new collateral manager has not 

been appointed in accordance with the provisions of the Collateral 

Management Agreement within 90 days of receipt of notice of such 

termination or resignation, all (but not some only) of the Class I 

Senior Notes, the Class II Senior Notes, the Class III Mezzanine 

Notes, the Class IV Mezzanine Notes and the Subordinated Notes 

shall be redeemed at their applicable Redemption Prices on the next 

following Payment Date in accordance with the Priorities of 

Payment set out in Condition 3(c)(ii) (Application of Principal 

Proceeds) and subject to the payment of any prior ranking 

amounts. See Condition 7(g) (Redemption upon Failure to Appoint 

a Replacement Collateral Manager). 

On each Payment Date on which any repayments of principal are 

made in respect of the Subordinated Notes, a portion of such 

payment shall be allocated to the Structured Combination Notes of 

which the Subordinated Component is a part in the proportion that 

the principal amount of such Component bears to the principal 

12

amount of the Class as a whole (including the related Components 

for the purposes of such calculation). Subject as provided below, no 

other payments in respect of principal will be made on the 

Structured Combination Notes. 

In addition, the holders of any Structured Combination Notes shall 

have all the rights of the holder of a Subordinated Note 

corresponding to the Subordinated Component of which the 

Structured Combination Notes are comprised as if they were a 

direct holder thereof. 

Security for the Notes: 

The Notes will be secured by (amongst other things) a portfolio of 

Collateral Debt Obligations including: 

(a) 

(b) 

(c) 

Senior Secured Loans, Second Lien Loans and Mezzanine 

Obligations of various obligors denominated in Euro; and/or 

Currency Swap Obligations which shall each comprise: 

(i) 

(ii) 

a Senior Secured Loan, Second Lien Loan or Mezzanine 

Obligation denominated in United States dollars, 

Canadian dollars, Australian dollars, pounds sterling 

or any lawful currency (other than the Euro) of a 

Qualifying Country (each a ‘‘Non-Euro Obligation’’) 

which satisfies each of the Eligibility Criteria other than 

that relating to its currency of denomination; and 

a Currency Swap Transaction entered into with a 

Currency Swap Counterparty in respect of such 

obligation referred to in (i) above pursuant to which 

the payments of principal, interest and other amounts in 

respect of such Non-Euro Obligation are exchanged for 

amounts in Euros. See ‘‘Description of the Portfolio – 

Currency Swap Obligations’’ below. 

in the event that any such securities are acquired by the Issuer, 

Synthetic Securities which are linked to obligations with the 

characteristics of Senior Secured Loans, Second Lien Loans 

or Mezzanine Obligations. 

The Notes will also be secured by certain other assets of the Issuer. 

See Condition 4(a) (Security). 

The Structured Combination Notes will be secured solely to the 

extent to which the respective underlying Components comprising 

the Structured Combination Notes are secured. The Class V 

Structured Combination Notes will have the benefit of an 

assignment, by way of security, relating to the OAT Strips 

pursuant to the Trust Deed and a pledge over the OAT Strips 

comprising the OAT Strips Portion pursuant to the OAT Strips 

Pledge Agreement for the benefit of the Class V Structured 

Combination Noteholders only. 

The Class VI Structured Combination Notes will have the benefit 

of an assignment, by way of security, relating to the Natexis Zero 

Coupon Notes, pursuant to the Trust Deed and a pledge over the 

Natexis Zero Coupon Notes comprising the Natexis Zero Coupon 

Notes Portion pursuant to the Natexis Zero Coupon Notes Pledge 

Agreement for the benefit of the Class VI Structured Combination 


13

Purchase of Collateral Debt 

Obligations: 

A portfolio of Senior Secured Loans, Second Lien Loans and 

Mezzanine Obligations that at the time of their acquisition on 

behalf of the Issuer complies with the Eligibility Criteria described 

herein will be purchased on behalf of the Issuer by the Collateral 

Manager either (i) on or about the Closing Date or (ii) during the 

Investment Period (as defined below), out of the net proceeds of the 

issue of the Notes deposited in the Additional Collateral Account 

on the Closing Date and sums standing to the credit of the Principal 

Account as described herein (together, the ‘‘Final Portfolio’’). The 

Issuer shall be required to purchase Collateral Debt Obligations 

with an aggregate principal amount of A250,000,000 by the Initial 

Effective Date and an aggregate principal amount of A300,000,000 

(the ‘‘Target Par Amount’’) by the end of the Investment Period. It 

is anticipated that the Issuer will have purchased, or entered into 

agreements to purchase, Collateral Debt Obligations with an 

aggregate principal amount of approximately A200,000,000 on or 

about the Closing Date. The Additional Collateral Debt 

Obligations purchased on behalf of the Issuer by the Collateral 

Manager during the Investment Period will, at the time of their 

acquisition, satisfy the Eligibility Criteria and the purchase thereof 

will be required to satisfy the Reinvestment Criteria. 

It is expected that substantially all of the Collateral Debt 

Obligations will have ratings that are below investment grade and 

accordingly will have greater credit and liquidity risk than 

obligations of investment grade sovereign or corporate entities. 

See ‘‘Risk Factors. 

The Collateral Managers will use their reasonable endeavours to 

procure that: 

(a) 

(b) 

the aggregate principal amount of the Collateral Debt 

Obligations held or committed to be purchased is equal to 

at least A250,000,000 as at the Initial Effective Date and at 

least 100 per cent. of the Target Par Amount as at the Final 

Effective Date; 

the Collateral Quality Tests (consisting of the Minimum 

Diversity Test, the Maximum Weighted Average Life Test, 

the Maximum Portfolio Rating Test, the Minimum Weighted 

Average Spread Test, the Moody’s Minimum Weighted 

Average Recovery Rate Test, the S&P Minimum Weighted 

Average Recovery Rate Test, the S&P CDO Monitor Test, 

and the S&P CDO Evaluator Test), the Portfolio Profile Tests 

and the Coverage Tests (consisting of the Senior Par Value 

Test, the Senior Interest Coverage Test, the Mezzanine Par 

Value Tests, the Mezzanine Interest Coverage Tests and the 

Interest Reinvestment Test) are satisfied with respect to the 

Collateral Debt Obligations held or committed to be 

purchased as at the Final Effective Date. Failure to satisfy 

such tests will result in the occurrence of an Effective Date 

Rating Event which, if continuing on the second Business 

Day prior to the next Payment Date, could result in 

redemption of the Notes. See ‘‘Description of the Portfolio’’ 

and Condition 7(d) (Redemption upon Effective Date Rating 

Event). 

14

Investment Period: 

Collateral Enhancement 

Obligations: 

Management of Collateral: 

The period from and including the Closing Date up to but 

excluding the date which is the earlier of: (a) the date designated for 

such purpose by the Collateral Manager, acting on behalf of the 

Issuer, by written notice to the Trustee, the Issuer and the 

Collateral Administrator pursuant to the Collateral Management 

Agreement, subject to the Effective Date Requirements having been 

satisfied; and (b) the date which falls twelve months after the 

Closing Date, or if such day is not a Business Day, the immediately 

following Business Day. 

Collateral Enhancement Obligations comprise warrants and equity 

securities (excluding Defaulted Equity Securities), including, 

without limitation, warrants relating to Mezzanine Obligations 

and any equity security received upon conversion, exchange or 

exercise of an option under, or otherwise in respect of, a Collateral 

Enhancement Obligation, or any warrant or equity security 

purchased as part of a unit with a Collateral Debt Obligation, 

provided that such Collateral Enhancement Obligations may not 

constitute Margin Stock. The ratings assigned by the Rating 

Agencies to each Class of the Rated Notes do not take into account 

the value of Collateral Enhancement Obligations. Collateral 

Enhancement Obligations are excluded from any determination 

of satisfaction of the Coverage Tests, the Collateral Quality Tests 

or the Portfolio Profile Tests and neither the Eligibility Criteria nor 

the Reinvestment Criteria apply to Collateral Enhancement 

Obligations. Collateral Enhancement Obligations will be 

purchased on behalf of the Issuer by the Collateral Manager in 

accordance with the Collateral Management Agreement as part of a 

unit with Collateral Debt Obligations or be purchased 

independently out of the Balance standing to the credit of the 

Collateral Enhancement Account or amounts advanced to the 

Issuer by the Collateral Manager for such purpose from time to 

time. 

The costs of exercising any option or warrant comprised in a 

Collateral Enhancement Obligation shall be payable out of the 

Balance standing to the credit of the Collateral Enhancement 

Account from time to time (which shall be funded out of amounts 

which would otherwise be payable to the Subordinated 

Noteholders in accordance with the Priorities of Payment) or, in 

circumstances where the Balance standing to the credit of the 

Collateral Enhancement Account is insufficient to fund such 

exercise, out of amounts which have been advanced by the 

Collateral Manager, by way of a Collateral Manager Advance. 

Collateral Manager Advances may also be made to the Issuer for 

general purposes. See ‘‘Description of the Portfolio -Management 

of the Portfolio – Collateral Enhancement Obligations’’. Failure of 

the Issuer for any reason to repay any Collateral Manager Advance 

shall not constitute an Event of Default in respect of the Notes. 

Subject to the terms of the Collateral Management Agreement, the 

Collateral Managers shall make investment decisions and purchase 

on behalf of the Issuer the Collateral Debt Obligations (including 

all Additional Collateral Debt Obligations and Substitute 

Collateral Debt Obligations) respectively managed by them. The 

Collateral Managers shall, as an ancillary function, monitor the 

performance and credit quality of the Collateral Debt Obligations 

managed respectively by them on an ongoing basis. In discharging 

15

their respective functions under the Collateral Management 

Agreement each of the Collateral Managers shall ensure that the 

portion of the Portfolio for which it is responsible is managed in 

compliance with the terms of the Collateral Management 

Agreement and the Conditions of the Notes. Natexis Banques 

Populaires will procure that Natexis Asset Management will 

comply with its obligations as a Collateral Manager under the 

Collateral Management Agreement (including its obligation to 

manage the categories of Collateral Debt Obligations to be 

managed by it in compliance with the Collateral Management 

Agreement and the Conditions of the Notes). The Collateral 

Managers shall prior to making investment or disposal decisions 

consult with each other with a view to ensuring that the Portfolio 

complies with the terms of the Collateral Management Agreement 

and the Conditions of the Notes (and, in particular to ensure 

compliance with the obligations of the Collateral Managers 

thereunder in respect of the Investment Objectives and the 

Collateral Quality Tests to the extent required under the terms of 

the Collateral Management Agreement). 

Sale of Collateral Debt Obligations: Subject to the terms of the 

Collateral Management Agreement, the following categories of 

Collateral Debt Obligations or Defaulted Equity Securities owned 

by the Issuer may be sold in the following circumstances: 

(a) at any time: 

(i) any Defaulted Obligation; 

(ii) any Defaulted Equity Security; 

(iii) any Credit Risk Obligation; and 

(iv) any Credit Improved Obligation; 

(b) at any time during the Reinvestment Period: any Collateral 

Debt Obligation which is not a Credit Improved Obligation, a 

Credit Risk Obligation or a Defaulted Obligation provided 

that all such sales (measured by reference to the aggregate 

Principal Balance of the Collateral Debt Obligations 

(excluding any Credit Improved Obligations, Credit Risk 

Obligations or Defaulted Obligations) sold in that year (each 

such year being a year from, but excluding, the Closing Date 

or, as the case may be an anniversary thereof, to, but 

excluding, the next succeeding anniversary thereof)(and 

excluding any sales pursuant to paragraph (a) above)) do 

not exceed 20 per cent. of the CDO Principal Balance as at the 

most recent to have occurred of the Closing Date and each 

anniversary thereof. 

subject in each case to certain restrictions described under 

‘‘Description of the Portfolio – Management of the Portfolio – 

Overview’’ below. 

Treatment of Sale Proceeds and Principal Proceeds: The proceeds of 

sale of Collateral Debt Obligations in the circumstances provided 

above, together with any other Principal Proceeds received, will be 

applied by the Collateral Administrator, acting on behalf of the 

Issuer: 

16

Treatment of Sale Proceeds as 

Interest Proceeds: 

(a) 

(b) 

(c) 

during the Non-Call Period: in the acquisition of Substitute 

Collateral Debt Obligations, subject to satisfaction of the 

Reinvestment Criteria (each as described under ‘‘Description 

of the Portfolio’’ below) or in payment into the Principal 

Account pending such reinvestment (save in the case of the 

proceeds of sale of any Collateral Debt Obligations above 

which represent accrued interest which the Collateral 

Manager may at its discretion designate as Interest Proceeds 

to be paid into the Interest Account); 

following expiry of the Non-Call Period but during the 

remainder of the Reinvestment Period: either, at the 

discretion of the Collateral Manager: 

(i) in the acquisition of Substitute Collateral Debt 

Obligations, subject to satisfaction of the 

Reinvestment Criteria, or in payment into the 

Principal Account pending such reinvestment (or, in 

the case of proceeds of sale representing accrued interest 

as referred to in paragraph (a) above, into the Interest 

Account); or 

(ii) in payment into the Principal Account, for disbursement 

on the next following Payment Date in redemption of 

each Class of Notes in accordance with the Priorities of 

Payment; and 

following the expiry of the Reinvestment Period: 

(i) in the case of Unscheduled Principal Proceeds and Sale 

Proceeds (other than Sale Proceeds of Defaulted 

Obligations) designated for reinvestment by the 

Collateral Manager in accordance with the terms of 

the Collateral Management Agreement, at the discretion 

of the Collateral Manager, either in the acquisition of 

Substitute Collateral Debt Obligations, subject to 

satisfaction of the Reinvestment Criteria and certain 

other criteria as described in ‘‘Description of the 

Portfolio – 7.8 Reinvestment Criteria’’, or payment 

into the Principal Account pending such reinvestment or 

in payment into the Principal Account for disbursement 


Notes in accordance with the Priorities of Payment; or 

(ii) in the case of Principal Proceeds other than 

Unscheduled Principal Proceeds and Sale Proceeds 

(other than Sale Proceeds of Defaulted Obligations) 

designated for reinvestment by the Collateral Manager, 

in payment into the Principal Account, for disbursement 


each Class of Notes in accordance with the Priorities of 

Payment. 

Subject to the terms of the Collateral Management Agreement, the 

Collateral Manager acting on behalf of the Issuer, shall allocate 

accrued interest included in the amount of any Sale Proceeds 

received in respect of Collateral Debt Obligations (provided always 

that such Sale Proceeds may not be allocated as Interest Proceeds 

and shall be allocated to the Principal Account if (i) they 

constituted part of the principal amount of a Collateral Debt 

17

Treatment of Interest Proceeds: 

Accounts: 

Interest Rate Hedge Agreement: 

Limited Recourse: 

Obligation at the time it was bought including any Purchased 

Accrued Interest and any accrued interest or other sum that has, 

under the terms of such Collateral Debt Obligation, been 

capitalised as principal thereafter; and (ii) (a) the Class IV Par 

Value Ratio is less than such ratio as at the Closing Date; or (b) the 

aggregate of such Sale Proceeds is equal to or less than 100% of the 

purchase price for such Collateral Debt Obligations). Such Sale 

Proceeds designated as Interest Proceeds as provided above shall be 

applied in accordance with the Priorities of Payment set out in 

Condition 3(c)(i) (Application of Interest Proceeds). 

The Interest Proceeds of Collateral Debt Obligations received will 

be transferred to the Payment Account and, on each Payment Date, 

applied subject to and in accordance with the Priorities of Payment 

and the Conditions. In the event that the Interest Reinvestment 

Test is not satisfied on the related Determination Date, Interest 

Proceeds will on the next Payment Date be applied, subject to and 

in accordance with the Priorities of Payment and the Conditions, in 

the acquisition of Substitute Collateral Debt Obligations, subject to 

satisfaction of the Reinvestment Criteria (each as described under 

‘‘Description of the Portfolio’’ below), or in payment into the 

Principal Account pending such reinvestment to the extent 



not exceeding 25 per cent. of the Interest Proceeds that would 

otherwise be payable to the holders of the Subordinated Notes. 

For the purposes of the Notes, the Issuer shall, prior to the Closing 

Date, establish with the Account Bank the Collection Account, 

which shall be sub-divided in the ledgers of the Account Bank into 

the Principal Account and the Interest Account, the Expense 

Reserve Account, the Additional Collateral Account, the Collateral 

Enhancement Account, the Payment Account, the Synthetic 

Collateral Account, the Retained Portion Account and the 

Currency Accounts. 

The Issuer may (depending on the composition of the Portfolio) on 

or following the Closing Date enter into an interest rate hedge 

transaction with the Interest Rate Hedge Counterparty (in 

compliance with Rating Agency requirements) in order to protect 

the Issuer against interest rate exposure in the event of changes in 

the level of EURIBOR rates. 

The obligations of the Issuer to pay amounts due and payable in 

respect of the Notes and to the other Transaction Creditors at any 

time shall be limited to the proceeds available at such time to make 

such payment in accordance with the Conditions and the Trust 

Deed. 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. Payments on the Notes both 

prior to and following enforcement of the security over the 

Collateral are subordinated to the prior payment of certain fees 

and expenses of the Issuer. The net proceeds of the realisation of 

the security over the Collateral following an Event of Default may 

be insufficient to pay all amounts due to the Noteholders after 

making payments to other creditors of the Issuer ranking prior to, 

or pari passu with, the holders of the relevant Notes. In the event of 

a shortfall in such proceeds, the Issuer will not be obliged to pay, 

18

Withholding Tax: 

The Offering: 

Ratings: 

and the other assets (if any) of the Issuer will not be available for 

payment of, any such shortfall, all claims in respect of which shall 

be extinguished. Such shortfall will be borne by the Class I Senior 

Noteholders, the Class II Senior Noteholders, the Class III 

Mezzanine Noteholders, the Class IV Mezzanine Notes and the 

Subordinated Noteholders in inverse order of the Priorities of 

Payment. The Structured Combination Notes shall be limited 

recourse obligations of the Issuer to the extent of their respective 

Components. No Noteholder of any Class other than Class V 

Structured Combination Notes shall have recourse to the OAT 

Strips Collateral (as defined below). No Noteholder of any Class 

other than Class VI Structured Combination Notes shall have 

recourse to the Natexis Zero Coupon Collateral (as defined below). 

Furthermore, none of the Noteholders of any Class or the other 

Transaction Creditors (nor any other person acting on behalf of 

any of them save for any receiver appointed by the Trustee under 

the Trust Deed) shall be entitled at any time until two years and one 

day after the date of redemption of the latest maturing Note to 

institute against the Issuer, or join in any institution against the 

Issuer of, any bankruptcy, reorganisation, arrangement, 

insolvency, examination, winding-up or liquidation proceedings 

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 

Transaction Creditors, 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. 

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 by 

or within Ireland, or any political sub-division or any authority 

therein or thereof having power to tax, unless such withholding or 

deduction is required by law. For the avoidance of doubt, the Issuer 

shall not be required to gross up any payments made to the 

Noteholders 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). 

The Notes of each Class will be offered (a) outside of the United 

States to non-U.S. Persons (as defined in Regulation S under the 

Securities Act) in ‘‘offshore transactions’’ in compliance with 

Regulation S under the Securities Act and (b) within the United 

States to qualified institutional buyers (‘‘QIBs’’) in reliance on Rule 

144A under the Securities Act who are Qualified Purchasers for the 

purposes of Section 3(c)(7) of the Investment Company Act. 

It is a condition of the issuance of the Notes that the following 

Classes of Notes be assigned the following ratings by Moody’s 

Investors Service, Inc. (‘‘Moody’s’’) and Standard & Poor’s Rating 

Services, a division of The McGraw-Hill Companies, Inc. (‘‘S&P’’), 

respectively: Class I Senior Notes: ‘‘Aaa’’ from Moody’s and 

‘‘AAA’’ from S&P; Class II Senior Notes: ‘‘Aa2’’ from Moody’s 

19

Authorised Denominations: 

Form, Registration and Transfer of 

the Notes: 

and ‘‘AA’’ from S&P; Class III Mezzanine Notes: ‘‘Baa2’’ from 

Moody’s and ‘‘BBB’’ from S&P and Class IV Mezzanine Notes: 

‘‘Ba2’’ from Moody’s and ‘‘BB’’ from S&P. It is expected that the 

Class V Structured Combination Notes will receive a rating of 

‘‘AAA’’ from S&P. 

The Issuer will request that each Rating Agency confirms its ratings 

assigned to each of the Class I Senior Notes, the Class II Senior 

Notes, the Class III Mezzanine Notes and the Class IV Mezzanine 

Notes on the Closing Date within 30 days after each of the Initial 

Effective Date and the Final Effective Date. The Subordinated 

Notes and the Class VI Structured Combination Notes will not be 

rated. See ‘‘Ratings of the Notes’’. 

The Regulation S Notes of each Class (including the Structured 

Combination Notes) will be issued in minimum denominations of 

A50,000 and integral multiples of A10,000 in excess thereof. The 

Rule 144A Notes of each Class (including the Structured 

Combination Notes) will be issued in minimum denominations of 

A250,000 and integral multiples of A10,000 in excess thereof. 

The Notes of any Class sold in off-shore transactions to non-U.S. 

Persons in compliance with Regulation S under the Securities Act 

will be represented by one or more permanent notes of each Class, 

in bearer form, without interest coupons or principal receipts 

attached (each, a ‘‘Regulation S Global Note’’), deposited with 

LaSalle Bank National Association as book-entry depositary (in 

such capacity, the ‘‘Depositary’’) pursuant to a depositary 

agreement (the ‘‘Depositary Agreement’’) expected to be dated the 

Closing Date between the Issuer, the Depositary and the Trustee 

and, on the basis of the depositary arrangements described below, 

will be treated as being issued in registered form for U.S. federal 

income tax purposes. See ‘‘Book-Entry Clearance Procedures and 

Certain Relevant Provisions of the Depositary Agreement’’. 

Neither U.S. Persons (as defined in Regulation S under the 

Securities Act) nor U.S. residents (as determined for the purposes 

of the Investment Company Act) may hold Regulation S Notes at 

any time. 

The Notes of any Class sold to persons who are qualified 

institutional buyers (‘‘QIBs’’) and Qualified Purchasers in reliance 

on Rule 144A under the Securities Act of 1933, as amended, will be 

represented by one or more permanent notes of each Class, in 

bearer form, without interest coupons or principal proceeds 

attached (each, a ‘‘Rule 144A Global Note’’), which will be 

deposited on or about the Closing Date with the Depositary and, 

on the basis of the depositary arrangements described below, will be 

treated as being issued in registered form for U.S. federal income 

tax purposes. See ‘‘Book-Entry Clearance Procedures and Certain 

Relevant Provisions of the Depositary Agreement’’. 

It is anticipated that the Depositary will (i) issue a certificated 

depositary interest (each, a ‘‘CDI’’) in respect of each Regulation S 

Global Note to HSBC Bank plc as common depositary (the 

‘‘Common Depositary’’) for Euroclear Bank S.A./N.V., as operator 

of the Euroclear System (‘‘Euroclear’’) and Clearstream Banking, 

société anonyme (‘‘Clearstream, Luxembourg’’) and their respective 

participants and (ii) issue a CDI in respect of each Rule 144A 

Global Note to HSBC Bank plc as Common Depositary for 

20

Acts of Structured Combination 

Noteholders: 

Euroclear and Clearstream, Luxembourg and their respective 

participants. Each of Euroclear and Clearstream, Luxembourg 

will record the beneficial interests in the CDIs representing the 

Regulation S Global Notes and the Rule 144A Global Notes, as the 

case may be (‘‘Book-Entry Interests’’). Book-Entry Interests in such 

CDIs will be shown on, and transfers thereof will be effected only 

through, records maintained in book-entry form by Euroclear and/ 

or Clearstream, Luxembourg, and their respective participants. See 

‘‘Book-Entry Clearance Procedures and Certain Relevant 

Provisions of the Depositary Agreement’’. 

Except in the limited circumstances described under ‘‘Form of the 

Notes – 2. Exchange for Definitive Certificates’’, Notes in definitive 

fully registered form (each, a ‘‘Definitive Certificate’’) will not be 

issued in exchange for beneficial interests in the Global Notes. 

Transfers of interests in the Global Notes are subject to certain 

restrictions and must be made in accordance with the procedures 

set forth in the Trust Deed. See ‘‘Form of the Notes’’, ‘‘Book-Entry 

Clearance Procedures and Certain Relevant Provisions of the 

Depositary Agreement’’ and ‘‘Transfer Restrictions’’. 

Each purchaser of Notes, in making its purchase will be required to 

make, or will be deemed to have made, certain acknowledgements, 

representations and agreements. See ‘‘Subscription and Sale’’ and 

‘‘Transfer Restrictions’’. The Issuer, the Trustee, each Transfer 

Agent and the Registrar will not recognise a transfer of Rule 144A 

Notes in breach of certain of such representations and agreements 

and such transfer will not operate to transfer any rights to the 

transferee. See ‘‘Subscription and Sale’’ and ‘‘Transfer 

Restrictions’’. 

The Subordinated Components of the Structured Combination 

Notes will be treated as Subordinated Notes represented by such 

Components for the purposes of requests, demands, authorisations, 

directions, notices, consents, waivers or other actions. The holders 

of the Structured Combination Notes shall be entitled to vote the 

Subordinated Components of such Notes, and the Structured 

Combination Noteholders will not otherwise be entitled to vote. 

Governing Law: 

The Notes and the Trust Deed will be governed by, and construed 

in accordance with, English law. 

Listing and Trading: 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 to trading on its regulated market. See 

‘‘General Information’’. 

Tax Status: 

See ‘‘Tax Considerations’’. 

ERISA Considerations: 

Except as described, and subject to the restrictions set forth, in 

‘‘Certain ERISA Considerations’’, the Rated Notes (other than the 

Class IV Mezzanine Notes) may be sold and transferred to benefit 

plan investors, including ERISA Plans, (as such terms are defined 

in ‘‘Certain ERISA Considerations’’) and the Class IV Mezzanine 

Notes, the Subordinated Notes and Structured Combination Notes 

may be sold and transferred to benefit plan investors, other than 

ERISA Plans. See ‘‘Certain ERISA Considerations’’. 

21

The Depositary: 

Additional Issuance: 

Pursuant to the Depositary Agreement, LaSalle Bank National 

Association (the ‘‘Depositary’’) will hold the Global Notes in 

custody and will issue the CDIs representing interests in the Global 

Notes of each Class. See ‘‘Book-Entry Clearance Procedures and 

Certain Relevant Provisions of the Depositary Agreement’’. 

The Issuer may issue and sell additional Class I Senior Notes, Class 

II Senior Notes, Class III Mezzanine Notes, Class IV Mezzanine 

Notes, Subordinated Notes and Structured Combination Notes, 

and use the proceeds thereof to purchase Additional Collateral 

Debt Obligations and, if applicable, enter into further interest rate 

protection transactions, subject to the conditions set out in 

Condition 17 (Further Issues). 

22

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 loans, securities and other financial assets with certain 

risk characteristics as described below and subject to the investment policies, restrictions and 

guidelines described in ‘‘Description of 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 holders 

of Notes 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 factors set out below 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 in accordance with its priority of payment pursuant to the Priorities of Payment. 

None of the Lead Manager, the Joint Lead Managers, the Collateral Managers or the Trustee 

undertakes to review the financial condition or affairs of the Issuer during the life of the 

arrangements contemplated by this Prospectus or to advise any investor or potential investor in the 

Notes of any information coming to the attention of the Lead Manager, the Joint Lead Managers, 

the Collateral Managers or the Trustee which is not included in this Prospectus. None of the Lead 

Manager, the Joint Lead Managers nor the Trustee undertakes to review the financial condition or 

affairs of the Collateral Managers during the life of the arrangements contemplated by 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 Structured Combination Notes 

Each of the risk factors herein applies to the Structured Combination Notes to the extent that 

the Components of such Structured Combination Notes correspond to the Underlying Notes to which 

these risk factors apply. 

In addition to the risks associated with the OAT Strips Collateral, the risks associated with an 

investment in the Class V Structured Combination Notes include the risks associated with an 

investment in the Subordinated Notes to the extent of the Class V Subordinated Component. Unless 

the Class V Structured Combination Notes are mentioned separately in these Risk Factors, 

descriptions of the risks associated with investments in the Subordinated Notes apply equally to an 

investment in the Class V Structured Combination Notes, to the extent of the Class V Subordinated 

Component. In addition, Class V Structured Combination Notes will be subject to the credit risk of 

the obligor under the OAT Strips Collateral. 

In addition to the risks associated with the Natexis Zero Coupon Collateral, the risks associated 

with an investment in the Class VI Structured Combination Notes include the risks associated with an 

investment in the Subordinated Notes to the extent of the Class VI Subordinated Component. Unless 

the Class VI Structured Combination Notes are mentioned separately in these Risk Factors, 

descriptions of the risks associated with investments in the Subordinated Notes apply equally to an 

investment in the Class VI Structured Combination Notes, to the extent of the Class VI Subordinated 

23

Component. In addition, Class VI Structured Combination Notes will be subject to the credit risk of 

the obligor under the Natexis Zero Coupon Collateral. 

1.4 Projections, Forecasts and Estimates 

Any projections, forecasts and estimates contained herein are forward looking statements and 

are based upon certain assumptions that the Collateral Manager considers reasonable. Projections are 

necessarily speculative in nature, and it can be expected that some or all of the assumptions 

underlying the projections will not materialize or will vary significantly from actual results. 

Accordingly, the projections are only an estimate. Actual results are likely to vary from the 

projections, and the variations may be material. 

Some important factors that could cause actual results to differ materially from those in any 

forward looking statements include changes in interest rates, market, financial or legal uncertainties, 

changes in law, the timing of acquisitions of Collateral Debt Obligations in the Portfolio, differences 

in the actual allocation of the Collateral Debt Obligations among asset categories from those 

assumed, the timing of acquisitions of the Collateral Debt Obligations, mismatches between the timing 

of accrual and receipt of Interest Proceeds and Principal Proceeds from the Collateral Debt 

Obligations in the Portfolio (particularly during the Initial Investment Period), defaults under 

Collateral Debt Obligations in the Portfolio and the effectiveness of the Hedge Agreements, among 

others. Consequently, the inclusion of projections herein should not be regarded as a representation 

by the Issuer, the Collateral Manager, the Trustee, Lead Manager or Joint Lead Managers or any of 

their respective Affiliates or any other person or entity of the results that will actually be achieved by 

the Issuer. 

None of the Issuer, the Collateral Manager, the Collateral Administrator, the Trustee, Lead 

Manager or Joint Lead Managers, any of their respective Affiliates or any other person has any 

obligation to update or otherwise revise any projections, including any revisions to reflect changes in 

economic conditions or other circumstances arising after the date hereof or to reflect the occurrence 

of unanticipated events, even if the underlying assumptions do not come to fruition. 

2. Relating to the Collateral 

2.1 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. The Collateral Debt Obligations pledged to secure the Notes will be Senior Secured 

Loans, Second Lien Loans and Mezzanine Obligations generally lent to or issued by various obligors 

with a principal place of business in Western Europe, the United States or Canada. 

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 level of Collateral securing the Notes will be established to withstand certain assumed 

deficiencies in payment caused by defaults on the related Collateral Debt Obligations. If, however, 

actual payment deficiencies exceed such assumed levels, payments on the Notes could be adversely 

affected. Whether and by how much defaults on the Collateral Debt Obligations adversely affect 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 

24

Collateral Debt Obligations is concentrated in any one issuer, 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. 

Disposal Risk 

To the extent that a default occurs with respect to any Collateral Debt Obligation and the 

Issuer or Trustee or any receiver 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 sub-investment grade leveraged loan markets means that 

the market value of such Collateral Debt Obligations at any time will vary, and may vary 

substantially, from the price at which such Collateral Debt Obligations were 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 on the timing of any recovery. 

Acquisition and Disposal Risk 

The financial markets may experience substantial fluctuations in prices for senior secured loans, 

senior unsecured loans, second lien loans and mezzanine obligations and limited liquidity for such 

obligations. No assurance can be made that the conditions giving rise to such price fluctuations and 

limited liquidity will not occur, subsist or become more acute following the Closing 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 to the extent 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 positions in declining markets will conversely cause 

its net asset value to decline as the value of unsold positions is marked to lower prices. 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 Obligations and could ultimately affect 

the ability of the Issuer to pay in full or redeem the Notes. 

Characteristics of Senior Secured Loans, Second Lien Loans and Mezzanine Obligations 

The Portfolio Profile Tests provide that on and after the Final Effective Date (and thereafter, to 

the extent required to do so under the Reinvestment Criteria), Collateral Debt Obligations with an 

aggregate Principal Amount of at least A276,000,000 should consist of Collateral Debt Obligations 

which constitute Senior Secured Loans and that Collateral Debt Obligations with an aggregate 

Principal Amount of not more than A24,000,000 may consist of Second Lien Loans and Mezzanine 

Obligations. Senior Secured Loans, Second Lien 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 often judged by the rating agencies to be below 

investment grade. Senior Secured Loans are typically at the most senior level of the capital structure 

with Second Lien Loans and Mezzanine Obligations being subordinated thereto or to any other 

senior debt of the obligor. Senior Secured Loans are often secured by specific collateral or guarantee, 

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 Secured Loans may be limited to share security over 

25

the obligor group. Second Lien Loans and Mezzanine Obligations often have the benefit of a second 

charge over such assets. 

Senior Secured 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. 

Second Lien Loans and Mezzanine Obligations generally take the form of medium term loans 

repayable shortly (perhaps six months or one year) after the Senior Secured Loans of the obligor 

thereunder. Because it is only repayable after the senior debt (and interest payments may be blocked 

to protect the position of senior debt interest in certain circumstances) it will carry a higher rate of 

interest to reflect the greater risk of it not being repaid. Due to the greater risk associated with 

Mezzanine Obligations as a result of their subordination below Senior Secured Loans of the obligor, 

mezzanine lenders are typically granted share options, warrants or higher cash paying instruments or 

payments in kind 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. 

The majority of Senior Secured Loans, Second Lien 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 may 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 Secured 

Loan, Second Lien Loan or Mezzanine Obligation may receive certain syndication or participation 

fees in connection with its purchase. Other fees payable in respect of a Senior Secured Loan, Second 

Lien Loan or Mezzanine Obligation, which are separate from interest payments on such loan, may 

include facility, commitment, amendment and prepayment fees. 

Risks Associated with Senior Secured Loans, Second Lien Loans and Mezzanine Obligations 

As a result of, among other things, the additional debt incurred by a borrower in the course of 

loan transactions, such borrower’s creditworthiness is often judged by the rating agencies to be below 

investment grade. In order to induce the banks and institutional investors to invest in a borrower’s 

loan facility, and to offer a favourable interest rate, the borrower often provides the banks and 

institutional investors with extensive information about its business, which is not generally available 

to the public. Because of the provision of confidential information, the unique and customised nature 

of a loan agreement, and the private syndication of the loan, loans 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. 

Senior Secured Loans, Second Lien Loans and Mezzanine Obligations also generally provide for 

restrictive covenants designed to limit the activities of the obligor 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 Secured Loan, Second Lien Loan or Mezzanine Obligation which 

is not waived by the lending syndicate normally is an event of acceleration which allows the syndicate 

to demand immediate repayment in full of the outstanding loan. The unique nature of the loan 

documentation may also create a degree of complexity in negotiating a secondary market purchase or 

sale which may not exist, for example, in the high yield bond market. 

Historically, investors in or lenders under European Senior Secured Loans, Second Lien 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, 

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 will be subject to 

greater disposal risk in the event that such assets are sold following enforcement of the security over 

26

the Collateral or otherwise. The European market for Second Lien Loans and Mezzanine Obligations 

is also generally less liquid than that for Senior Secured Loans, resulting in increased disposal risk for 

Second Lien Loans and Mezzanine Obligations. 

The fact that Second Lien Loans and Mezzanine Obligations are generally subordinated to any 

Senior Secured 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 thereunder of 

Second Lien Loans and Mezzanine Obligations in an enforcement situation. 

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. Second Lien Loans and Mezzanine Obligations also 

generally involve greater credit and liquidity risks than those associated with investment grade 

corporate obligations and Senior Secured 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. 

There is little historical data available as to the levels of defaults and/or recoveries that may be 

experienced on Second Lien Loans and Mezzanine Obligations and no assurance can be given as to 

the levels of default and/or recoveries that may apply to any Second Lien Loans and Mezzanine 

Obligations purchased by the Issuer. Recoveries on Senior Secured Loans, Second Lien Loans and 

Mezzanine Obligations will also be affected by the different bankruptcy regimes applicable in different 

jurisdictions and the enforceability of claims against the Obligors thereunder. See ‘‘Insolvency of 

Obligors under 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 of such 

Defaulted Obligation. In addition, such negotiations or restructuring may be quite extensive and 

protracted over time, 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 rating the Notes or any recovery rate used in the 

analysis of the Notes that may have been prepared for prospective Noteholders. 

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 payments or other 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 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. 

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 participation or 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 participation or sub-participation are 

27

eferred 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. In the case of a novation, the Issuer will obtain the right 

to receive from the borrower all payments of principal and interest to which it is entitled. 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 no 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, only be entitled to receive payments of principal and interest to the 

extent that the Selling Institution has received 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 may set-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 Collateral 

Manager has not and will not perform independent credit analyses of the Selling Institution. 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. 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 are generally not required to consider the interest of the Issuer in connection 

with the exercise of its votes. 

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. 

Additional risks are therefore associated with the purchase of Participations by the Issuer as 

opposed to Assignments. The Portfolio Profile Tests provide that Collateral Debt Obligations with an 

aggregate Principal Balance of not more than 20 per cent. of the CDO Principal Balance may consist 

of Synthetic Securities and not more than 30 per cent. of the CDO Principal Balance may consist of 

Participations together with Synthetic Securities, subject to further limits relating to the credit ratings 

assigned to the obligors in respect of such Participations and Synthetic Securities. 

28

Exercise of Rights under Collateral Enhancement Obligations 

The exercise of any rights or options under any Collateral Enhancement Obligation on behalf of 

the Issuer by the relevant Collateral Manager 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. 

If sufficient amounts are not so available, the Collateral Manager may, at its discretion, fund the 

payment of any such shortfall by way of a Collateral Manager Advance. However, the Collateral 

Manager is under no obligation to make any Collateral Manager Advances and there can be no 

assurance that the amounts 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. Collateral Manager Advances may be made for purposes other than acquiring or exercising 

rights with respect to a Collateral Enhancement Obligation. Any Collateral Manager Advance will be 

repaid (prior to the enforcement of security over the Collateral) from the Distributions and Sale 

Proceeds of Collateral Enhancement Obligations pursuant to Condition 3(c)(i)(X) (Application of 

Interest Proceeds), Condition 3(c)(ii)(P) (Application of Principal Proceeds) or Condition 3(i)(E) 

(Collateral Enhancement Account). Failure to exercise any such right or option may result in a 

reduction of the returns to the Subordinated Noteholders (and, potentially, Noteholders of other 

Classes). 

Collateral Enhancement Obligations and any income or return generated thereby are not taken 

into account for the purposes of determining satisfaction of, or required to satisfy, any of the 

Coverage Tests, Portfolio Profile Tests or Collateral Quality Tests. 

Counterparty Risk 

Participations, Synthetic Securities, Interest Rate Hedge Agreements and Currency Swap 

Agreements 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 relevant counterparty with respect to any 

such payments, the risks relating to which are discussed further below. See ‘‘Risks Relating to 

Synthetic Securities’’ below. 

2.2 Insolvency of Obligors under Collateral Debt Obligations 

The Collateral Debt Obligations may be subject to various laws enacted for the protection of 

creditors in the countries of the jurisdictions of incorporation of the obligors thereunder and, if 

different, in which the obligors conduct their business and in which they hold their 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 or its assets is located and 

may differ depending on the legal status of the obligor. 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 results in a 

corresponding variability of recovery rates for Senior Secured Loans, Second Lien Loans and 

Mezzanine Obligations entered into by obligors in such jurisdictions. No reliable historical data is 

available in respect of such recovery rates. 

2.3 The Target Amount 

The Issuer intends to enter into agreements on or about the Closing Date to purchase a 

substantial portion of the Portfolio. The prices paid for such Collateral Debt Obligations 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 Closing 

Date or the date of settlement of the applicable trade, if later. In addition, although such obligations 

are expected to satisfy the Eligibility Criteria at the time of the Issuer (or the Collateral Manager on 

behalf of the Issuer) entering into a binding commitment to purchase such obligations, it is possible 

that such obligations may no longer satisfy such Eligibility Criteria after entry into such binding 

commitment and therefore on or after the Closing Date due to intervening events. The requirement 

that the Eligibility Criteria be satisfied applies only at the time that any commitment to purchase a 

29

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. 

2.4 Considerations Relating to the Investment Period 

The Collateral Managers will, subject to the provisions of the Collateral Management 

Agreement, use all reasonable endeavours to make investment decisions in relation to the acquisition 

of additional Collateral Debt Obligations that satisfy the Interim Targets as at the Initial Effective 

Date, and the Collateral Quality Tests, the Coverage Tests and the Portfolio Profile Tests as at the 

Final Effective Date, and, in each case, at all times thereafter to the extent required to do so under 

the Reinvestment Criteria. The ability of the Collateral Managers, acting on behalf of the Issuer, to 

do so will depend on a number of factors beyond the control of the Issuer or the Collateral 

Managers including the condition of certain financial markets, general economic conditions and 

international political events and there can therefore be no assurance that such result will be achieved. 

To the extent it is not possible to purchase such Collateral Debt Obligations, the level of income 

receivable by the Issuer on the Collateral and the weighted average lives of the Notes may be 

adversely affected. The independent accountants appointed by the Issuer in accordance with the 

Collateral Management Agreement will be requested to issue, within 20 days of the Final Effective 

Date, a report confirming details of the aggregate principal amount of the Collateral Debt Obligations 

purchased or committed to be purchased as at such date and the computations of the Portfolio 

Profile Tests and the computations and results of the Collateral Quality Tests and the Coverage Tests 

by reference to such Collateral Debt Obligations. The Collateral Manager, acting on behalf of the 

Issuer, shall request that the Rating Agencies confirm the Initial Ratings assigned to the Class I 

Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine 

Notes within 30 days of the Initial Effective Date and the Final Effective Date. Failure to satisfy, as 

applicable, the Interim Targets or the Portfolio Profile Tests, the Collateral Quality Tests and the 

Coverage Tests as a result of any inability to purchase the Collateral Debt Obligations may result in 

the Rating Agencies not confirming the Initial Ratings assigned to the Class I Senior Notes, the Class 

II Senior Notes and/or the Class III Mezzanine Notes and/or the Class IV Mezzanine Notes on the 

Closing Date. A reduction or withdrawal of the ratings assigned to the Class I Senior Notes, the 

Class II Senior Notes and/or the Class III Mezzanine Notes and/or the Class IV Mezzanine Notes by 

the Rating Agencies as a result of such request for confirmation following the Initial Effective Date 

and/or the Final Effective Date and/or failure to satisfy the above tests will (subject as described in 

‘‘Description of the Portfolio – 4. Final Effective Date’’) result in redemption of the Notes on the 

Payment Date following each of the Initial Effective Date and the Final Effective Date to the extent 

required in order to cause such ratings to be reinstated and such tests to be satisfied. See Condition 

7(d) (Redemption upon Effective Date Rating Event). Any redemption of the Notes in the 

circumstances outlined above will reduce the leverage ratio of Subordinated Notes to the Collateral, 

which could adversely affect the level of returns to the holders of the Subordinated Notes. 

2.5 Collateral Managers 

Pursuant to the terms of the Collateral Management Agreement, the Collateral Managers have 

respectively agreed to make investment decisions in relation to the Portfolio, to monitor the Collateral 

and, acting on behalf of the Issuer, perform all investment-related duties and functions required to 

make and implement investment decisions in relation to the Collateral in accordance with the 

parameters and criteria set out in the Collateral Management Agreement. See ‘‘Description of the 

Portfolio’’ and ‘‘Description of the Collateral Management Agreement’’. The powers and duties of the 

Collateral Managers in making investment decisions in relation to the Collateral Debt Obligations 

include making investment decisions on the sale of certain of the securities in the Portfolio during the 

Reinvestment Period (subject to certain limits) and, at any time, upon the occurrence of certain events 

(including a Collateral Debt Obligation becoming a Defaulted Obligation, a Credit Improved 

Obligation or a Credit Risk Obligation), in accordance with the provisions of the Collateral 

Management Agreement. See ‘‘Description of the Portfolio’’. In undertaking this role, the Collateral 

Managers may review such available public information relating to the obligors or guarantors of 

Collateral Debt Obligations as they consider appropriate in their absolute discretion. Such review will 

not include due diligence of the kind common in relation to a primary securities offering. The liability 

of the Collateral Managers to the Issuer under the Collateral Management Agreement is limited to 

30

damage caused by acts or omissions constituting bad faith, negligence or wilful misconduct in the 

performance of the obligations of the Collateral Managers in their capacity as such. In the Collateral 

Management Agreement, Natexis Banques Populaires shall undertake to pay any loss, damage or 

other amount which Natexis Asset Management is liable to pay under the Collateral Management 

Agreement. 

The performance of any investment in the Notes may be dependent on, among other things, the 

ability of the Collateral Managers to make investment decisions in relation to the Portfolio and the 

performance of the Collateral Managers of their obligations under the Collateral Management 

Agreement. Although the Collateral Managers are required, pursuant to their entry into the Collateral 

Management Agreement, to commit an appropriate amount of their business efforts to making 

investment decisions in relation to the Portfolio, the Collateral Managers are not required to devote 

all of their time to such affairs and may continue to advise other investment funds or provide other 

management services in the future. The nature of, and risks associated with, the Collateral Debt 

Obligations to be acquired by the Issuer may differ materially from those investments and strategies 

undertaken historically by the Collateral Managers, including by reason of the diversity and other 

parameters required under the Collateral Management Agreement. Accordingly, there can be no 

assurance that the Issuer’s investments will perform as well as the past investments for any such 

accounts. 

2.6 The Portfolio 

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 have an opportunity to evaluate for themselves the relevant economic, financial and other 

information regarding the investments to be made by the Issuer and, accordingly, will be dependent 

upon the judgment and ability of the Collateral Managers in acquiring investments for purchase on 

behalf of the Issuer over time. Although the Collateral Managers will, subject to the provisions of the 

Collateral Management Agreement, use all reasonable endeavours to make investment decisions in 

relation to the acquisition of Collateral Debt Obligations that satisfy the Interim Targets as at the 

Initial Effective Date and the Collateral Quality Tests, the Coverage Tests and the Portfolio Profile 

Tests as at the Final Effective Date, and, in each case, at all times thereafter to the extent required to 

do so under the Reinvestment Criteria, the ability of the Collateral Managers, acting on behalf of the 

Issuer, to do so will depend on a number of factors beyond the control of the Issuer or the 

Collateral Managers including the condition of certain financial markets, general economic conditions 

and international political events. There can therefore be no assurance that the Issuer and the 

Collateral Managers will be successful in obtaining suitable investments or that, if such investments 

are made, the objectives of the Issuer and the Collateral Managers will be achieved. 

None of the Lead Manager, the Joint Lead Managers, the Trustee or the Collateral 

Administrator has made any investigation into the obligors or guarantors of the Collateral Debt 

Obligations and prospective purchasers of Notes should not rely on such parties having made any 

such investigations. The value of the Collateral Debt Obligations may fluctuate from time to time (as 

a result of substitution or otherwise) and none of the Issuer, the Trustee, the Lead Manager, the 

Joint Lead Managers, the Custodian, the Collateral Managers or the Collateral Administrator 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 Collateral Managers, the Collateral Administrator, 

the Lead Manager, the Joint Lead Managers 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 receivable therefrom from time to time. 

2.7 Collateral Reinvestment Provisions 

During the Reinvestment Period, the Collateral Manager may make investment decisions in 

relation to the disposal of certain Collateral Debt Obligations and the reinvestment of the Sales 

Proceeds thereof in Substitute Collateral Debt Obligations subject to compliance with the 

Reinvestment Criteria and certain other conditions. The earnings with respect to such Substitute 

Collateral Debt Obligations will depend, among other factors, on reinvestment rates available at the 

time and on the availability of investments satisfying the Reinvestment Criteria and acceptable to the 

31

Collateral Manager. The need to satisfy such Reinvestment Criteria and identify acceptable 

investments may require the purchase by the Collateral Manager, acting on behalf of the Issuer, of 

Substitute Collateral Debt Obligations with a lower yield than those initially acquired or require that 

such Sale Proceeds 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 Collateral 

Management Agreement on the Collateral Managers’ ability to buy and sell Collateral Debt 

Obligations, during certain periods or in certain circumstances, the Collateral Managers may be 

unable as a result of such restrictions to buy or sell securities or to take other actions 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 or 

prepay 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 Subordinated Notes 

will be magnified by the leveraged nature of the Subordinated Notes. See ‘‘Description of the 

Portfolio’’. 

2.8 Interest Rate Risk 

The Rated Notes bear interest at floating rates based on EURIBOR. However, the amount or 

proportion of the Collateral Debt Obligations securing the Notes that bear interest at floating rates 

based on EURIBOR may not correspond to the amount or proportion of the Notes that bear 

interest on such basis. There will be no requirement as to the amount or proportion of the Collateral 

Debt Obligations securing the Notes that must bear interest on a particular basis, save that the 

Portfolio Profile Tests provide that Collateral Debt Obligations with an aggregate Principal Balance 

of no more than 10 per cent. of the CDO Principal Balance may bear interest at a rate of interest 

other than a floating rate of interest. 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 Investments bear interest 

on a particular basis, and the interest rates available for such Eligible Investments are inherently 

uncertain. Furthermore, there may be a timing mismatch in the case that Collateral Debt Obligations 

and Eligible Investments adjust more or less frequently and on different dates based on different 

indices. As a result of these factors, it is expected that there will be a fixed/floating rate mismatch 

and/or a floating rate basis mismatch between the Notes and the underlying Collateral Debt 

Obligations and Eligible Investments. Such mismatch may be material and may change from time to 

time as the composition of the related Collateral Debt Obligations and Eligible Investments change 

and as the Notes of various Classes are repaid. As a result of such mismatches, changes in the level 

of EURIBOR could adversely affect the ability to make payments on the Notes. 

To the extent set forth in the Collateral Management Agreement (and as described in this 

Prospectus), the Issuer may enter into an Interest Rate Hedge Agreement to reduce the effect of any 

such interest rate mismatch. (Subject to obtaining the consent of the Trustee and obtaining Rating 

Agency Confirmation the Interest Rate Hedge Transactions may contain terms which are different 

from those described herein.) However, despite such Interest Rate Hedge Agreement, there can be no 

assurance that the Collateral Debt Obligations, Eligible Investments, Interest Rate Hedge Agreement 

and the Currency Swap Agreements securing the Notes will in all circumstances generate sufficient 

Interest Proceeds to make timely payments of interest on the Notes or that any particular levels of 

return will be generated on the Subordinated Notes. 

The Issuer will depend upon its ability to identify one or more suitable Interest Rate Hedge 

Counterparties and upon each Interest Rate Hedge Counterparty performing its obligations under any 

Interest Rate Hedge Agreement. If an Interest Rate Hedge Counterparty defaults or becomes unable 

to perform due to insolvency or otherwise, the Issuer may not receive payments it would otherwise be 

entitled to from the Interest Rate Hedge Counterparty to cover its interest rate exposure. The 

payments associated with such hedging arrangements generally rank senior to payments on the Notes. 

2.9 Currency Risk 

The Portfolio Profile Tests provide that Collateral Debt Obligations with an aggregate Principal 

Balance of not more than A60,000,000 may consist of Non-Euro Obligations denominated in United 

32

States dollars, Canadian dollars, Australian dollars, pounds sterling or any lawful currency (other 

than the Euro) of any Qualifying Country. The percentage of the Portfolio that comprises these types 

of obligations may increase or decrease over the life of the Notes within the limits set by the 

Portfolio Profile Tests. Notwithstanding that Currency Swap Obligations will incorporate a Currency 

Swap Transaction, fluctuations in exchange rates may lead to the proceeds of the Portfolio being 

insufficient to pay all amounts due to the respective Classes of Noteholders. Notwithstanding that 

Non-Euro Obligations are required to have an associated Currency Swap Transaction which will 

include currency protection provisions, losses may be incurred due to fluctuations in the Euro 

exchange rates in the event of a default by the relevant Currency Swap Counterparty under any such 

Currency 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. 

In addition, it may be necessary for the Issuer to make substantial up-front payments in order 

to enter into currency hedging arrangements on the terms required by the Collateral Management 

Agreement, and the Issuer’s ongoing payment obligations under such Currency Swap Transactions 

(including any termination payments) may be significant. The payments associated with such hedging 

arrangements generally rank senior to payments on the Notes. 

Defaults, trading and other events increase the risk of a mismatch between the foreign exchange 

Currency Swap Transactions and the Non-Euro denominated Collateral Debt Obligations which may 

result in losses. In addition, the Collateral Manager may be limited at the time of reinvestment in the 

choice of Collateral Debt Obligations that it is able to acquire on behalf of the Issuer because of the 

cost of such hedging and due to restrictions in the Collateral Management Agreement with respect to 

such hedging. 

The Issuer will depend upon its ability to identify one or more suitable Currency Swap 

Counterparties and upon each Currency Swap Counterparty performing its obligations under any 

Currency Swap Agreements. If a Currency Swap Counterparty defaults or becomes unable to perform 

its obligations under the Currency Swap Agreement due to insolvency or otherwise, the Issuer may 

not receive payments it would otherwise be entitled to from the Currency Swap Counterparty to 

cover its foreign exchange exposure. (Subject to obtaining the consent of the Trustee and Rating 

Agency Confirmation the terms of the Currency Swap Agreements may contain terms which are 

different from those described herein.) 

2.10 Risks Related to Synthetic Securities 

Synthetic Securities may not be acquired by the Issuer and comprise a part of the Portfolio 

unless and until the programme of activities of Natexis Asset Management is extended by the 

Autorité des Marchés Financiers (or any relevant successor authority) to cover the management of 

these assets, in accordance with applicable French law and regulations (or any other Collateral 

Manager of the Issuer has such regulatory authority in respect of such assets at the relevant time). 

In the event that Collateral Debt Obligations acquired by the Collateral Manager, acting on 

behalf of the Issuer, from time to time are Synthetic Securities, in addition to the credit risks 

associated with the Collateral Debt Obligations to which such Synthetic Securities are linked 

(‘‘Reference Obligations’’), the Issuer will also be subject to the credit risk of the applicable Synthetic 

Counterparty, although the obligations of such Synthetic Counterparty may, in certain cases, be 

collateralised. The Issuer will have a contractual relationship only with the Synthetic Counterparty 

and not with the obligor under the Reference Obligation. The Issuer generally will have no right to 

directly enforce compliance by the obligor under the Reference Obligation with the terms of the 

Reference Obligation, will not have any rights of set-off against such obligor, any voting rights with 

respect to the Reference Obligation, 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. The Issuer will therefore be exposed to the credit risk of 

the applicable Synthetic Counterparty as well as the obligor of the Reference Obligation (the 

‘‘Reference Entity’’). In addition, in the event of the insolvency of any Synthetic Counterparty, the 

Issuer may be treated as a general unsecured creditor of such Synthetic Counterparty, and will not 

have any specific claim in respect of the Reference Obligation the subject of the applicable Synthetic 

Security. As a result, concentrations of Synthetic Securities in any one Synthetic Counterparty may 

33

subject the Notes to an additional degree of risk with respect to defaults by such Synthetic 

Counterparty in addition to the credit risk of the Reference Obligation. The Portfolio Profile Tests 

impose restrictions on the level of exposure to the credit of Synthetic Counterparties by reference to 

the rating thereof and on the percentage of the Portfolio that may comprise Synthetic Securities (both 

collateralised and un-collateralised). 

Whilst the returns on a Synthetic Security generally reflect those of the related Reference 

Obligation, 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 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, credit exposures and non-credit related exposures to 

obligations of the related issuer than those of 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 

(i) a principal amount of Reference Obligations or other Deliverable Obligations of the applicable 

Reference Entity or (ii) 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, in either case, 

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. The Collateral Manager, acting on behalf of the Issuer, will be required to sell 

any Deliverable Obligations which are delivered in such circumstances if they do not satisfy the 

Eligibility Criteria as described in ‘‘Description of the Portfolio’’, which exposes the Issuer to 

additional disposal risk as discussed under ‘‘Nature of the Collateral – Disposal Risk’’ above. 

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 the occurrence of a credit event to take 

delivery of a non-Euro denominated obligation or of a currency other than Euros, exposing the Issuer 

to currency exchange rate risk. 

For the purposes of this section, ‘‘Deliverable Obligations’’ shall mean an obligation referred to 

in a Synthetic Security as the ‘‘Deliverable Obligation’’ which is deliverable upon termination prior to 

the scheduled maturity thereof. 

2.11 Changes in Tax Law 

At the time when the Issuer (or the Collateral Manager on its behalf) has entered into a binding 

commitment to acquire a Collateral Debt Obligation, payments of interest on such Collateral Debt 

Obligation either will not be (definitively) reduced by any withholding tax imposed by any jurisdiction 

or, if and to the extent that any such withholding tax does apply, the relevant obligor will be obliged 

to make gross-up payments to the Issuer that cover the full amount of such withholding tax. Only 

net interest proceeds receivable have been assumed in the cash flow analysis for the Notes. However, 

if the obligors of 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. 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 Ireland and the jurisdiction from which the relevant payment is 

made (ii) the current applicable law in the jurisdiction of the relevant borrower or (iii) in certain 

cases, as a result of 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 

34

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. In the event 

that any or greater withholding tax should become applicable to payments on the Collateral Debt 

Obligations, such tax would 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. 

As a result of a recent decision of the UK Court of Appeal, it could be argued that payments 

of interest on Collateral Debt Obligations with UK borrowers cannot benefit from the interest article 

in the UK/Ireland double taxation treaty. This would mean that UK withholding tax at 20 per cent. 

would need to be withheld from such interest payments. However, the Issuer’s holdings of Collateral 

Debt Obligations can be distinguished from the facts of the case which gave rise to this decision and 

accordingly it is unlikely that the Issuer would not be able to benefit from the interest article in the 

UK/Ireland double taxation treaty. 

In the event that the aggregate amount of any Gross Up Tax Amounts (essentially, withholding 

tax on payments in respect of the Collateral Debt Obligations during any Due Period which are not 

compensated for by a ‘‘gross up’’ provision) and Tax Charges in a Due Period, is in excess of ten per 

cent. of the aggregate interest payments due on all Collateral Debt Obligations during such Due 

Period, a Relevant 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 the Subordinated Noteholders acting by 

Extraordinary Resolution. See Condition 7(b)(i) (Redemption at the Option of the Subordinated 

Noteholders). 

2.12 Concentration Risk 

The Issuer will invest in a Portfolio of Collateral Debt Obligations consisting, at the Closing 

Date, of Senior Secured Loans, Second Lien Loans and Mezzanine Obligations. The concentration of 

the Portfolio in any one obligor would subject the Notes to a greater degree of risk with respect to 

defaults by such obligor and the concentration of the Portfolio in any one industry would subject the 

Notes to a greater degree of risk with respect to economic downturns relating to such industry. This 

risk is mitigated by the Portfolio Profile Tests which limit the amount of Collateral Debt Obligations 

that are obligations of a single obligor and by the Moody’s Diversity Test. See ‘‘Description of The 

Portfolio – Portfolio Profile Tests’’ and ‘‘The Minimum Diversity Test’’. 

2.13 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 Collateral Managers do 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 undercapitalisation 

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 

35

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 Collateral 

Managers do 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. 

2.14 All Collateral Debt Obligations were Identified Before the Closing Date and the Terms of their 

Acquisition may Adversely Affect the Issuer 

The Collateral Debt Obligations to be acquired by the Issuer on the Closing Date as part of the 

Portfolio were identified prior to the Closing Date by Natexis Banques Populaires as Collateral 

Manager. The Issuer has instructed the Collateral Manager that the Collateral Debt Obligations will 

be acquired on the Closing Date by the Issuer on the terms prevailing in the market at the time when 

the Collateral Manager identified such assets for purchase by the Issuer. Investors in the Notes will 

be assuming the risk of market value, currency fluctuations and credit quality changes from the date 

such assets were identified for purchase by the Collateral Manager and the date they are in fact 

acquired by the Issuer. The Issuer shall not be entitled to any interest accrued but unpaid on the 

Collateral Debt Obligations on the Closing Date. 

3. Relating to the Notes 

3.1 Limited Recourse Obligations 

The Notes are limited recourse obligations of the Issuer and are payable solely from amounts 

received in respect of the Collateral Debt Obligations, Interest Rate Hedge Agreements, Currency 

Swap Hedge Agreements and other 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 Lead Manager, the Joint Lead Managers, the Trustee, the Collateral Managers, the 

Collateral Administrator or any of their Affiliates or any other person or entity (other than the 

Issuer) will be obliged to make payments on the Notes. Consequently, the Noteholders must rely 

solely on distributions on the Collateral Debt Obligations and other Collateral securing the Notes for 

the payment of principal and interest. There can be no assurance that the distributions on the 

Collateral Debt Obligations, amounts received under the Interest Rate Hedge Agreement and 

Currency Swap Agreements 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 any 

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 such Collateral Debt Obligations and other 

Collateral are insufficient to make payments on the Notes, no other assets will be available for 

payment of the deficiency and, following realisation of the security over 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. Such shortfall will be borne by (a) the Class I 

Senior Noteholders, (b) the Class II Senior Noteholders, (c) the Class III Mezzanine Noteholders, (d) 

the Class IV Mezzanine Noteholders and (c) the Subordinated Noteholders in inverse order in 

accordance with the Priorities of Payment. The Structured Combination Noteholders shall bear such 

shortfall to the extent that the corresponding Components of their Structured Combination Notes are 

affected by the shortfall as described above. 

In addition, at any time while the Notes are Outstanding, none of the Noteholders, 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, 

36

eorganisation, arrangement, insolvency, winding-up or liquidation proceedings or any proceedings for 

the appointment of a liquidator 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. 

3.2 Subordination Generally 

The Class II Senior Notes will be subordinated in respect of the payment of principal and 

interest to the Class I Senior Notes; the Class III Mezzanine Notes will be subordinated in respect of 

the payment of principal and interest to the Class I Senior Notes and the Class II Senior Notes; the 

Class IV Mezzanine Notes will be subordinated in respect of the payment of principal and interest to 

the Class I Senior Notes, the Class II Senior Notes and the Class III Mezzanine Notes, and the 

Subordinated Notes will be subordinated in respect of the payment of principal and interest to the 

Notes of each other Class. The risk of delays in payments or ultimate non-payment of principal and/ 

or interest will be borne disproportionately by the holders of the Subordinated Notes as compared to 

the Notes of each other Class, and as 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 III 

Mezzanine Notes and/or the Class IV Mezzanine Notes may be deferred to the extent there are not 

sufficient Interest Proceeds and/or Principal Proceeds available to pay in respect of one or both such 

Classes of Notes 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 Class I Senior 

Notes and/or any Class II Senior Notes and/or, in the case of non-payment of interest on the Class 

IV Mezzanine Notes, the Class III Mezzanine Notes, remain Outstanding. Any such deferral would 

increase the effect of the subordination of the Subordinated Notes and of the Classes of Notes in 

respect of which payment was deferred. Non-payment of interest on the Subordinated Notes as a 

result of the non-availability of Interest Proceeds, including due to a failure to satisfy any Coverage 

Test will not constitute an Event of Default in any circumstances. Non-payment of the portion of 

Interest Proceeds corresponding to interest due on the Components of any of the Structured 

Combination Notes will only affect such Structured Combination Notes to the extent that the 

corresponding Components of such Structured Combination Notes are affected as described above. 

3.3 Subordination of Subordinated Notes 

Payments on the Subordinated Notes both prior to and following enforcement of the security 

over the Collateral are subordinated to payments in respect of the Class I Senior Notes, the Class II 

Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine Notes and to payment of 

certain fees and other amounts payable by the Issuer in accordance with the Priorities of Payment. 

Subordinated Note Interest will be paid on an available funds basis only, to the extent that there are 

Interest Proceeds and Principal Proceeds available, semi-annually on each Payment Date following 

payment of interest on the Rated Notes whilst any such Notes remain Outstanding and the fees, 

expenses and other amounts set out in paragraphs (A) to (X) of Condition 3(c)(i) (Application of 

Interest Proceeds). 

As referred to under ‘‘Subordination Generally’’ above, the risk of delays in payments or 

ultimate non-payment of principal and/or interest will be borne disproportionately by the holders of 

the Subordinated Notes as compared to the Notes of each other Class. 

In the event of any redemption or repayment in whole of the Rated Notes pursuant to 

Condition 7(b) (Optional Redemption) or acceleration thereof, the Subordinated Notes may also be 

redeemed and the Portfolio will be liquidated. Liquidation of the Collateral at such time and/or the 

remedies pursued by the Trustee upon enforcement of the security over the Collateral in such 

circumstances could be adverse to the interests of the holders of the Subordinated Notes. 

37

3.4 Subordination of Structured Combination Notes 

For the purposes of subordination, the Structured Combination Notes shall not be treated as a 

separate Class, but the Subordinated Component of the Structured Combination Notes will be treated 

as Subordinated Notes, to which such Component relates. 

3.5 Subordination through Conflicts between Classes 

The holders of specified Classes of Notes Outstanding (generally the Controlling Class) at a 

given time will be entitled to determine the remedies to be exercised under the Conditions if an Event 

of Default occurs thereunder and to exercise certain other voting rights. Such remedies, or actions 

taken pursuant to such other voting rights, could be adverse to the interests of the holders of the 

Classes of Notes not entitled to vote, and the holders of the Notes of a given Class entitled to vote 

at any time will have no obligation to consider the effect of any such vote on the holders of any 

other Classes of Notes. 

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 II Senior Noteholders over the Class III Mezzanine 

Noteholders, the Class IV Mezzanine Noteholders and the Subordinated Noteholders, (b) the Class 

III Mezzanine Noteholders over the Class IV Mezzanine Noteholders and the Subordinated 

Noteholders, (c) the Class IV Mezzanine Noteholders over the Subordinated Noteholders. In the 

event that the Trustee receives conflicting or inconsistent requests from two or more groups of 

holders of the Controlling Class (or the holders of another Class of Notes given priority as described 

in this paragraph), each representing less than the majority by principal amount outstanding 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 outstanding 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. 

With regard to the security created pursuant to the OAT Strips Pledge Agreement and the 

provisions of the Trust Deed relating to OAT Strip Collateral, the Trustee shall have regard to the 

interests of the holders of the Class V Structured Combination Notes only. 

With regard to the security created pursuant to the Natexis Zero Coupon Notes Pledge 

Agreement and the provisions of the Trust Deed relating to the Natexis Zero Coupon Collateral, the 

Trustee shall have regard to the interests of the holders of the Class VI Structured Combination 

Notes only. 

3.6 Payments of Interest and Principal on the Notes 

There can be no assurance that the distributions on the Portfolio and other Collateral securing 

the Notes will be sufficient to enable the Issuer to make payments of interest and principal on the 

Notes after making payments which rank senior to such payments pursuant to the Priorities of 

Payment, including, in the case of the Class II Senior Notes, payments of principal and interest in 

respect of the Class I Senior Notes, in the case of the Class III Mezzanine Notes, payments of 

principal and interest in respect of the Class I Senior Notes and Class II Senior Notes, in the case of 

the Class IV Mezzanine Notes, payments of principal and interest in respect of the Class I Senior 

Notes, the Class II Senior Notes and the Class III Mezzanine Notes, and, in the case of the 

Subordinated Notes, payments in respect of each Class of Rated Notes. The Issuer’s ability to make 

payments of interest and principal in respect of the Notes will be constrained by (a) the effects of 

operation of the Priorities of Payment, (b) the level of distributions received in respect of the 

Portfolio and other Collateral securing the Notes (see ‘‘Nature of the Collateral’’ above) and (c) in 

certain circumstances, by the interest rate mismatch described under ‘‘Interest Rate Risk’’ above. In 

addition, in certain circumstances, including the breach of any Coverage Test, Interest Proceeds that 

would otherwise have been available for the payment of interest on the Notes may be used to redeem 

the Class I Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes or the Class IV 

38

Mezzanine Noteholders depending on the Coverage Test or Tests so breached. See Condition 3(c)(i) 

(Application of Interest Proceeds) and Condition 3(c)(ii) (Application of Principal Proceeds). Any 

failure to pay interest on the Class III Mezzanine Notes or the Class IV Mezzanine Notes (in the 

circumstances described in Condition 3(d)) when due will not be an Event of Default and any failure 

to pay principal or interest on the Subordinated Notes at any time will not constitute an Event of 

Default. 

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. 

3.7 Average life and prepayment considerations 

The Maturity Date of the Notes is 26 September 2022 (subject to adjustment for Business 

Days); however, the principal of the Notes of each Class 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, 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 (See ‘‘Risks 

Associated with Senior Secured Loans, Second Lien Loans and Mezzanine Obligations’’). 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 Collateral Manager, 

acting on behalf of the Issuer, to reinvest any Principal Proceeds in the manner described under ‘‘The 

Portfolio – Management of the Portfolio’’ below 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 Conditions relating to the optional or 

mandatory redemption of the Notes in whole or in part (as applicable) prior to the Maturity Date. 

3.8 Payments of Interest and Principal on the Subordinated Notes 

There can be no assurance that the distributions on the Portfolio and other Collateral securing 

the Notes will be sufficient to make payments of interest or principal on the Subordinated Notes after 

making payments which rank senior to such payments pursuant to the Priorities of Payment, 

including payments in respect of the Rated Notes. The Issuer’s ability to make payments of interest 

and principal in respect of the Subordinated Notes will be constrained by the terms of the Rated 

Notes, by the level of distributions received in respect of the Portfolio and other Collateral securing 

the Notes (see ‘‘Nature of Collateral’’) 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 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 Subordinated Notes for an indefinite period of time to maturity. 

39

3.9 Mandatory Redemption of the Notes upon Breach of Coverage Tests 

In certain circumstances, including breach of Coverage Tests (other than the Interest 

Reinvestment Test), Interest Proceeds and thereafter Principal Proceeds may be applied in redemption 

of the Notes in accordance with the Priorities of Payment to the extent required to cause any 

Coverage Test so breached to be satisfied if recalculated following such redemption. This could result 

in an elimination, deferral or reduction of interest and/or principal payments made to the holders of 

the Class II Senior Notes, Class III Mezzanine Notes, Class IV Mezzanine Notes and/or 

Subordinated Notes, as the case may be, and, in the case of application of Principal Proceeds in 

redemption of the Notes during the Reinvestment Period rather than in reinvestment in Substitute 

Collateral Debt Obligations, may also reduce the leverage ratio of the Subordinated Notes to the 

Collateral which could adversely impact the level of the returns to the holders of the Subordinated 

Notes and will affect the average life of the Notes redeemed to satisfy the Coverage Tests. 

3.10 Optional Redemption and Volatility of Portfolio Market Value 

A form of liquidity for the Subordinated Notes is the optional redemption provision set out in 

Condition 7(b)(i) (Redemption at the Option of the 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) (Conditions to Optional Redemption). The market value of the Collateral Debt 

Obligations may fluctuate, with, among other things, changes in prevailing interest rates, general 

economic conditions, the conditions of financial markets, European and international political events, 

events in the home countries of the obligors of the Collateral Debt Obligations, developments or 

trends in any particular industry and the financial condition of such obligors. The secondary market 

for leveraged loans is still limited. See ‘‘Nature of the Collateral’’ above. 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 Subordinated Notes 

pursuant to the right of optional redemption set out in Condition 7(b)(i) (Redemption at the Option of 

the 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 

Subordinated Notes after required payments are made in respect of the Class I Senior Notes, the 

Class II Senior Note, the Class III Mezzanine Notes and/or the Class IV Mezzanine Notes and the 

other creditors of the Issuer which rank in priority to the holders of the Subordinated Notes pursuant 

to the Priorities of Payment. 

3.11 Volatility of Subordinated Notes 

The Subordinated Notes represent a leveraged investment in the underlying Collateral Debt 

Obligations. It is therefore anticipated that changes in the market value of the Subordinated Notes 

will be greater than changes in the market value of the underlying Collateral Debt Obligations, the 

obligations comprising which are subject to the credit, liquidity, interest rate and currency exchange 

rate risks discussed elsewhere herein. 

3.12 Future Ratings of the Notes Not Assured and Limited in Scope 

It is a condition to the issuance and sale of the Notes that the Class I Senior Notes be rated 

‘‘Aaa’’ by Moody’s and ‘‘AAA’’ by S&P, that the Class II Senior Notes be rated at least ‘‘Aa2’’ by 

Moody’s and ‘‘AA’’ from S&P, that the Class III Mezzanine Notes be rated at least ‘‘Baa2’’ by 

Moody’s and ‘‘BBB’’ by S&P, that the Class IV Mezzanine Notes be rated at least ‘‘Ba2’’ by 

Moody’s and ‘‘BB’’ by S&P. The ratings of S&P of the Class I Senior Notes relate to the timely 

payment of interest and ultimate payment of principal on the Class I Senior Notes and Class II 

Senior Notes by the Issuer. The ratings of the Mezzanine Notes relate to the ultimate (rather than 

the timely) payment of interest and ultimate payment of principal on those Notes by the Issuer. The 

ratings of Moody’s address the expected loss posed to investors by the Maturity Date. While the 

Moody’s rating primarily addresses expected loss, in respect of the Senior Notes, Moody’s has also 

assessed the likelihood of timely cash payment of interest on these particular obligations and views it 

at closing as consistent with the expected loss rating assigned. 

40

It is expected that the Class V Structured Combination Notes will be rated ‘‘AAA’’ by S&P. It 

is not a condition of the issue and sale of the Notes that the Class V Structured Combination Notes 

be rated. 

A security rating is not a recommendation to buy, sell or hold the Rated Notes or the 

Structured Combination Notes 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 Rated Notes or the Class V Structured Combination Notes will remain for 

any given period of time or that the rating will not be lowered or withdrawn entirely by a Rating 

Agency if, in its judgment, circumstances in the future so warrant. In the event that a rating initially 

assigned to any of the Rated Notes or the Class V Structured Combination Notes is subsequently 

lowered for any reason, no person or entity is obliged to provide any additional support or credit 

enhancement with respect to any such Rated Notes or Class V Structured Combination Notes and 

the market value of such Notes is likely to be adversely affected. 

There can be no assurance that the Rating Agencies will confirm, within 30 days after the Initial 

Effective Date and the Final Effective Date, that it has not reduced or withdrawn the ratings 

assigned on the Closing Date on any of the Class I Senior Notes, the Class II Senior Notes, the 

Class III Mezzanine Notes or the Class IV Mezzanine Notes. In the event that any of the ratings 

assigned to such Notes on the Closing Date have been reduced or withdrawn and have not been 

reinstated at any time up to the Business Day prior to the Payment Date next following the Initial 

Effective Date or Final Effective Date as appropriate, Interest Proceeds and thereafter Principal 

Proceeds will be applied to redeem the Class I Senior Notes, in whole or in part, and following 

redemption in full thereof, to redeem the Class II Senior Notes, in whole or in part, and, following 

redemption in full thereof, to redeem the Class III Mezzanine Notes, in whole or in part, and, 

following redemption in full thereof, to redeem the Class IV Mezzanine Notes in whole or in part, on 

the Payment Date following each of the Initial Effective Date and the Final Effective Date, until the 

applicable Rating Agency confirms that each such rating is reinstated. Such Notes therefore bear the 

risk of early redemption in whole or in part in such circumstances resulting in potential reinvestment 

risk for the holders of such Notes. See Condition 7(d) (Redemption upon Effective Date Rating Event). 

3.13 Limited Liquidity and Restrictions on Transfer 

Although there is currently a market for notes representing collateralised debt obligations similar 

to the Notes (other than the Subordinated Notes), there is currently no market for the Notes 

themselves. While the Lead Manager (or in respect of the Subordinated Notes and the Structured 

Combination Notes, each of the Joint Lead Managers) may make a market in each relevant Class of 

Notes upon their respective issuance, it is under no obligation to do so. In addition, 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 holders of any such Class of Notes with liquidity of investment 

or will continue for the life of such Notes. Consequently, a purchaser must be prepared to hold such 

Notes for an indefinite period of time and potentially 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 under certain circumstances. Such restrictions on the transfer of the Notes 

may further limit their liquidity. See ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions’’. 

There is currently no market for the Subordinated Notes and there can be no assurance that 

such a market will develop. Consequently, a purchaser must be prepared to hold the Subordinated 

Notes potentially until their Maturity Date. 

3.14 No Gross-Up 

In the event that any withholding tax or deduction for tax is imposed on payments of interest 

on the Notes, the holders of the Notes will not be entitled to receive grossed-up amounts to 

41

compensate for such withholding tax and no Event of Default shall occur as a result of any such 

withholding or deduction. 

3.15 Security 

Any Collateral Debt Obligations or other assets forming part of the Collateral which are 

securities will be held by the Custodian (or a sub-custodian of the Custodian). LaSalle Bank National 

Association, as a sub-custodian (the ‘‘Sub-Custodian’’) of the Custodian will hold such assets which 

can be cleared through Euroclear in a pledged account with Euroclear (the ‘‘Euroclear Pledged 

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 or The 

Depository Trust Company (‘‘DTC’’), as appropriate, and (ii) through its sub-custodians who will in 

turn hold such Collateral Debt Obligations which are securities both directly and through any 

appropriate clearing system. Those assets held in clearing systems (and not held in the Euroclear 

Pledged 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 sub-custodian, as the case may be. A first fixed charge over such Collateral Debt 

Obligations which are securities will be created under English law pursuant to the Trust Deed on the 

Closing 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 Collateral Debt Obligations which are securities held by the Sub-Custodian through the 

Euroclear Pledged Account will be the subject of a commercial pledge under Belgian law created by 

the Issuer pursuant to the Euroclear Pledge Agreement on the Closing Date. The effect of this 

security interest will be to enable the Custodian, on enforcement, to sell the securities in the 

Euroclear Pledged Account on behalf of the Trustee. The Euroclear Pledge Agreement will 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. 

In any event, the charge created pursuant to the Trust Deed and the security created by the 

Euroclear 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 Sub-Custodian (or any other applicable sub-custodian) or the 

Custodian or any other 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 

must be borne by the Noteholders without recourse to the Issuer, the Trustee, the Lead Manager, the 

Joint Lead Managers, the Collateral Managers, the Collateral Administrator, the Custodian or any 

other party. 

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 Collateral 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 permitted under the Trust Deed) without the consent of the Trustee. 

The Structured Combination Notes will be secured solely to the extent to which the respective 

underlying Components comprising the Structured Combination Notes are secured. In respect of the 

OAT Security Component only, holders of the Class V Structured Combination Notes will have the 

benefit of a Belgian law OAT Strip Pledge Agreement, under which the Issuer will grant a pledge 

42

over the OAT Strips Portion held in Euroclear through the account of the Custodian. The pledged 

securities will be used solely to secure and discharge amounts due in relation to the Class V 

Structured Combination Notes and the holders thereof. In respect of the Natexis Zero Coupon 

Security Component only, holders of the Class VI Structured Combination Notes will have the benefit 

of a Belgian law Natexis Zero Coupon Notes Pledge Agreement, under which the Issuer will grant a 

pledge over the Natexis Zero Coupon Notes Portion held in Euroclear through the account of the 

Custodian. The pledged securities will be used solely to secure and discharge amounts due in relation 

to the Class VI Structured Combination Notes and the holders thereof. 

3.16 Net Proceeds Less than Aggregate Amount of the Notes 

It is anticipated that the proceeds received by the Issuer on the Closing Date from the issuance 

of the Notes, net of certain fees and expenses, will be less than the aggregate principal amount 

outstanding of the Notes. Consequently, it is anticipated that on the Closing Date the proceeds of the 

Collateral will be insufficient to redeem the Notes upon the occurrence of an Event of Default on or 

about that date. 

3.17 Resolutions, Amendments and Waivers and Voting Threshold Requirements of the Notes 

Decisions may be taken by Noteholders by way of Ordinary Resolution or (save in the case of 

the Class I Senior Notes) 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 ten per 

cent. in aggregate principal amount outstanding of the Notes Outstanding of a particular Class, 

subject to certain conditions including minimum notice periods. 

The Trustee may, based on an opinion of counsel and/or certificates of holders of one or more 

Classes of Notes, 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, 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 aggregate principal amount outstanding 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 aggregate 

principal amount outstanding 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 principal amount outstanding 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 principal amount outstanding 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(a) 

(Meetings of Noteholders) and the Trust Deed. 

Certain proposed resolutions, amendments, waivers, consents and directions in respect of the 

Class I Senior Notes under the Conditions of the Notes will be made either (i) by the Class I Senior 

Noteholders acting by way of Ordinary Resolution (and not Extraordinary Resolution) or (ii) by a 

direction or request in writing by Class I Senior Noteholders representing more than 50 per cent. of 

the aggregate principal amount outstanding of the Class I Senior Notes (as provided, for example, in 

43

Condition 14(b) (Modification and Waiver) and ‘‘Description of the Collateral Management Agreement 

– Termination of the Collateral Manager – Removal without Cause’’. This effectively means that any 

Class I Senior Noteholder holding or controlling the voting rights to more than 50 per cent. of the 

Class I Senior Notes will be able to control each such proposed resolution, amendment, waiver, 

consent and direction regardless of whether any (or all) of the other Class I Senior Noteholders 

disagree with such proposed resolution, amendment, waiver, consent and direction. 

Certain entrenched rights relating to the 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 Noteholders do not 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 the Trustee may agree, without the consent of the Noteholders, to changes to the 

Conditions which in its opinion are of a formal, minor or technical nature or are to correct a 

manifest error or to cure any ambiguity, or to changes which, in its opinion, are not materially 

prejudicial to the interests of the Noteholders of any Class, and to certain other changes. See 

Condition 14(b) (Modification and Waiver). 

3.18 Enforcement Rights Following an Event of Default 

Following the occurrence of an Event of Default (other than an Event of Default pursuant to 

Condition 10(a)(i) (Non-payment of interest) where the Issuer has not failed to pay interest on the 

Class I Senior Notes and other than an Event of Default pursuant to Condition 10(a)(ii) (Nonpayment 

of principal)) the Trustee may, at its discretion, and shall, if any such Event of Default 

occurs and if so directed by the Controlling Class acting by Extraordinary Resolution) or (x) in 

relation to the OAT Strips Pledge Agreement where it is directed by the holders of the Class V 

Structured Combination Notes, and (y) in relation to the Natexis Zero Coupon Notes Pledge 

Agreement, where it is directed by the holders of the Class VI Structured Combination Notes, 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 shall be enforced by the Trustee by the 

Controlling Class acting by Extraordinary Resolution, and in respect of the security created under the 

OAT Strips Pledge Agreement and the Natexis Zero Coupon Notes Pledge Agreement by the holders 

of relevant Class of Structured Combination Notes acting by Extraordinary Resolution) provided that 

it shall have been indemnified to its satisfaction against all liabilities, proceedings, claims and 

demands which may be incurred by it in connection therewith. 

Such request or direction of the Controlling Class and/or the holders of the Structured 

Combination Notes could result in enforcement of such security in circumstances where the proceeds 

of liquidation thereof would not be sufficient to ensure payment in full of all amounts due and 

payable in respect of the Rated 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 Subordinated Notes. 

4. Certain Conflicts of Interest 

Various potential and actual conflicts of interest may arise from the multiple roles of Natexis 

Banques Populaires and from other activities of Natexis Banques Populaires. The following briefly 

summarises some of these conflicts, but is not intended to be an exhaustive list of all such conflicts. 

Natexis Banques Populaires is acting as a Joint Lead Manager and a Collateral Manager (except 

in respect of Financial Instruments) and is expected to hold 20 per cent. (A6,440,000) of Subordinated 

Notes; Natexis Asset Management, a Collateral Manager (in respect of Financial Instruments only), is 

an Affiliate of Natexis Banques Populaires. Because of these and other relationships, potential 

conflicts of interest may arise. 

44

Natexis Banques Populaires is the issuer of (and obligor under) the Natexis Zero Coupon Notes, 

constituting the Natexis Zero Coupon Security Component of the Class VI Structured Combination 

Notes. 

Natexis Banques Populaires has undertaken to the Issuer that it or one or more of its Affiliates 

will purchase at least A6,440,000 aggregate principal amount of Subordinated Notes and will hold 

A6,440,000 aggregate principal amount of Subordinated Notes until the earlier of (x) the date on 

which it or any of its Affiliates no longer acts as Collateral Manager to the Issuer and (y) the 

maturity or earlier redemption of such Notes, except in circumstances where the Collateral Manager 

is advised such holding breaches any law or regulation by which it, its Affiliates or the Issuer are 

bound or with which the Collateral Manager or its Affiliates habitually comply. Further, certain 

amounts payable to the Collateral Manager (the Subordinated Collateral Management Fee and the 

Incentive Collateral Management Fee) are payable on a subordinated basis. In acting as the 

Collateral Manager with regard to the Portfolio, such factors could create an incentive for the 

Collateral Manager to seek to maximise the return on the Portfolio so as to increase the amount of 

payments to it by way of the Subordinated Collateral Management Fee and the Incentive Collateral 

Management Fee or as a Noteholder. However, the investment decisions of the Collateral Manager in 

relation to the Portfolio are governed by its internal policies as well as by the requirement that it 

comply with the investment guidelines and its other obligations set out in the Collateral Management 

Agreement. 

Various potential and actual conflicts of interest may arise from the overall investment activity 

of the Collateral Managers and their Affiliates. The Collateral Managers and their Affiliates may 

invest in loans or securities on their own behalf which would be suitable investments for the Issuer. 

However, such investments may be different from those made by the Collateral Managers, acting on 

behalf of the Issuer. The Collateral Managers and their Affiliates may also have ongoing relationships 

with and/or perform certain functions and duties and owe obligations of confidentiality in relation to 

companies whose loans or securities are pledged to secure the Notes and may own equity securities 

issued by obligors of Collateral Debt Obligations. As a result, individuals or Affiliates of the 

Collateral Managers may possess information relating to issuers of Collateral Debt Obligations which 

is not known to and cannot be communicated to the individuals at the Collateral Managers 

responsible for monitoring the Collateral Debt Obligations and performing the other obligations 

under the Collateral Management Agreement. Affiliates and clients of the Collateral Managers may 

invest in loans or securities that are senior to, or have interests different from or adverse to, the 

Collateral Debt Obligations that are charged and/or assigned to secure the Notes. The Collateral 

Managers or their Affiliates may serve as collateral manager for, invest in or be Affiliated with, other 

entities organised to issue collateralised debt obligations secured by loans, financial instruments or 

other assets. The Collateral Managers and their Affiliates may have proprietary interests in, and may 

manage or advise accounts or investment funds that have investment objectives similar or dissimilar 

to those of the Issuer and/or which engage in transactions in the same types of securities, loans and 

investments as the Issuer, and as a result may compete with the Issuer for appropriate investment 

opportunities. Obligors of Collateral Debt Obligations held by the Issuer may have publicly or 

privately traded securities, including securities that are senior to, or have interests different from or 

adverse to, the Collateral Debt Obligations that are pledged to secure the Notes, in which the 

Collateral Managers and their Affiliates are an investor or make a market. The Collateral Managers’ 

and their Affiliates’ trading activities generally are carried out without reference to positions held by 

the Issuer and may have an effect on the value of the positions so held, or may result in the 

Collateral Managers and their Affiliates having an interest in the applicable obligor adverse to that of 

the Issuer. In addition, the Collateral Managers and their Affiliates may create, write or issue 

derivative instruments with respect to which the underlying securities may be those in which the 

Issuer invests or which may be based on the performance of the Issuer. Further, except as otherwise 

provided in the Collateral Management Agreement or the Conditions, the Collateral Managers and 

their Affiliates and their managing directors, directors, officers and employees may obtain and keep 

any profits, commission and fees accruing to them in connection with their activities in transactions 

for the Issuer’s account and other activities for themselves and other clients and their own accounts, 

and the Collateral Managers’ fees as set forth in the Collateral Management Agreement shall not be 

abated thereby. The Collateral Managers may also at certain times be simultaneously making 

45

investment decisions for the Issuer and any similar entity for which they serve as Collateral Manager 

in the future, or for themselves, their clients or Affiliates, to purchase or sell investments. See 

‘‘Description of the Collateral Managers’’. 

Subject to any restrictions adopted by the directors or set forth in the status thereof, the 

Collateral Managers and any Affiliate and any directors of the foregoing may (a) have an interest in 

the Issuer or in any transaction effected with or for it, or a relationship of any description with any 

other person which may involve a potential conflict with their respective duties to the Issuer and (b) 

deal with or otherwise use the services of Affiliated companies in connection with the performance of 

such duties; and none of them will be liable to account for any profit or remuneration derived from 

so doing. 

For example, such potential conflicts may arise because: 

(a) each of the Collateral Managers or their Affiliates acts as adviser to clients in investment 

banking, financial advisory, asset management and other capacities related to the Portfolio 

that may be purchased or sold on the Issuer’s behalf; 

(b) each of the Collateral Managers or their Affiliates issues, or are engaged as underwriter for 

the issue of, instruments that the Issuer may purchase, sell or hold and these activities may 

cause departments of the Collateral Managers or their Affiliates to give advice to clients 

that may cause these clients to take actions adverse to the interests of the Issuer; 

(c) each of the Collateral Managers or their Affiliates, and their respective managing directors, 

directors, officers and employees acts in a proprietary capacity and holds long or short 

positions in instruments of all types, including the Portfolio – such activities could affect 

the prices and availability of the securities and instruments that the Collateral Managers 

determine be bought or sold by the Issuer or for the Issuer’s account, which could 

adversely impact the financial returns of the Issuer in respect of the Portfolio; 

(d) each of the Collateral Managers and/or their Affiliates, and their respective managing 

directors, directors, officers and employees serves as directors of companies the securities of 

which may comprise the Portfolio purchased, sold or held by the Issuer; and 

(e) each of the Collateral Managers and their Affiliates and each of them and their respective 

managing directors, directors, officers and employees gives advice, and takes action, with 

respect to any of the Collateral Manager’s or its Affiliates’ clients or proprietary accounts 

that differs from the advice given, or may involve a different timing or nature of action 

taken, with respect to any one or all of the Collateral Managers’ advisory accounts, or 

effects transactions for such clients or proprietary accounts at prices or rates that may be 

more or less favourable than the prices or rates applying to transactions effected for the 

Issuer. 

In certain circumstances, the Trustee or its Affiliates or both may receive compensation in 

connection with the investment of assets in certain Eligible Investments from the managers of such 

Eligible Investments. In addition, the Issuer may from time to time invest in Eligible Investments 

issued by, arranged by or underwritten by the Collateral Managers, the Trustee, the Lead Manager, 

the Joint Lead Managers or their Affiliates. 

Unless otherwise stated herein, there will be no restriction on the ability of the Lead Manager, 

the Joint Lead Managers, the Trustee, the Collateral Managers, the Collateral Administrator, any 

Interest Rate Hedge Counterparty or any Currency Swap Counterparty or any of their respective 

Affiliates or employees to purchase Notes of any Class (either upon initial issuance or through 

secondary transfers) and to exercise any voting rights to which such Notes are entitled. The interests 

of such holders may differ from those of other holders. 

Amounts payable to the Collateral Managers, any Interest Rate Hedge Counterparty and/or any 

Currency Swap 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 

herein and in the Trust Deed. In certain circumstances, such payment arrangements could create a 

conflict of interest between the Collateral Managers and/or any Affiliate of such Interest Rate Hedge 

46

Counterparty or Currency Swap Counterparty serving as Collateral Manager, on the one hand, and 

the holders of one or more Classes of Notes, on the other hand. 

5. Taxation of the Issuer 

The Directors intend to conduct the affairs of the Issuer in such a manner as to minimise, so 

far as they consider reasonably practicable, taxation suffered by the Issuer. This will include 

conducting the affairs of the Issuer so that, to the extent within the capacity of the Directors and the 

Issuer, the Issuer is at all times resident in Ireland for taxation purposes. 

Decisions relating to the management of the Issuer and its business shall be taken by the 

directors at properly constituted board meetings in Ireland. 

6. Certain Provisions of Irish Law 

6.1 Preferred Creditors 

Under Irish law, the claims of a limited category of preferential creditors will take priority over 

the claims of unsecured creditors and holders of floating security in the event of the appointment of a 

liquidator or a receiver to an Irish company such as the Issuer. These preferred claims include taxes, 

such as income tax and corporation tax payable before the date of appointment of the liquidator or 

receiver and arrears of value added tax, together with accrued interest thereon and claims of 

employees. 

Floating charges have certain weaknesses, including the following: 

(a) 

they have weak priority against purchasers (who are not on notice of any negative pledge 

contained in the floating charge) and chargees of the assets concerned and against lien 

holders, execution creditors and creditors with rights of set-off; 

(b) as discussed above, they rank after certain preferential creditors, such as claims of 

employees and certain taxes on winding-up; 

(c) 

(d) 

(e) 

they rank after certain insolvency remuneration expenses and liabilities; 

the examiner of a company has certain rights to deal with the property covered by the 

floating charge; and 

they rank after fixed charges. 

In addition, there is a further limited category of super preferential creditors which take priority, 

not only over unsecured creditors and holders of floating security, but also over holders of fixed 

security. These super preferential claims include the remuneration, costs and expenses properly 

incurred by an examiner appointed to a company which claims have been approved by the Irish 

courts and any capital gains tax payable on the disposition of an asset of the company by a 

liquidator, receiver or mortgagee in possession. 

The holder of a fixed security over the book debts (which would include the Trustee) of an Irish 

tax resident company (which would include the Issuer) may be required by the Irish Revenue 

Commissioners, by notice in writing, to pay to them sums equivalent to those which the holder 

thereafter receives in payment of debts due to it by the company. Where the holder of the security 

has given notice to the Irish Revenue Commissioners of the creation of the security within 21 days of 

its creation, the holder’s liability is limited to the amount of certain outstanding Irish tax liabilities of 

the company (including liabilities in respect of value added tax) arising after the issue of a notice by 

the Irish Revenue Commissioners to the holder of the fixed security. 

The Irish Revenue Commissioners may also attach any debt due to an Irish tax resident 

company by another person in order to discharge any liabilities of such Irish tax resident company in 

respect of outstanding tax whether the liabilities are due on its own account or as an agent or 

trustee. The scope of this right of the Irish Revenue Commissioners has not yet been considered by 

the Irish courts and it may override the rights of holders of security (whether fixed or floating) over 

the debt in question. 

47

In relation to the disposal of assets of an Irish tax resident company which are subject to 

security, a person entitled to the benefit of the security may be liable for tax in relation to any 

capital gains made by the company on a disposal of those assets on exercise of the security. 

6.2 Examination 

Examination is a court procedure available under the Irish Companies (Amendment) Act 1990, 

as amended (the ‘‘1990 Act’’) to facilitate the survival of Irish companies in financial difficulties. 

The examiner, once appointed, has the power to set aside contracts and arrangements entered 

into by the company after his appointment and, in certain circumstances, can avoid a negative pledge 

given by the company prior to his appointment. Furthermore, he may sell assets which are the 

subject of a fixed charge. However, if such power is exercised he must account to the holders of the 

fixed charge for the amount realised and discharge the amount due to them out of the proceeds of 

sale. 

During the period of protection, the examiner will compile proposals for a compromise or 

scheme of arrangement to assist the survival of the company or the whole or any part of its 

undertaking as a going concern. A scheme of arrangement may be approved by the Irish High Court 

when at least one class of creditors has voted in favour of the proposals and the Irish High Court is 

satisfied that such proposals are fair and equitable in relation to any class of members or creditors 

who have not accepted the proposals and whose interests would be impaired by implementation of 

the scheme of arrangement. 

In considering proposals by the examiner, it is likely that secured and unsecured creditors would 

form separate classes of creditors. In the case of the Issuer, if the Trustee represented the majority in 

number and value of claims within the secured creditor class (which would be likely given the 

restrictions agreed to by the Issuer in the Notes), the Trustee would be in a position to reject any 

proposal not in favour of the Noteholders. The Trustee would also be entitled to argue at the Irish 

High Court hearing at which the proposed scheme of arrangement is considered that the proposals 

are unfair and inequitable in relation to the Noteholders, especially if such proposals included a 

writing down to the value of amounts due by the Issuer to the Noteholders. 

The primary risks to the Noteholders if any examiner were to be appointed with respect to the 

Issuer are as follows: 

(a) 

(b) 

(c) 

the potential for a scheme of arrangement being approved involving the writing down of 

the debt due by the Issuer to the Noteholders as secured by the Trust Deed; 

the potential for the examiner to seek to set aside any negative pledge in the Notes or the 

transaction documents prohibiting the creation of security or the incurring of borrowings 

by the Issuer to enable the examiner to borrow to fund the Issuer during the protection 

period; and 

in the event that a scheme of arrangement is not approved and the Issuer subsequently 

goes into liquidation, the examiner’s remuneration and expenses (including certain 

borrowings incurred by the examiner on behalf of the Issuer and approved by the Irish 

High Court) will take priority over the amounts secured by the security granted pursuant 

to the Trust Deed. 

7. Certain ERISA Considerations 

Under a regulation of the United States Department of Labor, if certain employee benefit plans 

subject to the U.S. Employee Retirement Income Security Act of 1974 (‘‘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 Class IV Mezzanine Notes, the Subordinated Notes or the Structured Combination Notes, the 

assets of the Issuer could be considered to be assets of such Plans and, among other possible adverse 

results, certain of the transactions contemplated under the Notes could be considered ‘‘prohibited 

transactions’’ under Section 406 of ERISA or Section 4975 of the Code. See ‘‘Certain ERISA 

Considerations’’ below. 

48

8. 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’’ (within the meaning given 

to such term in the Investment Company Act and the regulations of the SEC thereunder) 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. 

9. Forced Transfer 

Each initial purchaser of an interest in a Rule 144A Note and each transferee of an interest a 

Rule 144A Note will be deemed to represent at the time of purchase that, amongst other things, the 

purchaser is both a QIB for the purpose of Rule 144A of the Securities Act and a Qualified 

Purchaser for the purpose of Section 3(c)(7) of the Investment Company Act. 

The Trust Deed provides that if, notwithstanding the restrictions on transfer contained therein, 

the Issuer determines that any holder of an interest in a Rule 144A Note (1) is a U.S. person as 

defined under Regulation S under the Securities Act (a ‘‘U.S. Person’’) and (2) is not both a QIB and 

a Qualified Purchaser at the time it acquires an interest in a Rule 144A Note (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 Collateral Managers on its behalf, the Trustee, on 

behalf of and at the expense of the Issuer, shall cause such beneficial interest to 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 and (b) pending such transfer, no further payments will be made in respect of 

such beneficial interest. 

10. Investment Tax Act (Germany) 

There is currently legal uncertainty in the Federal Republic of Germany as to whether the 

German Investment Tax Act (Investmentsteuergesetz) (the ‘‘Investment Tax Act’’) would apply to 

certain classes of CDO notes and similar instruments. In particular, although the German Federal 

Ministry of Finance issued a decree relating to the Investment Tax Act on 2nd June 2005, which 

should largely exclude CDO notes and similar instruments from the scope of the German Investment 

Tax Act provided that the tests set out in the decree are met (the ‘‘Decree’’), there is a risk as to the 

interpretation of such tests. Such tax risk particularly applies with respect to the Subordinated Notes 

and any Structured Combination Notes comprised of, inter alia, any Subordinated Component. With 

respect to the Senior Notes, however, there exists a remote risk that the German tax authorities take 

a different view regarding the application of the Investment Tax Act. 

If the Investment Tax Act would apply to any classes of Notes, this could have an adverse 

impact on the tax position of any Noteholder subject to the Investment Tax Act (as defined herein). 

If the Issuer complies with statutory reporting and publication requirements of the German 

49

Investment Tax Act (the ‘‘Investment Tax Act Reporting Requirements’’) such adverse impact on the 

position of the Noteholder could be mitigated. However, the Issuer has made no arrangements to 

comply with these Investment Tax Act Reporting Requirements and has no intention of making such 

arrangements. Consequently, if the German Tax authorities apply the Investment Tax Act in respect 

of any one or more Classes of Notes, any Noteholders Subject to the Investment Tax Act will be 

subject to the Investment Tax Act’s adverse lump-sum taxation. 

Prospective Noteholders who are German tax residents, investors holding Notes through a 

German permanent establishment (or a German permanent representative) and investors presenting 

Notes at the office of a German credit institution or financial services institution (each as defined in 

the German Banking Act) are, therefore, urged to consult their tax advisers on this matter as to (i) 

whether the relevant Notes are within the scope of the Investment Tax Act, and, in particular, 

whether the relevant Notes are exempt under the Decree, and (ii) the legal and tax consequences that 

may arise from the possible application of the Investment Tax Act to the relevant Notes. 

There are other German tax considerations relevant to Noteholders. For further details relating 

to the risks outlined above and further German tax considerations, this section should be carefully 

read in conjunction with the section entitled ‘‘Tax Considerations-German Taxation’’. 

11. Withholding Tax on the Notes 

As described in more detail under ‘‘Tax Considerations – 2. Irish Taxation – Withholding Tax’’ 

below, in general, tax at the standard rate of income tax (currently 20 per cent.) is required to be 

withheld from payments of Irish source interest, save where the ‘‘quoted eurobond’’ exemption (or 

another exemption) is available (subject to certain circumstances where Irish withholding tax will 

nevertheless remain payable as detailed in the above-referenced section of this document). The 

requirements of the ‘‘quoted eurobond’’ exemption to apply in respect of an issue of securities are 

broadly that such securities (‘‘quoted eurobonds’’) are (1) issued by a body corporate, (2) interest 

bearing and (3) quoted on a recognised stock exchange. 

It is expected that upon issue of the Notes on the Closing Date, each of the three requirements 

of the ‘‘quoted eurobond’’ exemption will be satisfied, since (1) the Issuer is a body corporate, (2) the 

Notes are interest bearing and (3) the Notes are expected on issue to be admitted to listing and 

trading on the Irish Stock Exchange. However, subsequent changes in the Notes could result in the 

‘‘quoted Eurobond’’ exemption no longer being available, and this triggering Irish withholding tax 

(subject as discussed in ‘‘Tax Considerations – 2. Irish Taxation – Withholding Tax’’ below). For 

example, the ‘‘quoted eurobond’’ exemption would no longer be available if the Notes were no longer 

admitted to listing and trading on a recognised stock exchange. 

In the event that the ‘‘quoted eurobond’’ exemption was to become no longer available and the 

Issuer was consequently required to pay withholding tax on the Notes (subject as discussed in ‘‘Tax 

Considerations – 2. Irish Taxation – Withholding Tax’’ below): (1) the Issuer would not be required 

to ‘‘gross up’’ any payments made to the Noteholders to compensate for such withholding and the 

Issuer would not be obliged to change its jurisdiction of tax residence pursuant to Condition 9 

(Taxation), (2) such payment of Irish withholding tax on the Notes in such circumstances would not 

be a ‘‘Relevant Tax Event’’ under Condition 7(i) (Redemption at the Option of the Subordinated 

Noteholders) and would not be an Event of Default under Condition 10 (Events of Default) in and of 

itself. See ‘‘Tax Considerations – 2. Irish Taxation – Withholding Tax’’ below. 

12. Book-Entry Interests 

As described in more detail in ‘‘Form of the Notes – 1. Initial Issue’’ below, at Closing the 

Global Notes will be issued to and held by the Depositary which, in turn, will issue Certificated 

Depositary Interests (‘‘CDIs’’) representing such Global Notes to the clearing systems in order to be 

held by the ultimate purchasers hereunder. Unless and until Definitive Certificates are issued in 

exchange for the Global Notes (which Global Notes are represented by CDIs), holders and beneficial 

owners of CDIs will not be considered the legal owners or holders of Notes under the Trust Deed 

with regard to payment. After payment to the Depositary in full of all payments due and payable in 

respect of the Notes, the Issuer will have no responsibility or liability for the payment of interest, 

principal or other amounts to the Common Depositary or to holders or beneficial owners of CDIs. 

50

The Depositary or its nominee will be the sole legal Noteholder under the Trust Deed while the 

Notes are represented by the Global Notes. Accordingly, each person owning a CDI must rely on the 

relevant procedures of the Depositary, Euroclear and/or Clearstream, Luxembourg and, if such person 

is not a participant in such entities, on the procedures of the participant through which such person 

owns its interest, to exercise any rights of a Noteholder under the Trust Deed. 

Payments of any amounts owing in respect of the Global Notes will be made by the Issuer, in 

euro, to the Depositary. The Depositary will, in turn, arrange for payments of such amounts to be 

made to the common depositary for Euroclear or Clearstream, Luxembourg, or its nominee, which 

will distribute such payments to Participants who hold interests in the CDIs in accordance with their 

procedures. Under the terms of the Trust Deed, the Issuer and the Trustee will treat the registered 

holder of the CDIs (being the common depositary for Euroclear or Clearstream, Luxembourg (or its 

nominee)) as the owner thereof for the purposes of receiving payments and for all other purposes. 

Consequently, none of the Issuer, the Trustee or any agent of the Issuer or the Trustee has or will 

have any responsibility or liability for: 

(a) any aspect of the records of Euroclear or Clearstream, Luxembourg or any Participant or 

Indirect Participant relating to or payments made on account of an ownership interest in a 

CDI (a ‘‘Book-Entry Interest’’) or for maintaining, supervising or reviewing any of the 

records of Euroclear or Clearstream, Luxembourg or any Participant or Indirect 

Participant relating to or payments made on account of a Book-Entry Interest; or 

(b) Euroclear or Clearstream, Luxembourg or any Participant or Indirect Participant. 

Payments by Participants to owners of Book-Entry Interests in the CDIs held through these 

Participants are the responsibility of such Participants, as is now the case with securities held for the 

accounts of customers registered in ‘‘street name’’. 

Although Euroclear and Clearstream, Luxembourg have agreed to certain procedures to 

facilitate transfers of CDIs among participants and account holders of Euroclear and Clearstream, 

Luxembourg, they are under no obligation to perform or continue to perform such procedures, and 

such procedures may be discontinued at any time. None of the Issuer, the Trustee or any of their 

respective agents will have any responsibility for the performance by Euroclear or Clearstream, 

Luxembourg or their respective participants or account holders of their respective obligations under 

the rules and procedures governing their operations. 

13. Not a bank deposit 

Any investment in the Notes does not have the status of a bank deposit in Ireland and is not 

within the scope of the deposit protection scheme operated by the Irish Financial Services Regulatory 

Authority. The Issuer is not regulated by the Irish Financial Services Regulatory Authority by virtue 

of the issue of the Notes. 

14. Proposed changes to the Basel Capital Accord (‘‘Basel II’’) 

In June 1999, the Basel Committee on Banking Supervision (the ‘‘Basel Committee’’) issued 

proposals for reform of the 1988 Capital Accord and proposed a new capital adequacy framework 

which places enhanced emphasis on market discipline. Following an extensive consultation period on 

its proposals, the Basel Committee announced on May 11, 2004 that it had achieved consensus on the 

framework of the ‘‘New Basel Capital Accord’’. The text of the New Basel Capital Accord was 

published on June 26, 2004. This text will serve as the basis for national and supra-national 

rulemaking and approval processes to continue and for banking organizations to complete their 

preparation for the implementation of the New Basel Capital Accord at the year-end 2006. 

Consequently, recipients of this prospectus should consult their own advisers as to the consequences 

to and effect on them of the potential application of the New Basel Capital Accord proposals. 

15. European Union Savings Directive 

The EU has adopted a Directive (2003/48/EC) regarding the taxation of savings income. Since 

July 1, 2005 member states have been required to provide to the tax authorities of other member 

states details of payments of interest and other similar income paid by a person to an individual in 

51

another member state, except that Austria, Belgium and Luxembourg instead impose a withholding 

system for a transitional period (unless during such period they elect otherwise). A number of non- 

European Union countries and territories including Switzerland have agreed to adopt similar measures 

(a withholding system in the case of Switzerland) with effect from the same date. 

52

CONDITIONS OF THE NOTES 

The following are the conditions of each of the Class I Senior Notes, the Class II Senior Notes, 

the Class III Mezzanine Notes, the Class IV Mezzanine Notes, the Subordinated Notes and the 

Structured Combination Notes substantially in the form in which they will be endorsed on such Notes if 

issued in definitive certificated registered form and will be incorporated by reference into the Global 

Notes in bearer form of each Class initially representing the Notes on issue. 

The issue of A187,800,000 Class I Senior Floating Rate Notes due 2022 (the ‘‘Class I Senior 

Notes’’), A52,300,000 Class II Senior Floating Rate Notes due 2022 (the ‘‘Class II Senior Notes’’ and, 

together with the Class I Senior Notes, the ‘‘Senior Notes’’), A25,400,000 Class III Mezzanine 

Deferrable Interest Floating Rate Notes due 2022 (the ‘‘Class III Mezzanine Notes’’), A8,900,000 Class 

IV Mezzanine Deferrable Interest Floating Rate Notes due 2022 (the ‘‘Class IV Mezzanine Notes’’ 

and, together with the Class III Mezzanine Notes, the ‘‘Mezzanine Notes’’), A18,000,000 Class V 

Structured Combination Notes due 2022 (the ‘‘Class V Structured Combination Notes’’), A3,500,000 

Class VI Structured Combination Notes due 2022 (the ‘‘Class VI Structured Combination Notes’’ and 

together with the Class V Structured Combination Notes, the ‘‘Structured Combination Notes’’) and 

A32,200,000 Subordinated Notes due 2022 (the ‘‘Subordinated Notes’’, and the Subordinated Notes, 

together with the Structured Combination Notes, the Senior Notes and the Mezzanine Notes, the 

‘‘Notes’’) of Vallauris CLO II PLC (the ‘‘Issuer’’) was authorised by resolution of the board of 

directors of the Issuer dated on or about 15 May 2006. The Notes are constituted by and issued 

pursuant to a Trust Deed (together with any other security documents entered into in respect of the 

Notes, the ‘‘Trust Deed’’) dated on or about 26 July 2006 between (amongst others) the Issuer and 

ABN AMRO Trustees Limited, in its capacity as trustee (the ‘‘Trustee’’ which expression shall include 

all persons for the time being the trustee or trustees under the Trust Deed) for the Noteholders (as 

defined in Condition 1 (Definitions)). 

Each Structured Combination Note consists of two Components. Each Class V Structured 

Combination Note consists of: (i) the OAT Security Component, which will be collateralised by OAT 

Strips acquired by the Issuer which shall mature on 25 April 2021 in respect of the nominal principal 

amount of A18,049,190 and (ii) a Class V Subordinated Component which comprises a proportional 

interest of each such Structured Combination Note in an aggregate initial principal amount of 

A8,100,000, which represents an equal initial principal amount of the Subordinated Notes. Each Class 

VI Structured Combination Note consists of two Components: (i) the Natexis Zero Coupon Security 

Component, which will be collateralised by Natexis Zero Coupon Notes acquired by the Issuer which 

shall mature on 26 September 2018 in respect of the nominal principal amount of A3,500,000 and (ii) 

a Class VI Subordinated Component which comprises a proportional interest of each such Structured 

Combination Note in an aggregate initial principal amount of A1,420,000, which represents an equal 

initial principal amount of the Subordinated Notes. 

The terms and conditions applicable to the Structured Combination Notes shall be the same as 

those applicable to the relevant Underlying Notes (as defined below) (save, in each case, to the extent 

related to the issuance and transfer thereof) to the extent of the respective Components of which such 

Class is comprised. 

The initial principal amount of the Class V Subordinated Component and Class VI 

Subordinated Component (of the Class V Structured Combination Notes and Class VI Structured 

Combination Notes, respectively), is included in (and not additional to) the initial principal amounts 

of the Subordinated Notes. The OAT Security Component of the Class V Structured Combination 

Notes is equal to the nominal principal amount of the OAT Strips Portion. The Natexis Zero 

Coupon Security Component of the Class VI Structured Combination Notes is equal to the nominal 

principal amount of the Natexis Zero Coupon Notes Portion. For the purposes of these Conditions, 

save to the extent the provisions of these Conditions relate to the issuance or transfer of such Notes, 

references to the Subordinated Notes shall be deemed to include the principal amount of the Class V 

Subordinated Components and Class VI Subordinated Components, of which the respective 

Structured Combination Notes are comprised and all references to payments (including redemptions) 

or distributions to be made with respect to, or to votes or consents to be given by the holders of, the 

Subordinated Notes shall be deemed to include a reference to the proportional amount of such 

53

payments, distributions, votes or consents, as applicable, which relate to the Subordinated 

Components of each Class of Structured Combination Notes (whether or not explicitly mentioned). 

For the purposes of these Conditions, the Trust Deed and all agreements entered into in 

connection therewith, the Subordinated Notes shall be deemed to be issued and Outstanding in order 

to determine the rights attaching to the Subordinated 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, only the Subordinated 

Component of which each Structured Combination Note is comprised by reference to the 

Subordinated Notes corresponding thereto treated as if (i) they were issued and Outstanding in a 

principal amount outstanding equal to the principal amount outstanding of the Subordinated 

Components, and (ii) amounts had been paid in respect thereof in accordance with the Conditions of 

the Notes. Notwithstanding the above, a principal amount outstanding of the Subordinated Notes 

which is equal to the principal amount outstanding of the Subordinated Components of the 

Structured Combination Notes shall not actually be issued and Outstanding to the extent of the 

principal amount outstanding of each Subordinated 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 the Structured Combination Notes to amounts payable pursuant to the 

Priorities of Payment shall be determined by reference to the entitlement of the Underlying Notes 

which correspond to the Components of which the Structured Combination Notes are comprised 

pursuant to the Priorities of Payment. 

These Conditions include summaries of, and are subject to, the detailed provisions of the Trust 

Deed (which includes the forms of the Global Notes representing the Notes). The following 

agreements have been entered into in relation to the Notes: (a) an agency agreement dated on or 

about 26 July 2006 (the ‘‘Agency Agreement’’) between, amongst others, the Issuer, ABN AMRO 

Bank N.V. (London Branch) as the principal paying agent (the ‘‘Principal Paying Agent’’, which term 

shall include any successor or substitute principal paying agent appointed pursuant to the terms of 

the Agency Agreement), each of the Principal Paying Agent and Deutsche International Corporate 

Services (Ireland) Limited, as the initial paying agents and transfer agents (the ‘‘Paying Agents’’ or 

the ‘‘Transfer Agents’’, respectively, which term shall include any successor or substitute paying and 

transfer agent appointed pursuant to the terms of the Agency Agreement), LaSalle Bank National 

Association, as registrar (the ‘‘Registrar’’, which term shall include any successor or substitute 

registrar appointed pursuant to the terms of the Agency Agreement), ABN AMRO Bank N.V. 

(London Branch), as calculation agent (the ‘‘Calculation Agent’’, which term shall include any 

successor or substitute calculation agent appointed pursuant to the terms of the Agency Agreement), 

ABN AMRO Bank N.V. (London Branch), as account bank (the ‘‘Account Bank’’, which term shall 

include any successor or substitute account bank appointed pursuant to the terms of the Agency 

Agreement) and the Trustee; (b) a depositary agreement dated on or about 26 July 2006 (the 

‘‘Depositary Agreement’’) between the Issuer, the Trustee and LaSalle Bank National Association as 

book-entry depositary (in such capacity, the ‘‘Depositary’’); (c) a collateral management agreement 

dated on or about 26 July 2006 (the ‘‘Collateral Management Agreement’’) between amongst others 

Natexis Banques Populaires in relation to all investment and management functions with respect to 

the Collateral (with the exception of the Financial Instruments) and Natexis Asset Management in 

relation to all investment and management functions in respect of the Financial Instruments only. 

Accordingly the term ‘‘Collateral Manager’’ means as the context requires Natexis Banques Populaires 

(other than in respect of Financial Instruments) or as the case may be Natexis Asset Management (in 

respect of Financial Instruments) and the term the ‘‘Collateral Managers’’ refers collectively to both 

of them, which term shall include any successor or replacement collateral manager(s) appointed 

pursuant to the terms of the Collateral Management Agreement), the Issuer, ABN AMRO Bank N.V. 

(London Branch), as collateral administrator (the ‘‘Collateral Administrator’’ which term shall include 

any successor collateral administrator appointed pursuant to the terms of the Collateral Management 

Agreement) and the Trustee; (d) the Corporate Services Agreement; (e) the Collateral Acquisition 

Documents entered into on or prior to the Closing Date; (f) the Euroclear Pledge Agreement; (g) the 

OAT Strips Pledge Agreement; and (h) the Natexis Zero Coupon Notes Pledge Agreement. Copies of 

54

the Trust Deed, the Agency Agreement, the Depositary Agreement, the Collateral Management 

Agreement, the Interest Rate Hedge Agreement, the Currency Swap Agreement, the Corporate 

Services Agreement, the Collateral Acquisition Documents, the Euroclear Pledge Agreement, the OAT 

Strips Pledge Agreement and the Natexis Zero Coupon Notes Pledge Agreement are available for 

inspection during usual business hours at the principal office of the Trustee (presently at 82 

Bishopsgate, London EC2N 4BN) and at the specified offices of the Paying Agents 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 Depositary Agreement and the Collateral Management 

Agreement, applicable to them. 

1. Definitions 

‘‘Accounts’’ means the Collection Account (including the Principal Account and the Interest 

Account into which the Collection Account is divided in the ledgers of the Account Bank), the 

Expense Reserve Account, the Collateral Enhancement Account, the Additional Collateral Account, 

the Payment Account, the Synthetic Collateral Account, the Counterparty Downgrade Collateral 

Account, the Retained Portion Account and the Currency Accounts. 

‘‘Additional Collateral Account’’ means the interest bearing account of the Issuer with the 

Account Bank, the Balance of which may be applied in the acquisition of Additional Collateral Debt 

Obligations during the Investment Period in accordance with the Collateral Management Agreement. 

‘‘Additional Collateral Debt Obligation’’ means a Collateral Debt Obligation purchased by or on 

behalf of the Issuer (out of the Balance standing to the credit of the Additional Collateral Account 

from time to time) during the Investment Period in accordance with the provisions of the Collateral 

Management Agreement, which is not purchased in substitution for a Collateral Debt Obligation 

previously forming part of the Collateral. 

‘‘Administrative Expenses’’ means amounts due and payable (which shall be applied in the 

following order): 

(a) to the Custodian and the Agents pursuant to the Agency Agreement; 

(b) to the Collateral Administrator pursuant to the Collateral Management Agreement; 

(c) to the Depositary pursuant to the Depositary Agreement; 

(d) on a pro rata basis, to the independent accountants, agents and counsel of the Issuer (but 

excluding any amounts payable in respect of the Notes); 

(e) to any Rating Agency in connection with the Rated Notes or the Class V Structured 

Combination Notes or which may from time to time be requested to assign a confidential 

credit estimate to any of the Collateral Debt Obligations, for such fees and expenses and 

any ongoing surveillance fees; 

(f) to the Corporate Administrator pursuant to the Corporate Administration Agreement; 

(g) to the Collateral Managers pursuant to the Collateral Management Agreement (including 

indemnities provided for therein), but excluding any Collateral Management Fees and the 

repayment of Collateral Manager Advances; 

(h) to any Person in respect of any governmental fee or charge (excluding, for the avoidance 

of doubt, any taxes payable to any tax authority); 

(i) in respect of any third party portfolio management software; 

(j) to any other Person in respect of any other fees or expenses permitted under these 

Conditions and the documents delivered pursuant to or in connection with the Notes or 

the sale thereof; 

(k) to the payment of any amounts due and payable by the Issuer to any Selling Institution 

pursuant to any Collateral Acquisition Document after the date of entry into any 

Participation; and 

(l) into the Issuer Irish Account, on each Payment Date, in the sum of A500, 

55

in each case, including any value added tax due and payable in respect thereof and provided, however, 

that ‘‘Administrative Expenses’’ shall not include any Trustee Fees and Expenses or any amounts due 

or accrued with respect to the actions taken on or in connection with the Closing Date, the latter 

being payable out of the proceeds of the issue of the Notes. 

‘‘Affiliate’’ or ‘‘Affiliated’’ means with respect to a Person, (a) any other Person who, directly or 

indirectly, is in control of, or controlled by, or is under common control with, such Person or (b) 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 (iii) of any Person described in clause (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. In addition, each of Banque Fédérale des Banques Populaires, Banques 

Populaires Régionales, Crédit Coopératif, CASDEN Banque Populaire and Crédit Maritime Mutuel 

and the wholly owned entities of the foregoing shall be ‘‘Affiliates’’ of Natexis Banques Populaires 

and Natexis Asset Management. However, the Banques Populaires Régionales shall not be 

‘‘Affiliates’’ of Natexis Banques Populaires and Natexis Asset Management for the purposes of the 

provisions relating to the removal of the Collateral Manager without cause, as described in 

‘‘Description of the Collateral Management Agreement – Termination and Resignation – Removal 

Without Cause’’ and ‘‘Description of the Collateral Manager – Voting Rights of the Collateral 

Managers’’ below. 

‘‘Agent’’ means each of the Principal Paying Agent, the Paying Agents, the Registrar, the 

Transfer Agents, the Account Bank, the Depositary, the Calculation Agent and the Custodian and 

each of their permitted successors or assigns. 

‘‘aggregate principal amount outstanding’’ means, in respect of the Notes, or any of them, at any 

time, the aggregate of the principal amount outstanding (as such phrase ‘‘principal amount 

outstanding’’ is defined below) in respect of such Notes at such time. 

‘‘Annual Interest Payment’’ means each periodic payment of interest received by the Issuer in 

respect of a Collateral Debt Obligation that provides for periodic payments of interest annually. 

‘‘Annual Interest Payment Amount’’ means, in respect of a Collateral Debt Obligation that 

provides for Annual Interest Payments, the amount of each such Annual Interest Payment. 

‘‘Authorised Denomination’’ means (a) in the case of Regulation S Notes of each Class (including 

the Structured Combination Notes), the Minimum Denomination and any denominations of A10,000 

in excess thereof and (b) in the case of Rule 144A Notes of each Class (including the Structured 

Combination Notes), the Minimum Denomination and any denominations of A10,000 in excess 

thereof. 

‘‘Authorised Officer’’ means, with respect to the Issuer, any Director or duly authorised 

signatory of the Issuer or agent who is authorised to act for the Issuer in matters relating to, and 

binding upon, the Issuer. For the avoidance of doubt, neither the Collateral Manager nor any of its 

officers or employees are or will be Authorised Officers of the Issuer. 

‘‘Balance’’ means on any date, with respect to cash and Eligible Investments, the aggregate: 

(a) current balance of cash, demand deposits, time deposits, federal funds and commercial 

bank money market accounts; 

(b) principal amount outstanding of interest-bearing corporate and government securities, 

money market accounts and repurchase obligations; and 

(c) face amount of non-interest-bearing government and corporate securities, 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 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 

the value of its recovery value as determined by the Collateral Manager (acting in a commercially 

reasonable basis and subject to Rating Agency Confirmation) for the purpose of calculating the 

Balance standing to the credit of any account. 

56

‘‘Bearer Notes’’ has the meaning given thereto in Condition 2(a)(i) (Global Notes). 

‘‘Business Day’’ means (save to the extent otherwise defined) a day: 

(a) on which the TARGET System is open; 

(b) on which commercial banks and foreign exchange markets settle payments in London, 

New York, New York and Chicago Illinois (other than a Saturday or a Sunday); and 

(c) 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. 

‘‘CDO Liabilities’’ means the payment obligations of the Issuer under the Notes and the 

Transaction Documents. 

‘‘CDO Principal Balance’’ means the sum of: 

(a) the aggregate outstanding Principal Balance of Collateral Debt Obligations (excluding 

Defaulted Obligations); 

(b) the Balances standing to the credit of the Principal Account and the Additional Collateral 

Account; and 

(c) the Euro Equivalent of the principal amount standing to the credit of the Currency 

Accounts, solely to the extent that such amounts are yet to be transferred to the Principal 

Account on the next Payment Date. 

‘‘Class I Floating Rate of Interest’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class I Margin’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class I Senior Noteholders’’ means the holders of the Class I Senior Notes from time to time. 

‘‘Class II Floating Rate of Interest’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class II Margin’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class II Senior Noteholders’’ means the holders of the Class II Senior Notes from time to time. 

‘‘Class III Coverage Test’’ means the Class III Interest Coverage Test and the Class III Par 

Value Test. 

‘‘Class III Floating Rate of Interest’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class III Interest Coverage Ratio’’ means, as at any Measurement Date, the ratio (expressed as 

a percentage) obtained by dividing (a) the Interest Coverage Numerator by (b) the sums of the 

scheduled interest payments due and payable on (i) the Senior Notes Outstanding and (ii) the Class 

III Mezzanine Notes Outstanding, on the next following Payment Date. 

‘‘Class III Interest Coverage Test’’ means the test which shall be satisfied if as at any 

Measurement Date the Class III Interest Coverage Ratio is at least 110 per cent. 

‘‘Class III Margin’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class III Mezzanine Noteholders’’ means the holders of the Class III Mezzanine Notes from 

time to time. 

‘‘Class III Par Value Ratio’’ means, as of any Measurement Date, the ratio (expressed as a 

percentage) obtained by dividing the Par Coverage Numerator by the aggregate principal amount 

outstanding of (a) the Senior Notes Outstanding and (b) the Class III Mezzanine Notes Outstanding 

(which shall include, for the avoidance of doubt, Deferred Interest on such Notes). 

‘‘Class III Par Value Test’’ means the test which shall be satisfied if, as at any Measurement 

Date, the Class III Par Value Ratio is at least 107 per cent. 

‘‘Class IV Coverage Test’’ means the Class IV Interest Coverage Test and the Class IV Par 

Value Test. 

‘‘Class IV Floating Rate of Interest’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class IV Interest Coverage Test’’ means the test which shall be satisfied if as at any 

Measurement Date the Class IV Interest Coverage Ratio is at least 100 per cent. 

57

‘‘Class IV Interest Coverage Ratio’’ means, as at any Measurement Date, the ratio (expressed as 

a percentage) obtained by dividing (a) the Interest Coverage Numerator by (b) the sums of the 

scheduled interest payments due and payable on (i) the Senior Notes Outstanding; (ii) the Class III 

Mezzanine Notes Outstanding; and (iii) the Class IV Mezzanine Notes Outstanding, on the next 

following Payment Date. 

‘‘Class IV Margin’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Class IV Mezzanine Noteholders’’ means the holders of the Class IV Mezzanine Notes from 

time to time. 

‘‘Class IV Par Value Ratio’’ means, as of any Measurement Date, the ratio (expressed as a 


outstanding of (a) the Senior Notes Outstanding; (b) the Class III Mezzanine Notes Outstanding 

(which shall include, for the avoidance of doubt, Deferred Interest on such Notes); and (c) the Class 

IV Mezzanine Notes Outstanding (which shall include, for the avoidance of doubt, Deferred Interest 

on such Notes). 

‘‘Class IV Par Value Test’’ means the test which shall be satisfied if, as at any Measurement 

Date, the Class IV Par Value Ratio is at least 105.5 per cent. 

‘‘Class V Structured Combination Noteholders’’ means the holders of the Class V Structured 

Combination Notes from time to time. 

‘‘Class V Subordinated Component’’ means a component of the Class V Structured Combination 

Notes, the terms and conditions applicable to which (save for those relating to issuance or transfer 

thereof) are the same as A32,200,000 in original principal amount of Subordinated Notes in respect of 

each A8,100,000 original principal amount of such Structured Combination Notes. 

‘‘Class VI Structured Combination Noteholders’’ means the holders of the Class VI Structured 

Combination Notes from time to time. 

‘‘Class VI Subordinated Component’’ means a component of the Class VI Structured 

Combination Notes, the terms and conditions applicable to which (save for those relating to issuance 

or transfer thereof) are the same as A32,200,000 in original principal amount of Subordinated Notes 

in respect of each A1,420,000 original principal amount of such Structured Combination Notes. 

‘‘Class of Notes’’ means each of the classes of Notes being (a) the Class I Senior Notes, (b) the 

Class II Senior Notes, (c) the Class III Mezzanine Notes, (d) the Class IV Mezzanine Notes, (e) the 

Class V Structured Combination Notes, (f) the Class VI Structured Combination Notes and (g) the 

Subordinated Notes, and ‘‘Class’’ and ‘‘Class of Noteholders’’ shall be construed accordingly. 

‘‘Closing Date’’ means 26 July 2006. 

‘‘Collateral’’ means the property, assets and benefits described in Condition 4(a) (Security) which 

are charged or assigned to the Trustee from time to time for the benefit of the Secured Parties 

pursuant to the Trust Deed and the Euroclear Pledge Agreement. 

‘‘Collateral Acquisition Documents’’ means each of the documents entered into by the Issuer in 

relation to the acquisition by the Issuer of Senior Secured Loans, Second Lien Loans and Mezzanine 

Obligations on or about the Closing Date, together with any other documents entered into by or on 

behalf of the Issuer from time to time for the acquisition of Collateral Debt Obligations thereafter. 

‘‘Collateral Debt Obligation’’ means any Senior Secured Loan, Second Lien Loan, Mezzanine 

Obligation or a Structured Finance Security which satisfies the Eligibility Criteria at the time of its 

acquisition (to the extent required to do so, in the case of a Synthetic Security falling within the 

definition of a Senior Secured Loan, Second Lien Loan or Mezzanine Obligation, as the case may be) 

purchased by or on behalf of the Issuer from time to time pursuant to the Collateral Management 

Agreement. References to Collateral Debt Obligations shall include Currency Swap Obligations but 

shall not include Collateral Enhancement Obligations or Defaulted Equity Securities. For the 

avoidance of doubt, the failure by any obligation to satisfy the Eligibility Criteria at any time after 

its acquisition 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 

and held with the Account Bank, the Balance of which from time to time may be applied in the 

58

acquisition of Collateral Enhancement Obligations by, or on behalf of, the Issuer in accordance with 

the Collateral Management Agreement and into which the proceeds of any sale of, or Distributions in 

respect of, Collateral Enhancement Obligations, together with Collateral Manager Advances and 

certain other amounts, may be deposited from time to time. 

‘‘Collateral Enhancement Obligation’’ means any warrant or equity security (excluding Defaulted 

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, in each case, the acquisition of which will not result 

in the imposition of any present or future actual or contingent monetary liabilities or obligations on 

the Issuer other than those which may arise at its option and references in this definition to ‘‘a 

Collateral Debt Obligation’’ shall be deemed to be, in the case of any Collateral Debt Obligation that 

is a Synthetic Security, the Reference Obligation to which such Synthetic Security is linked. 

‘‘Collateral Management Fees’’ means each of the Senior Collateral Management Fees, the 

Subordinated Collateral Management Fee and the Incentive Collateral Management Fee. 

‘‘Collateral Manager’’ means, in relation to all investment and management functions with 

respect to the Collateral except in respect of Financial Instruments, Natexis Banques Populaires, and, 

in relation to all investment and management functions with respect to Financial Instruments only, 

Natexis Asset Management, in each case individually as the context requires, the ‘‘Collateral 

Manager’’ and together, the ‘‘Collateral Managers’’. 

‘‘Collateral Manager Advances’’ means all amounts paid by the Collateral Manager on behalf of 

the Issuer pursuant to the Collateral Management Agreement for the purpose of acquiring or 

exercising rights under any Collateral Enhancement Obligation, for general purposes or to fund the 

Collateral Enhancement Account. 

‘‘Collateral Quality Tests’’ means the Collateral Quality Tests as set out in the Collateral 

Management Agreement being the Minimum Diversity Test, the Maximum Weighted Average Life 

Test, the Maximum Portfolio Rating Test, the Minimum Weighted Average Spread Test, the Moody’s 

Minimum Weighted Average Recovery Rate Test, the S&P Minimum Weighted Average Recovery 

Rate Test, the S&P CDO Monitor Test, and the S&P CDO Evaluator Test, each as defined therein. 

‘‘Collection Account’’ means an interest bearing account in the name of the Issuer with the 

Account Bank which shall be sub-divided in the ledgers of the Account Bank into the Principal 

Account and the Interest Account. 

‘‘Components’’ means, in respect of the Class V Structured Combination Notes, the Class V 

Subordinated Component and the OAT Security Component, and in respect of the Class VI 

Structured Combination Notes, the Class VI Subordinated Component and the Natexis Zero Coupon 

Security Component. 

‘‘Conditions’’ means these terms and conditions, being the terms and conditions of the Class I 

Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine 

Notes, the Structured Combination Notes and the Subordinated Notes. 

‘‘Controlling Class’’ means the Class I Senior Notes or, following redemption and payment in 

full of the Class I Senior Notes, the Class II Senior Notes or, following redemption and payment in 

full of the Class II Senior Notes, the Class III Mezzanine Notes, or, following redemption and 

payment in full of the Class III Senior Notes, the Class IV Mezzanine Notes, or following 

redemption and payment in full of the Class IV Mezzanine Notes, the Subordinated Notes. 

‘‘Counterparty Downgrade Collateral’’ means any cash and/or securities delivered to the Issuer as 

collateral for the obligations of any Interest Rate Hedge Counterparty under an Interest Rate Hedge 

Agreement or Currency Swap Counterparty under a Currency Swap Agreement. 

‘‘Counterparty Downgrade Collateral Account’’ means one or more interest bearing accounts of 

the Issuer with the Custodian into which all Counterparty Downgrade Collateral is to be deposited. 

‘‘Coverage Test’’ means each of the Senior Par Value Test, the Senior Interest Coverage Test, 

the Mezzanine Par Value Tests, the Mezzanine Interest Coverage Tests and the Interest Reinvestment 

Test. 

59

‘‘Credit Improved Obligation’’ means any Collateral Debt Obligation which, in the Collateral 

Manager’s judgment: 

(a) has significantly improved in credit quality since the date on which such Collateral Debt 

Obligation was purchased; or 

(b) the public credit rating or confidential credit estimate of which has been upgraded or put 

on a watch list for possible upgrade by any nationally recognised investment rating agency; 

or 

(c) whose obligor has shown improved financial results; or 

(d) whose obligor has raised equity capital or other capital which has improved the liquidity 

or credit standing of such obligor; or 

(e) which has increased in price to 100.5 per cent. or more in the case of Collateral Debt 

Obligations other than Synthetic Securities, in each case, of the original purchase price 

thereof; provided that in the case of a Collateral Debt Obligation paying a fixed rate, the 

calculation of such increase in price shall have been adjusted for movements in floating 

rates since the date of purchase of such Collateral Debt Obligation; 

in each case since the date on which such Collateral Debt Obligation was purchased, provided 

however that, unless the holders of the majority of the principal amount outstanding of the 

Controlling Class of Notes Outstanding have voted to suspend this proviso, if: 

(i) the ratings of the Class I Senior Notes or the Class II Senior Notes have been reduced by 

at least one sub-category from the Initial Ratings or if the ratings of any of the Class I 

Senior Notes are withdrawn by either Rating Agency; or 

(ii) the ratings of the Class III Mezzanine Notes or the Class IV Mezzanine Notes have been 

reduced by at least two rating sub-categories from the Initial Ratings or are withdrawn by 

either Rating Agency, 

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 the applicable Rating Agency or put on a 

watch list for possible upgrade since the date of acquisition thereof or have increased in price to 101 

per cent. or more, in the case of Collateral Debt Obligations other than Synthetic Securities, in each 

case, of the original purchase price thereof (provided further that in the case of a Collateral Debt 

Obligation paying a fixed rate, the calculation of such increase in price shall have been adjusted for 

movements in floating rates since the date of purchase of such Collateral Debt Obligation) and 

provided further that a Synthetic Security shall constitute a Credit Improved Obligation in the event 

that the Reference Obligation to which such Synthetic Security is linked would constitute a Credit 

Improved Obligation if it were itself a Collateral Debt Obligation. 

‘‘Credit Risk Obligation’’ means any Collateral Debt Obligation which, in the Collateral 

Manager’s judgment, has a significant risk of declining in credit quality (which risk is unrelated to 

general market conditions) and, with a lapse of time, becoming a Defaulted Obligation, provided 

however that, unless the holders of the majority of the principal amount outstanding of the 

Controlling Class of Notes Outstanding have voted to suspend this proviso, if: 

(a) the ratings on the Class I Senior Notes or the Class II Senior Notes assigned by Moody’s 

have been reduced by at least one sub-category from the Initial Ratings or are withdrawn 

by Moody’s; or 

(b) the ratings of the Mezzanine Notes assigned by Moody’s have been reduced by at least 

two rating 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 list for possible 

downgrade by Moody’s since the date of acquisition thereof or have decreased in price by 1 per cent. 

or more in the case of any Collateral Debt Obligations other than a Synthetic Security, in each case, 

of the original purchase price (provided that in the case of a Collateral Debt Obligation paying a 

fixed rate, the calculation of such decrease in price shall have been adjusted for movements in floating 

rates since the date of purchase of such Collateral Debt Obligation), and provided further that a 

60

Synthetic Security shall constitute a Credit Risk Obligation in the event that the Reference Obligation 

to which such Collateral Debt Obligation is linked would constitute a Credit Risk Obligation if it 

were itself a Collateral Debt Obligation. 

‘‘Currency Accounts’’ means the accounts of the Issuer with the Account Bank, each of which 

shall be denominated in one of the currencies of Non-Euro Obligations, into which amounts received 

in respect of Non-Euro Obligations shall be paid and out of which amounts payable to a Currency 

Swap Counterparty pursuant to any Currency Swap Transaction shall be paid. 

‘‘Currency Swap Agreement’’ means each 1992 ISDA Master Agreement (Multicurrency Cross- 

Border) or 2002 ISDA Master Agreement (or such ISDA pro forma Master Agreement as may be 

published by ISDA from time to time) and the Schedule relating thereto entered into between the 

Issuer and a Currency Swap Counterparty, including any guarantee thereof and any credit support 

annex entered into pursuant to the terms thereof and together with each confirmation entered into 

thereunder in respect of a Currency Swap Transaction and including any Replacement Currency Swap 

Agreement entered into and replacement thereof provided always that each such Currency Swap 

Agreement will be in the applicable Pre-Approved Form or shall be in a form in respect of the terms 

of which Rating Agency Confirmation has been received. 

‘‘Currency Swap Counterparty’’ means any financial institution with which the Issuer has 

(pursuant to, and in accordance with, the terms of the Collateral Management Agreement) entered 

into a Currency Swap Agreement or any permitted successor or assignee thereof pursuant to the 

terms of such Currency Swap Agreement. 

‘‘Currency Swap Obligation’’ means a Non-Euro Obligation together with its related Currency 

Swap Transaction. 

‘‘Currency Swap Replacement Receipt’’ means any amount payable to the Issuer by a Currency 

Swap Counterparty upon entry into a Replacement Currency Swap Agreement which is replacing a 

Currency Swap Agreement which has been terminated. 

‘‘Currency Swap Termination Payment’’ means any amount payable by the Issuer to a Currency 

Swap Counterparty upon termination (in whole or in part) of a Currency Swap Agreement. 

‘‘Currency Swap Termination Receipt’’ means any amount payable by the Currency Swap 

Counterparty to the Issuer upon termination of a Currency Swap Agreement in whole or in part. 

‘‘Currency Swap Transaction’’ means, in respect of each Non-Euro Obligation, the currency swap 

transaction entered into in respect thereof pursuant to the Collateral Management Agreement and 

under the Currency Swap Agreement, including each Replacement Currency Swap Transaction entered 

into in replacement therefor. 

‘‘Currency Swap Transaction Exchange Rate’’ means the rate of exchange set out in the relevant 

Currency Swap Agreement. 

‘‘Current Pay Obligation’’ means a Collateral Debt Obligation (a) which would otherwise be a 

Defaulted Obligation, but as to which: 

(i) no interest payments are due and unpaid, the most recent interest payment due thereon 

was paid in cash, and the Collateral Manager reasonably expects that the next interest 

payment due will be paid in cash; 

(ii) relevant amounts under the Collateral Debt Obligation can be legally paid by the obligor 

on its next payment due date, and which payment is not at risk of being set aside in any 

bankruptcy, insolvency or receivership proceeding in connection with such obligor; 

(iii) (in the case where such obligor is subject to bankruptcy proceedings), a bankruptcy court 

has authorised the payment of interest due and payable on such Collateral Debt 

Obligation; and 

(iv) the Market Value of such Collateral Debt Obligation is at least 80 per cent, 

and (b) which is determined by the Collateral Manager to conform to the foregoing 

requirements (i) through (iv) as applicable, provided however, that the Collateral Manager shall 

make such determination in its reasonable business judgment which shall not be called into 

question as a result of any subsequent event; and provided further that the aggregate Principal 

61

Balance of all Collateral Debt Obligations which constitute the ‘‘Current Pay Obligations’’ may 

not exceed 5 per cent. of the CDO Principal Balance. To the extent that any Collateral Debt 

Obligations (otherwise satisfying the definition of Current Pay Obligations) are in excess of such 

amount, they shall not constitute Current Pay Obligations and the Collateral Manager may, in 

its absolute discretion, select which Collateral Debt Obligations comprise Current Pay 

Obligations for the purpose of this definition. 

‘‘Custody Account’’ means the custody account or accounts established on the books of the 

Custodian in accordance with the provisions of the Agency Agreement, which term shall include each 

cash account relating to each such custody account (if any). 

‘‘Defaulted Equity Security’’ means any equity security delivered to the Issuer upon acceptance 

of an Offer in respect of a Defaulted Obligation. 

‘‘Defaulted Obligation’’ means a Collateral Debt Obligation in respect of which the Collateral 

Manager has received written notice stating, or as to which the Collateral Manager has actual 

knowledge, that: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

it is in default in accordance with its terms as a result of non-payment of principal and/or 

interest and has been in default for the lesser of two calendar days and any applicable 

grace period (unless the Collateral Manager certifies that such non-payment is minor or 

technical in nature and can be remedied within such period), until such time that such 

default is cured or waived; or 

it is the obligation of an obligor which has been adjudged to be bankrupt or insolvent 

(and such judgment remains in force); or 

it ranks pari passu with, or is subordinated to, another Senior Secured Loan, Second Lien 

Loan or Mezzanine Obligation of the same obligor, which obligation (A) satisfies the 

criteria in paragraph (a) above, and (B) is a full recourse obligation; or 

it (i) for so long as any Notes rated by S&P are Outstanding, is rated ‘‘D’’ or ‘‘SD’’ by 

S&P and is not a Current Pay Obligation, (ii) for so long as any Notes rated by Moody’s 

are Outstanding, is rated ‘‘Ca’’ or less by Moody’s, and (a) has suffered a payment default 

in interest and/or principal or (b) the Collateral Manager has a reasonable expectation of 

such a payment default as of the next scheduled payment date with respect to such 

Collateral Debt Obligation; or 

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 

Collateral 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 

provided that (1) if such amendment, exchange or restructuring is rejected or withdrawn 

such Collateral Debt Obligation shall no longer be deemed to be a Defaulted Obligation; 

and (2) if such amendment, exchange or restructuring is effected, any obligation or 

package of obligations received or resulting from such amendment, exchange or 

restructuring shall not be considered a Defaulted Obligation for so long as such obligation 

or obligations satisfy the definition of Collateral Debt Obligation and the Eligibility 

Criteria (excluding items (6), (10) and (18)); or 

in the case of a Deferring Mezzanine Obligation, cash payment of interest has been 

deferred and cash payment of interest thereunder has not been resumed within (the later 

of) one calendar year or two payment periods, 

62

provided that: 

(i) a Synthetic Security shall be considered a Defaulted Obligation if the Reference Obligation 

to which such Synthetic Security is linked would constitute a Defaulted Obligation if it 

were itself a Collateral Debt Obligation or it is a Synthetic Security in respect of which a 

Synthetic Counterparty Default has occurred; 

(ii) any such Collateral Debt Obligation which has been exchanged for or converted into 

another security of the same obligor which is a Current Pay Obligation, shall not be 

considered a ‘‘Defaulted Obligation’’; and 

(iii) notwithstanding the foregoing, the Collateral Manager may declare any Collateral Debt 

Obligation to be a Defaulted Obligation if, in the Collateral Manager’s reasonable business 

judgment, the credit quality of the issuer or obligor of such Collateral Debt Obligation has 

significantly deteriorated such that the Collateral Manager has a reasonable expectation of 

payment default as of the next scheduled payment date with respect to such Collateral 

Debt Obligation. 

‘‘Deferred Interest’’ has the meaning given thereto in Condition 6(c) (Deferral of Interest). 

‘‘Deferring Mezzanine Obligation’’ means a Mezzanine Obligation which by its contractual terms 

provides for the deferral of interest. 

‘‘Definitive Certificate’’ means a certificate representing one or more Notes in definitive, fully 

registered, form. 

‘‘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, the applicable Redemption 

Date. 

‘‘Distribution’’ means any payment of principal or interest or any dividend or premium or other 

amount or asset paid or delivered on or in respect of any Collateral Debt Obligation, any Collateral 

Enhancement Obligation, any Synthetic Collateral or any Defaulted Equity Security. 

‘‘Due Date’’ means each date on which a Distribution is due and payable on, or in respect of, a 

Collateral Debt Obligation. 

‘‘Due Period’’ means, with respect to any Payment Date, the period commencing on the day 

immediately following the seventh Business Day prior to the preceding Payment Date (or on the 

Closing Date, in the case of the Due Period relating to the first Payment Date) and ending on the 

seventh Business Day prior to such Payment Date (or, in the case of the Due Period applicable to 

the Payment Date which is the Maturity Date of any Note, ending on the day preceding such 

Payment Date). 

‘‘Effective Date Rating Event’’ means both: 

(a) any of (i) the Initial Ratings of the Rated Notes of any Class being downgraded or 

withdrawn by either Rating Agency or (ii) either or both of the Rating Agencies notifying 

the Collateral Manager on behalf of the Issuer that such Rating Agency intends to reduce 

or withdraw any of its Initial Ratings of the Rated Notes of any Class, in either case, 

upon request for confirmation of the Initial Ratings of the Rated Notes of each Class by 

the Collateral Manager, acting on behalf of the Issuer, following the Initial Effective Date 

or Final Effective Date, as applicable; and 

(b) either the failure by the Collateral Manager, acting on behalf of the Issuer, to present to 

the Rating Agencies, or the failure by any Rating Agency to accept, a plan setting out the 

actions the Collateral Manager, acting on behalf of the Issuer, is intending to take in order 

to cause the Initial Ratings of the Rated Notes of each Class to be so confirmed or 

reinstated, 

provided that any downgrade or withdrawal of any of the Initial Ratings of the Rated Notes of 

any Class which is not directly related to a request for confirmation thereof or which occurs 

after confirmation thereof by the Rating Agencies shall not constitute an Effective Date Rating 

Event. 

63

‘‘Effective Date Requirements’’ means each of the Portfolio Profile Tests, the Collateral Quality 

Tests and the Coverage Tests being satisfied as at the Final Effective Date and the Issuer having 

entered into binding commitments to acquire Collateral Debt Obligations the CDO Principal Balance 

of which equals or exceeds the Target Par Amount by such date, subject to receipt of Rating Agency 

Confirmation in respect of any such failure to satisfy the above requirements. 

‘‘Eligibility Criteria’’ means the Eligibility Criteria specified in the Collateral Management 

Agreement which each Collateral Debt Obligation is required to satisfy on acquisition by the Issuer 

thereof. 

‘‘Eligible Investments’’ means any Euro denominated investment that, in the event that it is an 

obligation of a company incorporated in, or a sovereign issuer of the United States, is Registered at 

the time it is acquired, is not a Security that has an ‘‘r’’ or ‘‘t’’ subscript from S&P 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 Collateral Manager or an Affiliate of any of them 

provides services: 

(a) 

(b) 

(c) 

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; 

demand and time deposits in, certificates of deposit of and bankers’ acceptances and 

commercial paper issued by any depositary institution or trust company (including the 

Account Bank) incorporated under the laws of a Qualifying Country which is subject to 

supervision and examination by governmental banking authorities so long as the 

commercial paper and/or the debt obligations of such depositary institution or trust 

company (or, in the case of the principal depositary 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, for so 

long as there are Rated Notes or Class V Structured Combination Notes which are 

Outstanding: 

(i) 

(ii) 

a long-term debt credit rating of ‘‘Aaa’’ from Moody’s and, ‘‘AAA’’ from S&P (the 

‘‘EI Minimum Long-Term Rating’’); or 

a short-term debt rating of ‘‘P-1’’ from Moody’s and ‘‘A-1+’’ from S&P (the ‘‘EI 

Minimum Short-Term Rating’’), provided that (a) no more than 20 per cent. of the 

Principal Balance of such Eligible Investments can consist of commercial paper and 

short-term debt obligations with a short-term credit rating equal to ‘‘A-1+’’ from 

S&P and a maturity of no longer than 30 days provided that such Eligible 

Investment may be rolled over in accordance with its terms; subject, in all respects, to 

the requirements of this paragraph (b)(ii) in the case of commercial paper and shortterm 

debt obligations rated ‘‘A-1+’’ by S&P and with 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 EI Minimum Long-Term Rating; 

subject to Rating Agency Confirmation, unleveraged repurchase obligations with respect to: 

(i) 

any obligation described in paragraph (a) above; or 

(ii) any other security issued or guaranteed by an agency or instrumentality of a 

Qualifying Country, in either case entered into with a depositary 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 EI Minimum Long-Term Rating or whose short-term debt obligations are 

rated not less than the EI 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 EI Minimum Long-Term Rating; 

64

(d) securities bearing interest or sold at a discount issued by any corporation incorporated 

under the laws of a Qualifying Country that have a credit rating of not less than the EI 

Minimum Long-Term Rating at the time of such investment or contractual commitment 

providing for such investment; 

(e) commercial paper or other short-term obligations having at the time of such investment a 

credit rating of not less than the EI Minimum Short-Term Rating and that either are 

bearing interest or are sold at a discount from 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 EI Minimum Long- 

Term Rating; 

(f) off-shore funds investing in the money markets rated, at all times, not less than (i) ‘‘Aaa/ 

MR1+’’ by Moody’s and (ii) ‘‘AAAm’’ by S&P or (subject to receipt of Rating Agency 

Confirmation by S&P) ‘‘AAAm-G’’ by S&P; 

(g) Structured Finance Securities that have a credit rating of not less than the EI Minimum 

Long Term Rating at the time of such investment or contractual commitment providing 

for such investment, subject to Rating Agency Confirmation; and 

(h) any other investment similar to those described in paragraphs (a) to (g) (inclusive) above: 

(i) in respect of which Rating Agency Confirmation has been received that entry into 

such investment and its inclusion in the Portfolio will not cause the reduction or 

withdrawal of the then current ratings of any Rated Notes; and 

(ii) which has, in the case of an investment with a maturity of longer than 91 days, a 

long-term credit rating not less than the EI Minimum Long-Term Rating or, in the 

case of investment with a maturity of 91 days or less, a short-term credit rating of 

not less than the EI 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 with a Stated Maturity (giving 

effect to any applicable grace period) no later than the first Business Day immediately preceding 

the next following Payment Date; provided however, that Eligible Investments shall not include 

any security the acquisition of which would cause the breach of applicable selling or transfer 

restrictions or of applicable Irish laws relating to the offering of securities or of collective 

investment schemes, any mortgage backed security, interest-only security, security subject to 

withholding or similar taxes, security purchased at a price in excess of 100 per cent. of par or 

security whose repayment is subject to substantial non-credit related risk, as determined by the 

Collateral Manager in its discretion; and provided further that, notwithstanding anything to the 

contrary, any Eligible Investment standing to the credit of a Counterparty Downgrade Collateral 

Account and/or a Synthetic Collateral Account must be capable of being liquidated, at par, on 

demand without penalty; and provided further that such Eligible Investments must be Section 

110 Assets. 

‘‘EURIBOR’’ means the rate determined in accordance with Condition 6(e) (Interest on the 

Rated Notes) and in respect of the Rated Notes for the first Interest Accrual Period, as a linear 

interpolation for 6 month Euro deposits and 9 month Euro deposits, and for each subsequent Interest 

Accrual Period, as applicable to 6 month Euro deposits. 

‘‘Euroclear’’ means Euroclear Bank S.A./N.V. as operator of the Euroclear System. 

‘‘Euroclear Pledge Agreement’’ means the Belgian law pledge agreement dated on or about 

26 July 2006 between the Issuer and the Trustee. 

‘‘Euro Equivalent’’ means: (a) subject to the application of sub-paragraph (b) below and without 

double-counting, an amount expressed in Euro, which is equal to a specified amount denominated in 

a currency other than Euro, as determined by the Issuer, following consultation with the Collateral 

Manager, by reference to the prevailing spot rate of exchange on the relevant date; or (b) in the case 

of amounts denominated in a currency other than Euro standing to the credit of any Currency 

Account which are scheduled to be paid by the Issuer under a Currency Swap Transaction on the 

65

next following Payment Date, an amount expressed in Euro calculated using the applicable Currency 

Swap Transaction Exchange Rate on the relevant date. 

‘‘Euro-zone’’ has the meaning given thereto in Condition 6 (Interest). 

‘‘Event of Default’’ means each of the events defined as such in Condition 10(a) (Events of 

Default). 

‘‘Expense Reserve Account’’ means the interest bearing account of the Issuer with the Account 

Bank into which an initial deposit of A75,000 and an amount equal to 0.04 per cent. of the Target 

Par Amount shall be made on the Closing Date and into which Interest Proceeds shall be deposited 

on each Payment Date (other than the date on which no Notes will remain outstanding following 

such Payment Date) in the amount required pursuant to paragraph (D) of Condition 3(c)(i) 

(Application of Interest Proceeds) and out of which Trustee Fees and Expenses and Administrative 

Expenses which become payable during any Due Period shall be paid. 

‘‘Extraordinary Resolution’’ means, in relation to any Class of Noteholders, a resolution passed 

(at a meeting of such Class of Noteholders duly convened and held in accordance with the Trust 

Deed) by a majority of at least 66 2/3 per cent. of the votes cast or a resolution in writing signed by, 

or on behalf, of the holders of not less than 66 2/3 per cent. in principal amount outstanding of 

Notes Outstanding of a Class, including, in each case, the Components of a Structured Combination 

Note corresponding to such Class who for the time being are entitled to receive notice of a meeting. 

‘‘Financial Instruments’’ means any financial instrument (instrument financier) within the meaning 

of article L.211-1 of the French Code Monétaire et Financier including any Mezzanine Obligations 

held in the form of debt securities, Synthetic Securities, Collateral Enhancement Obligations, 

Structured Finance Securities held in the form of debt securities, Currency Swap Transactions and 

any Interest Rate Hedge Transactions. 

‘‘Final Effective Date’’ means the earlier of: 

(a) the date designated for such purpose by the Collateral Manager, acting on behalf of the 

Issuer, by written notice to the Trustee, the Issuer and the Collateral Administrator 

pursuant to the Collateral Management Agreement, subject to the Effective Date 

Requirements having been satisfied; and 

(b) the date which falls twelve months after the Closing Date, or if such day is not a Business 

Day, the immediately following Business Day. 

‘‘Form-Approved Synthetic Security’’ means a Synthetic Security the documentation for and 

structure of which conforms to a form which has previously received Rating Agency Confirmation, 

save for the amount and timing of periodic payments, the name of the Reference Obligation, the 

notional amount, the effective date and/or the termination date and a Form-Approved Synthetic 

Security shall be deemed to constitute a Senior Secured Loan, Second Lien Loan or a Mezzanine 

Loan, if the Reference Obligation thereunder (if it were a Collateral Debt Obligation) would be a 

Senior Secured Loan, Second Lien Loan or a Mezzanine Obligation, as determined by the Collateral 

Manager. 

‘‘Global Note’’ and ‘‘Global Notes’’ have the respective meanings given thereto in Condition 

2(a)(i) (Global Notes). 

‘‘Incentive Collateral Management Fee’’ means the incentive collateral management fee payable to 

the Collateral Managers pursuant to the Collateral Management Agreement, excluding any value 

added tax due and payable thereon. 

‘‘Initial Effective Date’’ means the Business Day immediately following the six month period 

from the Closing Date or, if earlier, the date specified as such by the Collateral Manager in 

accordance with the terms of the Collateral Management Agreement. 

‘‘Initial Ratings’’ means in respect of any Class of Rated Notes or the Class V Structured 

Combination Notes and any Rating Agency, the ratings assigned to such Class of Notes by such 

Rating Agency as at the Closing Date and ‘‘Initial Rating’’ means each such rating. 

‘‘Interest Account’’ means a sub-account of the Collection Account created in the ledgers of the 

Account Bank to which Interest Proceeds are to be credited. 

66

‘‘Interest Accrual Period’’ means the period from and including the Closing 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 

the principal amount outstanding of the Notes of any Class indicated for any Interest Accrual Period 

being: 

(a) in the case of the Class I Senior Notes, the Class II Senior Notes, the Class III Mezzanine 

Notes and the Class IV Mezzanine Notes, as the case may be, the amount calculated by 

the Collateral Administrator as soon as practicable after 11:00 am (Brussels time) on the 

relevant Interest Determination Date in accordance with Condition 6(e)(ii) (Determination 

of Floating Rate of Interest and Calculation of Interest Amount) excluding any Deferred 

Interest; and 

(b) in the case of the Subordinated Notes the amounts in respect of Subordinated Note 

Interest calculated as provided in Condition 6(g) (Interest on the Subordinated Notes) and 

payable pursuant to Condition 3(c) (Priorities of Payment). 

‘‘Interest Coverage Numerator’’ means, on any particular Measurement Date: 

(a) the Balance standing to the credit of the Expense Reserve Account, the Interest Account 

and the Retained Portion Release Amount in respect of the next succeeding Payment Date; 

(b) plus the scheduled interest payments due but not yet paid (in each case regardless of 

whether the applicable Due Date has yet occurred) in the Due Period in which such 

Measurement Date occurs on: 

(i) the Collateral Debt Obligations (save for Currency Swap Obligations) excluding (x) 

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 by its 

terms and (y) any amounts expected to be withheld at source or otherwise deducted 

in respect of taxes plus any amounts expected to be reimbursed in respect of taxes 

withheld at source or otherwise deducted; and 

(ii) the Principal Account, the Interest Account, the Expense Reserve Account, the 

Additional Collateral Account, the Collateral Enhancement Account, the Retained 

Portion Account and the Currency Accounts (converted, in the case of any Currency 

Account, into Euro at the prevailing spot rate of exchange, as determined by the 

Issuer following consultation with the Collateral Manager), 

but excluding any scheduled interest payments as to which the Issuer or the Collateral Manager 

has actual knowledge or a reasonable expectation that such payment will not be made which 

such actual knowledge or reasonable expectation the Issuer or, as the case may be, the 

Collateral Manager has communicated to the Collateral Administrator, provided that, for the 

purposes of calculation of the Interest Coverage Numerator, Collateral Debt Obligations which 

pay interest on an annual basis shall be deemed to pay interest on a semi-annual basis; 

(c) plus any Scheduled Interest Rate Hedge Counterparty Payments due and payable from the 

Interest Rate Hedge Counterparty to the Issuer on or before the Business Day prior to the 

Payment Date relating to the Due Period in which such Measurement Date occurs 

(regardless of whether the scheduled date for payment has yet occurred), but excluding any 

such payments as to which the Issuer or the Collateral Manager has actual knowledge or a 

reasonable expectation that such payment will not be made; 

(d) plus scheduled periodic payments in the nature of coupon (and not principal) payable to 

the Issuer under any Currency Swap Transaction due and payable but not yet paid 

(regardless of whether the scheduled date for payment has yet occurred) in the Due Period 

in which such Measurement Date falls, but excluding any such payments as to which the 

Issuer or the Collateral Manager has actual knowledge or a reasonable expectation that 

such payment will not be made; and 

(e) minus the amounts payable pursuant to paragraphs (A) to (F) of Condition 3(c)(i) 

(Application of Interest Proceeds) on the following Payment Date. 

67

‘‘Interest Determination Date’’ shall have the meaning given thereto in paragraph (i)(A) of 

Condition 6(e) (Interest on the Floating Rate Notes). 

‘‘Interest Proceeds’’ means all amounts paid, or payable into the Interest Account from time to 

time and, with respect to any Payment Date, ‘‘Interest Proceeds’’ means the Interest Proceeds received 

by or on behalf of the Issuer during the related Due Period, together with all Scheduled Interest Rate 

Hedge Counterparty Payments payable on or before the Business Day prior to such Payment Date 

and any other amounts to be disbursed out of the Payment Account as Interest Proceeds on such 

Payment Date pursuant to Condition 3(c)(i) (Application of Interest Proceeds). 

‘‘Interest Rate Hedge Agreement’’ means each 1992 ISDA Master Agreement (Multicurrency 

Cross-Border) or 2002 ISDA Master Agreement (or such ISDA pro forma Master Agreement as may 

be published by ISDA from time to time), together with the Schedule and, where the context admits, 

the Confirmations relating thereto, entered into between the Issuer and the Interest Rate Hedge 

Counterparty in connection with the Issuer’s payment obligations under the Notes evidencing the 

Interest Rate Hedge Transactions entered into by the Issuer from time to time, as amended, 

supplemented or replaced from time to time and including any guarantee thereof and any credit 

support annex entered into pursuant to the terms thereof and including any Replacement Interest 

Rate Hedge Agreement entered into in replacement thereof, provided always that each such Interest 

Rate Hedge Agreement will be in the applicable Pre-Approved Form or shall be in a form in respect 

of the terms of which Rating Agency Confirmation has been received. 

‘‘Interest Rate Hedge Counterparty’’ any financial institution with which the Issuer has (pursuant 

to, and in accordance with, the terms of the Collateral Management Agreement) entered into an 

Interest Rate Hedge Agreement or any permitted successor or assignee thereof pursuant to the terms 

of such Interest Rate Hedge Agreement. 

‘‘Interest Rate Hedge Receipts’’ means Interest Rate Hedge Replacement Receipts and Interest 

Rate Hedge Termination Receipts. 

‘‘Interest Rate Hedge Replacement Receipt’’ means any amount payable to the Issuer by any 

Interest Rate Hedge Counterparty upon entry into a Replacement Interest Rate Hedge Agreement 

which is replacing an Interest Rate Hedge Agreement which has been terminated following the 

occurrence of an ‘‘Event of Default’’ or ‘‘Termination Event’’ thereunder. 

‘‘Interest Rate Hedge Termination Payment’’ means any amount payable by the Issuer to an 

Interest Rate Hedge Counterparty upon termination of the applicable Interest Rate Hedge Agreement 

in whole or in part; 

‘‘Interest Rate Hedge Termination Receipt’’ means an amount payable by an Interest Rate Hedge 

Counterparty to the Issuer upon termination of an Interest Rate Hedge Agreement in whole or in 

part following the occurrence of an ‘‘Event of Default’’ or ‘‘Termination Event’’ thereunder. 

‘‘Interest Rate Hedge Transaction’’ means each interest rate swap or protection transaction 

entered into pursuant to the Interest Rate Hedge Agreement. 

‘‘Interest Reinvestment Ratio’’ means, as at any Determination Date, the ratio (expressed as a 

percentage) obtained by dividing (a) the Par Coverage Numerator by (b) the sum of the aggregate 

principal amount outstanding of the Rated Notes. 

‘‘Interest Reinvestment Test’’ means the test which will be satisfied if, as at any Determination 

Date, the Interest Reinvestment Ratio is at least 106.0 per cent. 

‘‘Interim Targets’’ means, with respect to the Initial Effective Date, the measures set forth 

opposite the applicable Interim Target categories in the table below: 

Interim Target Category 

Moody’s Diversity Score................................................................................................. 

Weighted Average Spread............................................................................................... 

Moody’s Weighted Average Rating Factor.................................................................... 

Weighted Average Life ................................................................................................... 

Moody’s Minimum Weighted Average Recovery Rate Test.......................................... 

S&P’s Minimum Weighted Average Recovery Rate Test .............................................. 

Interim Target 

28 or higher 

2.50% or higher 

2410 or lower 

11 years or less 

52% or higher 

51% or higher 

68

‘‘Investment Company Act’’ means the United States Investment Company Act of 1940, as 

amended. 

‘‘Investment Period’’ means the period from and including the Closing Date to but excluding the 

Final Effective Date. 

‘‘Issuer Irish Account’’ means the account in the name of the Issuer, held with a bank in 

Ireland, into which an amount equal to the Issuer’s issued and paid up share capital shall be 

deposited on or before the Closing Date and into which an amount of A250 shall be deposited on 

each Payment Date. 

‘‘Joint Lead Managers’’ means, in respect of the Subordinated Notes, Natexis Banques 

Populaires and Dresdner Bank AG London Branch and ‘‘Joint Lead Manager’’ means either of them. 

‘‘Lead Manager’’ means, in respect of the Rated Notes, Natexis Banques Populaires. 

‘‘Letter of Undertaking’’ means the letter dated on or about the Closing Date from, among 

others, the Issuer and the Corporate Administrator to the Lead Manager, the Joint Lead Managers, 

the Collateral Manager and the Trustee. 

‘‘Market Value’’ means on any date of determination: 

(a) the bid price determined by an independent pricing service that is an established and 

recognised pricing service used widely in the market to price this type of Collateral Debt 

Obligation (such as Intex); 

(b) if such service is not available, the mean of the bid prices determined by three independent 

broker-dealers active in the trading of one or more Collateral Debt Obligations or, if three 

such broker-dealer prices are not available, the lower of the bid prices determined by two 

such broker-dealers, or if only one such broker dealer price is available, such price shall be 

the Market Value unless the relevant Collateral Manager determines a lower bid price in 

the manner described in (c) below; or 

(c) if the determinations of such broker-dealers are not available, then the fair market value 

thereof determined by the relevant Collateral Manager on a best efforts basis in a manner 

consistent with reasonable and customary market practice, 

in each case, as notified to the Collateral Administrator on the date of determination thereof, which 

shall, for the avoidance of doubt, be expressed as a percentage and, in the case of any Non-Euro 

Obligation, shall be determined by multiplying such percentage by the principal amount of such Non- 

Euro Obligation and converting it into Euro at the relevant Currency Swap Transaction Rate of 

Exchange and dividing the resulting amount by the principal amount of such Non-Euro Obligation 

converted into Euro using the relevant Currency Swap Transaction Rate of Exchange. 

‘‘Maturity Date’’ means, in respect of each Class of Notes, 26 September 2022, or in the event 

that such day is not a Business Day, the next following Business Day. 

‘‘Measurement Date’’ means (a) the Initial Effective Date, (b) the Final Effective Date; (c) after 

the Final Effective Date, any day or days on which a substitution (including each day of any sale 

and reinvestment, if not the same day) of, or a default under a Collateral Debt Obligation on 

acquisitions of any Additional Collateral Debt Obligation occurs; (d) the last Business Day of any 

month after the Final Effective Date and (e) with reasonable (and not less than two Business Days’ 

notice), any Business Day requested by either Rating Agency. 

‘‘Mezzanine Coverage Tests’’ means the Mezzanine Par Value Tests and the Mezzanine Interest 

Coverage Tests. 

‘‘Mezzanine Interest Coverage Tests’’ means the Class III Interest Coverage Test and the Class 

IV Interest Coverage Test. 

‘‘Mezzanine Noteholders’’ means the Class III Mezzanine Noteholders and the Class IV 

Mezzanine Noteholders. 

‘‘Mezzanine Obligation’’ means: 

69

(a) a secured mezzanine loan or other debt obligation, as determined by the Collateral 

Manager (excluding any loans to or issues by a start-up company or an obligor with no 

trading history, unless (i) such loans or securities are fully guaranteed by an Affiliate which 

has an established trading history or Rating Agency Confirmation is received; or (ii) such 

loans relate to the financing of a new company that has been specially created to buy a 

company or the business of a company with an established trading history; or (iii) such 

issue is a Participation therein; and/or 

(b) a Synthetic Security, the Reference Obligation applicable to which is a mezzanine loan or 

other debt obligation of the type described in (a) above or a Participation therein; and/or 

(c) a Currency Swap Obligation, the Non-Euro Obligation of which is, other than in relation 

to its currency of denomination, a Mezzanine Obligation of the type described in 

paragraph (a) above. 

‘‘Mezzanine Par Value Tests’’ means the Class III Par Value Test and the Class IV Par Value 

Test. 

‘‘Minimum Denomination’’ means (a) in respect of Regulation S Notes of each Class (including 

the Structured Combination Notes), A50,000 and (b) in respect of Rule 144A Notes of each Class 

(including the Structured Combination Notes), A250,000. 

‘‘Monthly Report’’ means the monthly report defined as such in the Collateral Management 

Agreement which is prepared by the Collateral Administrator on behalf of the Issuer and made 

available to the Issuer, the Trustee, the Collateral Manager and the Rating Agencies and, upon 

request therefor in accordance with Condition 4(f) (Information Regarding the Portfolio), to any 

Noteholder, which shall include information regarding the status of the Collateral Debt Obligations 

pursuant to the Collateral Management Agreement. 

‘‘Moody’s’’ means Moody’s Investors Service, Inc. and any successor or successors thereto. 

‘‘Natexis Zero Coupon Collateral’’ means the security granted by the Issuer to the Trustee 

pursuant to the Trust Deed and the Natexis Zero Coupon Notes Pledge Agreement. 

‘‘Natexis Zero Coupon Notes’’ means, the senior unsecured zero coupon notes issued by Natexis 

Banques Populaires pursuant to its Euro Medium Term Notes and other Debt Instruments 

Programme. 

‘‘Natexis Zero Coupon Notes 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 Natexis Zero 

Coupon Notes forming the Natexis Zero Coupon Portion will be credited. 

‘‘Natexis Zero Coupon Notes Pledge Agreement’’ means the Belgian law pledge agreement 

entered into between the Issuer and the Trustee on the Closing Date in respect of the Natexis Zero 

Coupon Notes Portion; 

‘‘Natexis Zero Coupon Notes Portion’’ means Natexis Zero Coupon Notes with a maturity date 

of 26 September 2018, ISIN FR0010359760 and a nominal principal amount of A3,500,000 purchased 

by the Issuer for A2,080,000 and held by the Custodian subject to the security created by the Natexis 

Zero Coupon Notes Pledge Agreement. 

‘‘Natexis Zero Coupon Security Component’’ means, in respect of the Class VI Structured 

Combination Notes, a Component thereof that represents an interest in the Natexis Zero Coupon 

Notes Portion. 

‘‘Non-Call Period’’ means the period from the Closing Date to but excluding 26 July 2010 (or, if 

such date is not a Business Day, the next following Business Day). 

‘‘Non-Euro Obligation’’ means a Senior Secured Loan, Second Lien Loan or Mezzanine 

Obligation denominated in United States dollars, Canadian dollars, Australian dollars, pounds sterling 

or any lawful currency (other than the Euro) of a Qualifying Country that, as of its date of purchase, 

satisfies each of the Eligibility Criteria (save for that relating to its currency of denomination). 

‘‘Non-Permitted Holder’’ has the meaning given thereto in Condition 2(i) (Forced Transfer of 

Rule 144A Notes). 

70

‘‘Note Valuation Report’’ means the semi-annual report defined as such in the Collateral 

Management Agreement which is prepared by the Collateral Administrator on behalf of the Issuer 

and is made available to the Issuer, the Lead Manager, the Joint Lead Managers, the Trustee, the 

Collateral Manager and the Rating Agencies and, upon request therefor in accordance with Condition 

4(f) (Information Regarding the Portfolio), to any Noteholder, which shall include information 

regarding the status of the Collateral Debt Obligations pursuant to the Collateral Management 

Agreement. 

‘‘Noteholders’’ means the persons in whose name the Notes are registered from time to time. 

‘‘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 OAT Strips forming the OAT Strips Portion 

will be credited. 

‘‘OAT Relevant Sale Portion’’ means in relation to a Payment Date, that portion of the OAT 

Strips to be sold on that Payment Date by the Custodian acting on behalf of the Issuer as calculated 

in accordance with the OAT Sale Formula by the Collateral Administrator and confirmed by the 

Collateral Managers and notified to the Issuer, the Trustee and the Custodian on the related 

Determination Date. 

‘‘OAT Sale Formula’’ means the formula which determines the aggregate notional principal 

amount of OAT Strips which collateralise the OAT Security Component of the Structured 

Combination Notes to be sold as set out below: 

X= 

E 

——— 

(1 – P) 

Where: 

X = the notional principal amount of the OAT Strips whose OAT Market Value on the 

relevant date is equal to the amount derived from the OAT Sale Formula; 

E = the distribution received on the Structured Combination Note Subordinated Component on 

the relevant Payment Date; 

P = the OAT Market Value of the OAT Strips Portion on the relevant date; and 

OAT Market Value = the best bid price from 3 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 OAT Strips available in the OAT Strips Portion. 

‘‘OAT Security Component’’ means, in respect of the Structured Combination Notes, a 

Component thereof that represents an interest in the OAT Strips Portion. 

‘‘OAT Strips Collateral’’ means the security granted by the Issuer to the Trustee pursuant to the 

Trust Deed and the OAT Strips Pledge Agreement. 

‘‘OAT Strips’’ means, Obligation Assimilable á des valeurs du Trésor securities issued by the 

French treasury which have been stripped by Spécialistes en Valeurs du Trésors into zero coupon 

bonds. 

‘‘OAT Strips Pledge Agreement’’ means the Belgian law pledge agreement entered into between 

the Issuer and the Trustee on the Closing Date in respect of the OAT Strips Portion; 

‘‘OAT Strips Portion’’ means OAT Strips with a maturity date of 25 April 2021, ISIN 

FR0010193003 and nominal principal amount of A18,049,190 purchased by the Issuer for A9,900,000 

and held by the Custodian subject to the security created by the OAT Strips Pledge Agreement. 

‘‘OAT Strips Sale Proceeds’’ means in relation to a Payment Date, the net proceeds of sale of 

the OAT Relevant Sale Portion on that Payment Date received by the Custodian, acting on behalf of 

the Issuer pursuant to the terms of the Agency Agreement. 

‘‘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 

71

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 issuer of such obligation or any other Person to amend, modify or waive any 

provision of such obligation or any related Underlying Instrument. 

‘‘Ordinary Resolution’’ means, in relation to any Class of Noteholders, a resolution passed (at a 

meeting of such Class of Noteholders duly convened and held in accordance with the Trust Deed) by 

a majority of the votes cast or a resolution in writing signed by, or on behalf, of the holders of not 

less than 50 per cent. in principal amount outstanding of Notes Outstanding of such Class, including, 

in each case, the Components of a Structured Combination Note corresponding to such Class who 

for the time being are entitled to receive notice of a meeting. 

‘‘Outstanding’’ has the meaning given thereto in the Trust Deed. 

‘‘Overcollateralisation Tests’’ means the Senior Par Value Test and the Mezzanine Par Value 

Tests. 

‘‘Par Coverage Numerator’’ means the aggregate of: 

(a) the aggregate of the Principal Balances of the Collateral Debt Obligations (provided that, 

in the case of unfunded Synthetic Securities, the notional amount of the underlying 

Reference Obligation shall be taken into account); 

(b) the aggregate of the Balances standing to the credit of the Principal Account and the 

Additional Collateral Account; and 

(c) the Euro Equivalent of the amount standing to the credit of each Currency Account, solely 

to the extent that such amounts are yet to be transferred to the Principal Account on the 

next Payment Date; and 

(d) the aggregate of the Principal Balances of the Eligible Investments (to the extent not 

included in (b) and (c) above), 

For the purposes of the calculation of the Par Coverage Numerator: 

(i) the Principal Balance of all Triple C Assets shall be the Triple C Asset Adjusted Par 

Value; 

(ii) the Principal Balance of any Collateral Debt Obligation having a purchase price to the 

Issuer of less than 90 per cent. of the principal amount thereof shall be such purchase 

price unless the Market Value (determined other than pursuant to (c) of the definition 

thereof) for such Collateral Debt Obligation is on average greater than 90 per cent. of the 

principal amount thereof, over a period of 45 consecutive days, at which time the Principal 

Balance thereof shall be its Principal Balance in accordance with the definition of such 

term in these Conditions; 

(iii) a Collateral Debt Obligation which meets the criteria of two subparagraphs (i) and (ii) 

above, shall be the lower of the Principal Balance attributable thereto under the terms of 

paragraph (i) or (ii) above; and 

(iv) for purposes of the Overcollateralisation Test only, the Principal Balance of any Collateral 

Debt Obligation in which the Trustee does not have a first priority perfected security 

interest shall be deemed zero. 

‘‘Participation’’ means an interest in relation to a Mezzanine Obligation, a Second Lien Loan or 

a Senior Secured Loan acquired indirectly by the Issuer (by way of participation or sub-participation) 

from a Selling Institution. 

‘‘Participation Agreement’’ means an agreement between the Issuer and a Selling Institution in 

relation to the purchase by the Issuer of a Participation. 

‘‘Payment Account’’ means the account in the name of the Issuer and held with the Account 

Bank to which amounts shall be caused to be transferred by the Account Bank on the first Business 

Day prior to each Payment Date out of the Expense Account and (to the extent applicable) the 

Additional Collateral Account, the Currency Accounts, the Interest Account, the Retained Portion 

72

Account and the Principal Account and out of which the amounts required to be paid on each 

Payment Date each as provided pursuant to the Priorities of Payment shall be paid. 

‘‘Payment Date’’ means 26 March and 26 September in each year, commencing 26 March 2007, 

the Maturity Date and any Redemption Date. 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. 

‘‘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. 

‘‘Portfolio’’ means the Collateral Debt Obligations, Collateral Enhancement Obligations, 

Defaulted 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 defined as such in the Collateral 

Management Agreement. 

‘‘Potential Event of Default’’ means any condition, event or act 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 would constitute an Event 

of Default. 

‘‘Pre-Approved Form’’ means the form of 1992 ISDA Master Agreement (Multicurrency Cross- 

Border) or 2002 ISDA Master Agreement (or such ISDA pro forma Master Agreement as may be 

published by ISDA from time to time), together with the Schedule and, where the context admits, the 

Confirmations relating thereto to be entered into from time to time between the Issuer and any 

Currency Swap Counterparty or, as the case may be, Interest Rate Hedge Counterparty in connection 

with the Issuer’s payment obligations under the Notes evidencing the Currency Swap Transaction or, 

as the case may be, Interest Rate Hedge Transactions entered into by the Issuer from time to time, in 

respect of the form and terms of which Rating Agency Confirmation has been obtained, as such Pre- 

Approved Form may be amended from time to time, subject to the receipt of Rating Agency 

Confirmation in respect thereto. 

‘‘Presentation Date’’ means a day which is a Business Day in the jurisdiction in which the 

account specified by the payee is open and in which the Note is presented for payment. 

‘‘Principal Account’’ means a sub-account of the Collection Account created in the ledgers of the 

Account Bank to which Principal Proceeds are to be credited. 

‘‘principal amount outstanding’’ of a Note of any Class on any date shall be (i) the initial 

principal amount thereof, plus (ii) any Deferred Interest deferred pursuant to Condition 6(c) (Deferral 

of Interest), less (iii) the aggregate of all principal payments (including Deferred Interest in respect of 

such Note) thereof at such date. 

‘‘Principal Balance’’ means, (1) with respect to any Collateral Debt Obligation as of any date of 

determination, the outstanding principal amount thereof (including any par accretion amount linked 

to Mezzanine Obligations and Purchased Accrued Interest) and (2) with respect to any Eligible 

Investment, as of any date of determination, the principal amount outstanding thereof (including any 

par accretion amount pursuant to the terms of such Eligible Investment), provided however that: 

(a) the Principal Balance of any Defaulted Equity Security shall be deemed to be zero; 

(b) the Principal Balance of any Collateral Debt Obligation which is or has become a 

Defaulted Obligation shall be the lower of the Market Value and the Recovery Value 

relating to such Defaulted Obligation; 

(c) the Principal Balance of any Current Pay Obligation shall be deemed to be 95 per cent. of 

its Market Value; 

(d) the Principal Balance of any Collateral Debt Obligation or Eligible Investment (other than 

a Collateral Debt Obligation or Eligible Investment of the type referred to in paragraph 

(b) above) that is a zero coupon bond shall be the accreted value thereof; 

73

(e) the Principal Balance of any Collateral Debt Obligation that is a Synthetic Security shall 

be deemed to be the principal or notional amount of such Synthetic Security as reduced 

from time to time as a result of certain ‘‘Credit Events’’ occurring in respect of the 

Reference Obligations specified therein; and 

(f) the Principal Balance of any Currency Swap Obligation shall be an amount in Euro equal 

to the principal amount outstanding of the related Non-Euro Obligation (provided that if 

such Non-Euro Obligation would otherwise fall within paragraphs (a) to (e) above, the 

Principal Balance of such Currency Swap Obligation will be calculated as an amount in 

Euro equal to the Principal Balance calculated in accordance with paragraphs (a) to (e) 

above), converted into Euro at the Currency Swap Transaction Exchange Rate, 

and save as provided in the definition of ‘‘Par Coverage Numerator’’. 

‘‘Principal Proceeds’’ means all amounts paid or payable into the Principal Account from time 

to time and, with respect to any Payment Date, ‘‘Principal Proceeds’’ means the Principal Proceeds 

received by or on behalf of the Issuer during the related Due Period and (without double counting) 

any other amounts to be disbursed out of the Payment Account as Principal Proceeds on such 

Payment Date pursuant to Condition 3(c)(ii) (Application of Principal Proceeds). 

‘‘Priorities of Payment’’ means in the case of Interest Proceeds, the priorities of payment set out 

in Condition 3(c)(i) (Application of Interest Proceeds) or, in the case of Principal Proceeds, the 

priorities of payment set out in Condition 3(c)(ii) (Application of Principal Proceeds), provided that in 

the case of any redemption of the Notes in whole pursuant to Conditions 7 (Redemption and 

Purchase) or 10 (Events of Default) or enforcement of the security over the Collateral pursuant to 

Condition 11 (Enforcement), Priorities of Payment in Condition 3(c)(i) (Application of Interest 

Proceeds) shall exclude paragraphs (A) and (C) of Condition 3(c)(i) (Application of Interest Proceeds) 

to the extent that the Administrative Expenses referred to in such paragraphs are Administrative 

Expenses of the nature described in paragraphs (a), (e), (f), (h), (i) and (j) of the definition thereof 

and, in the case of enforcement of the security over the Collateral pursuant to Condition 11 

(Enforcement), the Senior Fee Cap in paragraph (C) of Condition 3(c)(i) (Application of Interest 

Proceeds) shall not apply. 

‘‘Priority Termination Event’’ means the termination of a Currency Swap Agreement or, as the 

case may be, Interest Rate Hedge Agreement in whole (but not in part) in circumstances in which the 

applicable Currency Swap Counterparty or, as the case may be, Interest Rate Hedge Counterparty is 

not the ‘‘Defaulting Party’’ or the sole ‘‘Affected Party’’ (each such term as defined in such Currency 

Swap Agreement or, as the case may be, Interest Rate Hedge Agreement). 

‘‘pro rata basis’’ means an allocation of amounts payable: 

(a) in the case of amounts of interest payable among different Classes of Notes, by reference 

to the respective amounts of interest payable on such Classes of Notes; 

(b) in the case of amounts of principal payable among different Classes of Notes, by reference 

to the respective aggregate principal amount outstanding of such Classes of Notes 

Outstanding thereof at the relevant time; 

(c) in the case of a single Class, by reference to the respective principal amount outstanding of 

each Note of such Class Outstanding; and 

(d) in the case of any other amounts, by reference to the respective amounts payable. 

‘‘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, in respect of a Mezzanine Obligation, 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. 

‘‘QIB’’ means a Person who is a qualified institutional buyer as defined in Rule 144A under the 

Securities Act. 

74

‘‘QIB/QP’’ means a Person who is both a qualified institutional buyer as defined in Rule 144A 

under the Securities Act and a Qualified Purchaser for the purposes of Section 3(c)(7) of the 

Investment Company Act. 

‘‘Qualifying Country’’ means 

(i) each of Austria, Belgium, Bermuda, Canada, Denmark, Finland, France, Germany, Greece, 

Ireland, Italy, Liechtenstein, Luxembourg, The Netherlands, Norway, Portugal, Spain, 

Sweden, Switzerland, the United States and the United Kingdom with a foreign currency 

sovereign rating of ‘‘AA-’’ or above by S&P and a country ceiling for foreign currency 

bonds or bank deposits of ‘‘Aa3’’ or above by Moody’s (subject to receipt of Rating 

Agency Confirmation where such rating requirements are not satisfied); 

(ii) any other country in respect of which Rating Agency Confirmation has been received. 

‘‘Qualified Purchaser’’ means a Person who is a qualified purchaser as defined in Section 2(a)(51) 

of the Investment Company Act. 

‘‘Rated Notes’’ means, so long as any Notes of the relevant Class remain Outstanding, the Class 

I Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes and/or the Class IV 

Mezzanine Notes. 

‘‘Rating Agencies’’ means Moody’s and S&P, provided that if at any time Moody’s or S&P 

ceases to provide rating services, any other nationally recognised investment rating agency selected by 

the Issuer and satisfactory to the Trustee (a ‘‘Replacement 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 Collateral Management 

Agreement shall be 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 of written confirmation by the Rating Agencies, for so long as one or more 

Class of Rated Notes are Outstanding and rated by the Rating Agencies, that such specified action or 

determination will not result in the reduction or withdrawal of its then-current ratings on such Notes. 

‘‘Record Date’’ has the meaning given thereto in Condition 8(a) (Method of Payment). 

‘‘Recovery Value’’ means, in respect of any Collateral Debt Obligation, the recovery value 

thereof determined in accordance with the Collateral Management Agreement. 

‘‘Redemption Date’’ means each date specified for a redemption of the Notes of a Class pursuant 

to Condition 7 (Redemption and Purchase) or the date on which the Notes of such Class are 

accelerated pursuant to Condition 10 (Events of Default), in each case, if such day is not a Business 

Day the next following Business Day. 

‘‘Redemption Determination Date’’ has the meaning given thereto in Condition 7(b)(ii) 

(Conditions to Optional Redemption). 

‘‘Redemption Notice’’ means a redemption notice in the form available from any of the Transfer 

Agents which has been duly completed by a Subordinated Noteholder and which specifies, amongst 

other things, the applicable Redemption Date. 

‘‘Redemption Price’’ means, when used with respect to: 

(a) any Class I Senior Note, Class II Senior Note, Class III Mezzanine Note or Class IV 

Mezzanine Note to be redeemed pursuant to Condition 7(b) (Optional Redemption), 

Condition 7(c) (Redemption Upon Breach of Coverage Tests), Condition 7(d) (Redemption 

upon an Effective Date Rating Event), Condition 7(e) (Redemption at the Option of the 

Collateral Manager), Condition 7(f) (Redemption Following Expiry of the Reinvestment 

Period), Condition 7(g) (Redemption upon Failure to Appoint a Replacement Collateral 

Manager) or Condition 10 (Events of Default), 100 per cent. of the principal amount 

outstanding of the Class I Senior Note or Class II Senior Note, respectively, to be 

redeemed, together with interest accrued thereon to the date of redemption; 

75

(b) any Subordinated Note to be redeemed pursuant to Condition 7(b) (Optional Redemption), 

Condition 7(c) (Redemption Upon Breach of Coverage Tests), Condition 7(d) (Redemption 

upon an Effective Date Rating Event), Condition 7(e) (Redemption at the Option of the 

Collateral Manager), Condition 7(f) (Redemption Following Expiry of the Reinvestment 

Period), Condition 7(g) (Redemption Upon Failure to Appoint a Replacement Collateral 

Manager) or Condition 10 (Events of Default), such Subordinated Note’s pro rata share 

(calculated in accordance with paragraphs (Q) and (S) of the Priorities of Payment set out 

in 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, with 

any excess of this amount over the then outstanding principal amount of such Note being 

treated as interest; 

(c) any Class V Structured Combination Note, the Redemption Price applicable to the Class V 

Subordinated Component and the OAT Security Component, the latter payable by delivery 

of the OAT Strips corresponding to such Component, or by payment of the proceeds of 

any such OAT Strips having already matured, and taking into account any previous 

distributions of OAT Strips Sale Proceeds (with any excess of the Redemption Price over 

the outstanding principal amount of such Note being treated as additional interest); and 

(d) any Class VI Structured Combination Note, the Redemption Price applicable to the Class 

VI Subordinated Component and the Natexis Zero Coupon Security Component, the latter 

payable by delivery of the Natexis Zero Coupon Notes corresponding to such Component 

or by payment of the proceeds of any such Natexis Zero Coupon Notes, having already 

matured (with any excess of the Redemption Price over the outstanding principal amount 

of such Note being treated as additional interest), 

provided that, in the event that the Notes become subject to redemption in whole (but not in part) 

pursuant to more than one of Condition 7(b) (Optional Redemption) due to the occurrence of a 

Relevant Tax Event, Condition 7(b) (Optional Redemption) other than due to the occurrence of a 

Relevant Tax Event, Condition 7(c) (Redemption Upon Breach of Coverage Tests), Condition 7(d) 

(Redemption upon an Effective Date Rating Event), Condition 7(e) (Redemption at Option of the 

Collateral Manager), Condition 7(f) (Redemption Following Expiry of the Reinvestment Period), 

Condition 7(g) (Redemption upon Failure to Appoint a Replacement Collateral Manager) or Condition 

10 (Events of Default), 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. 

‘‘Reference Banks’’ has the meaning given thereto in paragraph (B) of Condition 6(e)(i) (Rate of 

Interest). 

‘‘Reference Obligation’’ means a debt obligation to which a Synthetic Security is linked that 

satisfies paragraphs (1), (3), (5) and (6) of the Eligibility Criteria. 

‘‘Register’’ has the meaning given in Condition 2(a) (Form and Denomination, Title, Transfer and 

Exchange of Notes). 

‘‘Registered’’ means, with respect to any debt obligation, a debt obligation issued after 18 July 

1984 and that is in registered form for the purposes of the United States Internal Revenue Code of 

1986 (as amended). 

‘‘Regulation S Global Note’’ has the meaning given thereto in Condition 2(a)(i) (Global Notes). 

‘‘Regulation S Notes’’ means Notes offered for sale to non-U.S. persons outside the United 

States under Regulation S of the Securities Act. 

‘‘Reinvestment Criteria’’ means the Reinvestment Criteria specified in the Collateral Management 

Agreement. 

‘‘Reinvestment Period’’ means the period from and including the Closing Date to and including 

26 July 2012 (or, if such day is not a Business Day, the next following Business Day). 

‘‘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 

76

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). 

‘‘Relevant Tax Event’’ has the meaning given thereto in Condition 7(b)(i) (Redemption at the 

Option of the Subordinated Noteholders). 

‘‘Replacement Currency Swap Agreement’’ means any Currency Swap Agreement entered into by 

the Issuer upon termination of an existing Currency Swap Agreement on substantially the same terms 

as such existing Currency Swap Agreement, that preserves for the Issuer the economic effect of the 

terminated Currency Swap Agreement and all Currency Swap Transactions thereunder, subject to 

such amendments as may be agreed by the Trustee and in respect of which Rating Agency 

Confirmation has been obtained. 

‘‘Replacement Currency Swap Transaction’’ means any currency swap transaction entered into by 

the Issuer in replacement of, and on substantially the same terms as, an existing Currency Swap 

Transaction pursuant to a Replacement Currency Swap Agreement. 

‘‘Replacement Interest Rate Hedge Agreement’’ means any Interest Rate Hedge Agreement 

entered into by the Issuer upon termination of the existing Interest Rate Hedge Agreement 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 and all Interest Rate 

Hedge Transactions thereunder, subject to such amendments as may be agreed by the Trustee and in 

respect of which Rating Agency Confirmation has been received. 

‘‘Replacement Interest Rate Hedge Transaction’’ means an interest rate swap or protection 

transaction entered into by the Issuer in replacement of, and on substantially the same terms as, an 

existing Interest Rate Hedge Transaction pursuant to a Replacement Interest Rate Hedge Agreement. 

‘‘Report’’ means each Monthly Report, Note Valuation Report and/or Subordinated Noteholder 

Report 

‘‘Required Ratings’’ means: 

(a) in the case of the Account Bank, the Custodian and the Sub-Custodian, long-term and 

short- term unsecured debt ratings of at least ‘‘A1’’ and ‘‘P-1’’, respectively, from Moody’s 

and ‘‘A-1’’ (in respect of the Custodian and Sub-Custodian) or ‘‘AA-’’ and ‘‘A-1+’’ (in 

respect of the Account Bank) respectively, from S&P; 

(b) in the case of any Interest Rate Hedge Counterparty, long-term and short-term senior 

unsecured ratings of at least ‘‘A1’’ and"P-1’’ from Moody’s and short-term senior 

unsecured ratings of at least ‘‘A-1’’ from S&P; and 

(c) in the case of any Currency Swap Counterparty, long-term and short-term senior 

unsecured ratings of at least ‘‘A1’’ and ‘‘P-1’’ from Moody’s and short-term senior 

unsecured ratings of at least ‘‘A-1+’’ from S&P, 

provided that, if any of the above requirements are not satisfied by any of the parties referred to 

above, such party will be deemed to have satisfied the Required Ratings where Rating Agency 

Confirmation is received in respect of the failure of such party to meet such requirements. 

‘‘Retained Portion’’ means such portion of Interest Proceeds received in respect of Collateral 

Debt Obligations that provide for Annual Interest Payments, in the Due Period in which such Annual 

Interest Payment Amounts are received, 50 per cent. of such Annual Interest Payment Amounts, to 

the extent that: 

(a) the aggregate Principal Balance of such annual paying Collateral Debt Obligations exceeds 

5 per cent. of the CDO Principal Balance on any Determination Date; 

(b) the retention of the Retained Portion will not result in a breach of any of the Coverage 

Tests; 

(c) such Retained Portion is not required to redeem all or any part of the Notes pursuant to 

Condition 7 (Redemption and Purchase); and 

77

(d) the retention of such Retained Portion would not otherwise cause either (i) a deferral of 

interest pursuant to Condition 6(c)(i) (Deferral of Interest) or (ii) an Event of Default due 

to the failure to pay interest on any Class of Note pursuant to the Priorities of Payment 

on such Payment Date pursuant to Condition 10(a)(i) (Non-payment of Interest) to occur. 

‘‘Retained Portion Account’’ means the interest bearing account of the Issuer with the Account 

Bank into which the Retained Portion (if any) shall be paid on the Business Day prior to each 

Payment Date and out of which the Retained Portion Release Amount shall be payable in accordance 

with Condition 3(i)(I) (Retained Portion Account). 

‘‘Retained Portion Release Amount’’ means the proportion, as determined below, of the Retained 

Portion received in respect of Collateral Debt Obligations deposited in the Retained Portion Account 

pending transfer to the Payment Account in accordance with Condition 3(i)(I) (Retained Portion 

Account) in respect of Collateral Debt Obligations paying Annual Interest Payment Amounts: (i) in 

respect of the Due Period immediately following the Due Period in which the relevant Annual 

Interest Payment Amount was received by the Issuer, 50 per cent. of each such Annual Interest 

Payment Amount and (ii) thereafter, nil, (each such amount, the ‘‘Minimum Retained Portion Release 

Amount’’) provided that if, on a Determination Date, the Collateral Administrator determines that: 

(a) upon application of amounts representing the Minimum Retained Portion Release Amount 

on the next following Payment Date in accordance with the Priorities of Payment any of 

the Coverage Tests would not be satisfied; or 

(b) the Minimum Retained Portion Release Amount, together with all other amounts available 

to the Issuer for such purpose, will be insufficient to redeem all or any part of the Notes 

as required by Condition 7 (Redemption and Purchase); or 

(c) on the Payment Date on which such Minimum Retained Portion Release Amount is to be 

applied, either (i) a deferral of interest pursuant to Condition 6(c)(i) (Deferral of Interest) 

would occur or (ii) an Event of Default due to the failure to pay interest on any Class of 

Note pursuant to the Priorities of Payment on such Payment Date pursuant to Condition 

10(a)(i) (Non-payment of Interest) would occur, 

then the ‘‘Retained Portion Release Amount’’ shall be the lesser of (x) such amount as is required to 

satisfy the requirements of paragraphs (a) to (c) above such that such provisos would not apply and 

(y) the balance of the Retained Portion Account; and provided further that in the event that the 

Retained Portion Release Amount determined by reference to paragraphs (a) to (c) is (1) less than the 

Minimum Retained Portion Release Amount, then the Retained Portion Release Amount shall be the 

Minimum Retained Portion Release Amount or (2) greater than the Minimum Retained Portion 

Release Amount, subject always to the Collateral Administrator determining that the requirements of 

paragraphs (a) to (c) above apply (in which case the Retained Portion Release Amount will be the 

lesser of (x) such amount as is required to satisfy the requirements of paragraphs (a) to (c) above 

such that such provisos would not apply and (y) the balance of the Retained Portion Account), the 

Retained Portion Release Amount calculated in respect of the next following Payment Date (and the 

Payment Date thereafter, if necessary) shall be reduced on a pro rata basis by an aggregate amount 

equal to the amount by which the first mentioned Retained Portion Release Amount exceeded the 

Minimum Retained Portion Release Amount. 

‘‘Rule 144A Global Note’’ has the meaning given thereto in Condition 2(a)(i) (Global Notes). 

‘‘Rule 144A Notes’’ means Notes offered for sale within the United States to Qualified 

Institutional Buyers (as defined in Rule 144A under the Securities Act) who are also Qualified 

Purchasers (for the purposes of Section 3(c)(7) of the Investment Company Act) in reliance on Rule 

144A under the Securities Act and Section 3(c)(7) under the Investment Company Act. 

‘‘S&P’’ means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, 

Inc. and any successor or successors thereto. 

‘‘Sale Proceeds’’ means (a) in the case of any Collateral Debt Obligation (save for any Currency 

Swap Obligation), Collateral Enhancement Obligation or Defaulted Equity Security all proceeds 

received upon the sale thereof (including any fees) and any Distribution received upon liquidation of 

Synthetic Collateral in the event that the Synthetic Security or the Synthetic Counterparty’s security 

78

interest is terminated or released by the Collateral Manager (on behalf of the Issuer) or sold or 

assigned, in each case pursuant to the Collateral Management Agreement, and (b) in the case of any 

Currency Swap Obligation, all amounts in Euro (or other currencies, if applicable) payable to the 

Issuer by the applicable Currency Swap Counterparty in exchange for payment by the Issuer of the 

sale proceeds of any Collateral Debt Obligation as described in paragraph (a) above, under the 

related Currency Swap Transaction, in each case net of any amounts expended by or payable by the 

Collateral Manager or the Collateral Administrator (in each case, on behalf of the Issuer) in 

connection with such sale or other disposition. 

‘‘Scheduled 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 applicable Interest Rate 

Hedge Counterparty pursuant to the terms of such Interest Rate Hedge Transaction, excluding any 

termination payments payable upon termination in whole or in part of the Interest Rate Hedge 

Agreement. 

‘‘Scheduled Interest Rate Issuer Payments’’ means with respect to any Interest Rate Hedge 

Transaction, the amount scheduled to be paid by the Issuer to the applicable Interest Rate Hedge 

Counterparty pursuant to the terms of such Interest Rate Hedge Transaction, excluding any 

termination payments payable upon termination in whole or in part of the Interest Rate Hedge 

Agreement. 

‘‘Scheduled Principal Proceeds’’ means: 

(a) in the case of any Collateral Debt Obligation save for any Currency Swap Obligation, 

scheduled principal repayments received by the Issuer (including scheduled amortisation, 

instalment or sinking fund payments); and 

(b) in the case of any Currency Swap Obligation, scheduled final and interim payments in the 

nature of principal payable to the Issuer by the applicable Currency Swap Counterparty 

under the related Currency Swap Transaction. 

‘‘Second Lien Loan’’ means: 

(a) a loan (or other comparable debt obligation (including any such obligation which is 

evidenced by an issue of notes)) which would be a Senior Secured Loan except that it is 

subordinated to another obligation of the Obligor which has a higher priority security 

interest in the fixed assets or stock on which the loan is secured as determined by the 

Collateral Manager, or a Participation therein; or 

(b) a Synthetic Security, the Reference Obligation applicable to which is an obligation of the 

type described in (a). 

‘‘Section 110 Asset’’ means a financial asset for the purposes of section 110 of the Irish Taxes 

Consolidation Act 1997, as amended, being: 

(a) shares, bonds and other securities; 

(b) futures, options, swaps, derivatives and similar instruments; 

(c) invoices and all types of receivables; 

(d) obligations evidencing debt (including loans and deposits); 

(e) leases and loan and lease portfolios; 

(f) hire purchase contracts; 

(g) acceptance credits and all other documents of title relating to movement of goods; and 

(h) bills of exchange, commercial paper, promissory notes and all other kinds of negotiable or 

transferable instruments. 

‘‘Secured Party’’ means each of the Class I Senior Noteholders, the Class II Senior Noteholder, 

the Class III Mezzanine Noteholders, the Class IV Mezzanine Note, the Subordinated Noteholders, 

the Structured Combination Noteholders, the Collateral Managers, the Collateral Administrator, the 

Trustee, the Agents, the Depositary, each Interest Rate Hedge Counterparty and each Currency Swap 

Counterparty. 

79

‘‘Securities Act’’ means the United States Securities Act of 1933, as amended. 

‘‘Selling Institution’’ means an institution from which a Participation is acquired. 

‘‘Senior Collateral Management Fee’’ means the fee payable to the Collateral Managers on each 

Payment Date pursuant to the Collateral Management Agreement, equal to 0.125 per cent. per 

annum of the aggregate of the Principal Balances of all the Collateral Debt Obligations and the 

Balances standing to the credit of the Principal Account, the Additional Collateral Account and the 

Euro Equivalent of principal amounts standing to the credit of the Currency Accounts, in each case 

as at the beginning of the Due Period preceding such Payment Date, excluding any value added tax 

due and payable thereon. 

‘‘Senior Coverage Tests’’ means the Senior Par Value Test and the Senior Interest Coverage 

Test. 

‘‘Senior Fee Cap’’ means, in respect of each Payment Date, the aggregate of A75,000 and an 

amount in Euro equal to 0.04 per cent. of the CDO Principal Balance as at the applicable 


‘‘Senior Interest Coverage Ratio’’ means, as at any Measurement Date, the ratio (expressed as a 

percentage) obtained by dividing (a) the Interest Coverage Numerator by (b) the sum of the 

scheduled interest payments due and payable on the Senior Notes payable on the next following 

Payment Date. 

‘‘Senior Interest Coverage Test’’ means the test which shall be satisfied if as at any Measurement 

Date the Senior Interest Coverage Ratio is at least 120 per cent. 

‘‘Senior Par Value Ratio’’ means, as at any Measurement Date, the ratio (expressed as a 


outstanding of the Senior Notes Outstanding. 

‘‘Senior Par Value Test’’ means the test that shall be satisfied if as at any Measurement Date 

the Senior Par Value Ratio is at least 115 per cent. 

‘‘Senior Secured Loan’’ means: 

(a) a Collateral Debt Obligation that is a senior secured obligation as determined by the 

Collateral Manager in its reasonable business judgement or a Participation therein provided 

that: 

(i) it is secured by a valid and perfected security interest in (A) fixed assets of the 

obligor or guarantor thereof if and to the extent that a pledge of fixed assets is 

permissible under applicable law (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 (B) 100 per cent. of the equity interests in the stock of an 

entity owing such fixed assets; and 

(ii) no other obligation of the obligor has any higher priority security interest in such 

fixed assets or stock referred to in (i) above; 

(b) a Synthetic Security, the Reference Obligation applicable to which is an obligation of the 

type described in (a) above; and/or 

(c) a Currency Swap Obligation, the Non-Euro Obligation of which is, other than in relation 

to its currency of denomination, an obligation of the type described in (a) above. 

‘‘Stated Maturity’’ means, with respect to any Collateral Debt Obligation 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, if such date is not a Business Day, the next 

following Business Day. 

‘‘Structured Finance Security’’ means any (a) debt obligation that is issued in connection with 

the securitisation of operating cash flows of a corporate obligor or (b) (for purposes of Eligible 

Investments only) a mortgage-backed security or asset-backed security. 

‘‘Subordinated Component’’ means the Class V Subordinated Component and/or the Class VI 

Subordinated Component. 

80

‘‘Subordinated Collateral Management Fee’’ means the fee payable to the Collateral Manager on 

each Payment Date pursuant to the Collateral Management Agreement, equal to 0.375 per cent. per 

annum aggregate of the Principal Balances of all the Collateral Debt Obligations and the Balances 

standing to the credit of the Principal Account, the Additional Collateral Account and the Euro 

Equivalent of principal amounts standing to the credit of the Currency Accounts, in each case, at the 

beginning of the Due Period preceding such Payment Date, excluding any value added tax due and 

payable thereon. 

‘‘Subordinated Note Interest’’ has the meaning given to it in Condition 6 (Interest). 

‘‘Subordinated Note Hurdle Return Amount’’ means, in respect of any Payment Date, an amount, 

calculated on a semi-annual basis, which in addition to any prior distributions on the Subordinated 

Notes gives an internal rate of return of 12 per cent. per annum on the aggregate principal amount 

outstanding of the Subordinated Notes for the period from the Closing Date to the applicable 


‘‘Subordinated Noteholders’’ means the holders of the Subordinated Notes from time to time. 

‘‘Substitute Collateral Debt Obligation’’ means a Collateral Debt Obligation purchased in 

substitution for a previously held Collateral Debt Obligation or purchased out of Principal Proceeds, 

in each case, pursuant to the terms of the Collateral Management Agreement. 

‘‘Synthetic Collateral’’ means any collateral 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 will always consist of Eligible Investments unless Rating 

Agency Confirmation is received in respect thereto. References to the price payable upon the 

acquisition of or entry into of 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 in the name of the Issuer held with the 

Custodian into which all Synthetic Collateral is to be deposited. 

‘‘Synthetic Counterparty’’ means any counterparty under a Synthetic Security or any guarantor 

of any such entity or, in the case of a Synthetic Security that represents an ownership interest in one 

or more assets held by the issuer of such Synthetic Security, any entity required to make payments on 

any such asset and which, in the case of a Synthetic Counterparty which has entered into a swap 

transaction, has the regulatory capacity to enter into derivatives transactions with Irish residents. 

‘‘Synthetic Counterparty Default’’ means, in the case of any Synthetic Security, a default by the 

Synthetic Counterparty in the performance of any of its payment obligations under the Synthetic 

Security has occurred and is continuing and such default has continued for the lesser of two calendar 

days and any applicable grace period (subject to the Collateral Manager certifying that such nonpayment 

is minor or technical in nature and can be remedied within such period), until such time 

that such default is cured or waived. 

‘‘Synthetic Security’’ means any Euro (or predecessor currency of those EU member states which 

have adopted the Euro as their currency) denominated swap transaction (including, without 

limitation, a credit default swap or total return swap), debt security, security issued by a trust or 

similar vehicle or other investment (excluding any equity investment) purchased or entered into by the 

Issuer (subject to Rating Agency Confirmation, save for where such Synthetic Security is a Form- 

Approved Synthetic Security) from or with a Synthetic Counterparty and that satisfies the Eligibility 

Criteria, save to the extent Rating Agency Confirmation is obtained in respect of any failure to 

satisfy the Eligibility Criteria (provided that such Synthetic Security may not include Margin Stock, 

any security the acquisition of which would cause the breach of applicable selling or transfer 

restrictions or of applicable Irish laws relating to the offering of securities or of collective investment 

schemes), the returns on which (as determined by the Collateral Manager) and that is linked to the 

credit of one or more Reference Obligations, but which may provide for a different maturity, 

payment dates, interest rate, credit exposure or other credit or non-credit related characteristics than 

such Reference Obligation(s), provided that: 

81

(a) 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; 

(b) where such Synthetic Security is unfunded, it contains limited recourse provisions in 

substantially the same form as those set out in Condition 4(c) (Limited Recourse); 

(c) 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); and 

(d) 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. 

The entry into of any Synthetic Security, other than a Form-Approved Synthetic Security, will 

be subject to the receipt of Rating Agency Confirmation. If such Rating Agency Confirmation is 

obtained, the Rating Agencies shall specify whether any Synthetic Security entered into or acquired 

shall be treated as a Senior Secured Loan, a Second Lien Loan or a Mezzanine Obligation. For the 

avoidance of doubt, a Currency Swap Obligation shall not constitute a Synthetic Security if such 

synthetic security provides for payments to the Issuer denominated in Euro. 

‘‘Target Par Amount’’ means A300,000,000. 

‘‘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 Creditors’’ means each of the Secured Parties, the Corporate Administrator and 

any other Person to whom the Issuer owes any obligations from time to time. 

‘‘Transaction Documents’’ means each of the Trust Deed, the Agency Agreement, the Depositary 

Agreement, the OAT Strips Pledge Agreement, the Natexis Zero Coupon Notes Pledge Agreement, 

the Euroclear Pledge Agreement, the Collateral Management Agreement, the Corporate Services 

Agreement, the Collateral Acquisition Documents, each Interest Rate Hedge Agreement, and each 

Currency Swap Agreement. 

‘‘Triple C Asset’’ means any Collateral Debt Obligation with a Moody’s Rating (as defined in 

the Collateral Management Agreement) of B3 on negative credit watch for downgrade or equal to (or 

below) ‘‘Caa1’’ (excluding Caa1 on positive credit watch for upgrade) or an S&P Rating (as defined 

in the Collateral Management Agreement) equal to (or below) ‘‘CCC+’’ which is not a Defaulted 

Obligation. 

‘‘Triple C Asset Adjusted Par Value’’ means the sum of (i) the aggregate principal amount 

outstanding of all Triple C Assets multiplied by the Triple C Asset Par Percentage and (ii) the 

aggregate principal amount outstanding of all Triple C Assets multiplied by the Triple C Asset 

Market Value Percentage multiplied by the Triple C Asset Aggregate Market Value. 

‘‘Triple C Asset Adjusted Market Value’’ means, in respect of any Triple C Asset at any time, 

the lesser of (i) the Market Value of such Triple C Asset at such time, (ii)the amount equal to the 

product of (A) (1 + Moody’s Recovery Rate in respect of such Triple C Asset at such time) divided 

by 2, multiplied by (B) the principal amount of such Triple C Asset at such time and (iii) 70 per 

cent. of the principal amount of such Triple C Asset at such time. For the purposes of the foregoing, 

‘‘Moody’s Recovery Rate’’ has the meaning given thereto in the Collateral Management Agreement. 

‘‘Triple C Asset Aggregate Market Value’’ means the sum of the products of (x) the Principal 

Balance of Triple C Assets which as a percentage of the CDO Principal Balance is in excess of the 

Triple C Asset Percentage Limit and which have the lowest Triple C Asset Adjusted Market Value 

multiplied by (y)(i) the Triple C Asset Market Value of such Triple C Asset, divided by (ii) the 

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aggregate Principal Balance of such Triple C Assets which as a percentage of the CDO Principal 

Balance is in excess of the Triple C Asset Percentage Limit. 

‘‘Triple C Asset Market Value Percentage’’ means 100 per cent. minus the Triple C Asset Par 

Percentage. 

‘‘Triple C Asset Par Percentage’’ means the lesser of (i) 100 per cent. and (ii) the Triple C Asset 

Percentage Limit divided by the Triple C Asset Percentage, provided that if the Triple C Asset 

Percentage is zero, the Triple C Asset Par Percentage will be 100 per cent. 

‘‘Triple C Asset Percentage’’ means the aggregate outstanding Principal Balances of all Triple C 

Assets divided by the CDO Principal Balance, expressed as a percentage. 

‘‘Triple C Asset Percentage Limit’’ means in the case of a calculation of the Triple C Asset 

Adjusted Par Value in respect of each of the Senior Par Value Ratio, the Mezzanine Par Value Tests 

and the Interest Reinvestment Test, 5 per cent. 

‘‘Trustee Fees and Expenses’’ means the fees and expenses and any other amounts payable to the 

Trustee pursuant to the Transaction Documents from time to time, including any value added tax 

due and payable in respect thereof. 

‘‘Underlying Instruments’’ means the indenture or other agreement or instrument 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. 

‘‘Underlying Notes’’ means, in respect of the Class V Structured Combination Notes, the 

Subordinated Notes and the OAT Strips relating to the respective Components thereof, and in respect 

of the Class VI Structured Combination Notes, the Subordinated Notes and the Natexis Zero 

Coupon Notes relating to the respective Components thereof. 

‘‘Unscheduled Principal Proceeds’’ means: 

(a) 

(b) 

(c) 

(d) 

with respect to any Collateral Debt Obligation other than a Currency 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 premia or 

make whole amounts in excess of the principal amount of such Collateral Debt 

Obligation), and other unscheduled principal payments with respect to Collateral Debt 

Obligations (to the extent not included in Sale Proceeds); 

with respect to any Currency Swap Obligation, any amounts in Euro payable to the Issuer 

by the applicable Currency Swap Counterparty in exchange for payment by the Issuer of 

any unscheduled principal proceeds received in respect of any Collateral Debt Obligation, 

as described in paragraph (a) above, under the related Currency Swap Transaction; 

Synthetic Collateral (or any amount received upon liquidation thereof) that ceases to be 

subject to the applicable Synthetic Counterparty’s security interest on early termination 

(but not expiration) of such Synthetic Security other than at the option of the Issuer; and 

Currency Swap Termination Receipts, in each of the following cases: (i) where a Currency 

Swap Agreement has been terminated and the Collateral Manager acting on behalf of the 

Issuer, determines not to replace such Currency Swap Agreement and Rating Agency 

Confirmation is received in respect of such determination; (ii) where termination of the 

Currency Swap Agreement occurs on a Redemption Date pursuant to Conditions 7(a) 

(Final Redemption), 7(b) (Optional Redemption), 7(g) (Redemption upon Failure to Appoint a 

Replacement Collateral Manager) or10(Events of Default); 

Excluding in any case, however, any principal proceeds recovered in respect of a Defaulted 

Obligation. 

83

2. Form and Denomination, Title, Transfer and Exchange of Notes 

(a) Form and Denomination: 

(i) Global Notes: Each Class of Notes (for the avoidance of doubt, each of the Class I 

Senior Notes, Class II Senior Notes, the Class III Mezzanine Notes, the Class IV 

Mezzanine Notes, the Class V Structured Combination Notes, the Class VI 

Structured Combination Notes and the Subordinated Notes represent a separate 

‘‘Class’’ for such purpose) will initially be represented by a corresponding global note 

in the case of Regulation S Notes of such Class (each global note a ‘‘Regulation S 

Global Note’’) and by a corresponding global note in the case of Rule 144A Notes of 

such Class (each global note a ‘‘Rule 144A Global Note’’ and, together with the 

Regulation S Global Note and each of the Rule 144A Global Note, the ‘‘Global 

Notes’’ and each, a ‘‘Global Note’’). Each of the Global Notes will be issued in 

bearer form without interest coupons or principal receipts attached (‘‘Bearer Notes’’). 

The Global Notes of each Class will together represent the aggregate principal 

amount outstanding of the Notes of such Class. 

(ii) Definitive Certificates: 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 the applicable Minimum Denomination and integral 

multiples of any Authorised Denomination in excess thereof. 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. 

(b) 

(c) 

(d) 

Title: 

(i) Title to the Bearer Notes: Title to the Bearer Notes (including the Global Notes) will 

pass by delivery. The holder of any Bearer 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. 

(ii) 

Title to the Registered Notes: Title to the Notes, if represented by one or more 

Definitive Certificates, passes upon registration of transfers in the Register in 

accordance with the provisions of the Agency Agreement and the Trust Deed. Notes 

if represented by one or more Definitive Certificates, will be transferable only on the 

books of the Registrar and its agents. The registered holder of any Note if 

represented by one or more Definitive Certificates, 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. 

Transfer: One or more Notes, if represented by one or more Definitive Certificates, may be 

transferred in whole or in part in nominal amounts equal to the applicable Minimum 

Denomination and integral multiples of any Authorised Denomination in excess thereof 

only upon the surrender, at the specified office of the Registrar or any Transfer Agent, 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 or Transfer Agent may reasonably require. 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. 

Delivery of New Certificate: Each new Definitive Certificate to be issued pursuant to 

Condition 2(c) (Transfer) 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 

84

(e) 

(f) 

(g) 

(h) 

(i) 

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 Certificate to such address as may be so specified. In this Condition 2(d) 

(Delivery of New Certificate) ‘‘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 

applicable Transfer Agent and the Registrar. 

Transfer Free of Charge: Transfer of Certificates and 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 Agents, 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. 

Closed Periods: No Noteholder may require the transfer of a Note, if represented by one 

or more Definitive Certificates, 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. 

Regulations Concerning Transfer and Registration: All transfers of Notes, if represented by 

one or more Definitive Certificates, and entries on the Register will be made subject to the 

detailed regulations concerning the transfer of Notes, if represented by one or more 

Definitive Certificates, scheduled to the Trust Deed, including without limitation, that a 

transfer of Notes, if represented by one or more Definitive Certificates, in breach of certain 

of such regulations will not be recognised by the Issuer, the Trustee and the Registrar and 

such transfer will not operate to transfer any rights to the transferee. 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 requirements or in any other 

manner which, in the opinion of the Issuer (after consultation with the Trustee), is not 

prejudicial to the interests of the holders of the relevant Class of Notes. A copy of the 

current regulations will be sent by the Registrar to any Noteholder who so requests. 

Exchange of Structured Combination Notes: A Structured Combination Note may be 

exchanged for the Components thereof in accordance with the provisions of the Agency 

Agreement and the Trust Deed; in particular, Class V Structured Combination Notes may 

be exchanged for OAT Strips in an amount equal to that secured under the OAT Security 

Component and for Subordinated Notes in an amount equal to such Structured 

Combination Notes Class V Subordinated Component; and Class VI Structured 

Combination Notes may be exchanged for Natexis Zero Coupon Notes in an amount 

equal to that secured under the Natexis Zero Coupon Security Component and for 

Subordinated Notes in an amount equal to such Structured Combination Notes Class VI 

Subordinated Component; provided that the Structured Combination Notes may only be 

exchanged for Components thereof to the extent that the principal amount of the 

Subordinated Notes to which the relevant Subordinated Components relate is equal to the 

Minimum Denomination and integral multiples of the applicable Authorised Denomination 

thereof. 

Forced Transfer of Rule 144A Notes: If the Issuer determines at any time that a U.S. 

holder of Rule 144A Notes is not a QIB/QP (any such person, a ‘‘Non-Permitted Holder’’), 

the Issuer shall promptly after determination that such person is a Non-Permitted Holder, 

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 holder fails to sell or transfer its Rule 144A Notes within such 

period, such holder may be required by the Issuer to sell such Rule 144A Notes to a 

purchaser selected by the Issuer on such terms as the Issuer may choose, subject to the 

transfer restrictions set out herein. The Issuer may select the purchaser by soliciting one or 

85

more bids from one or more brokers or other market professionals that regularly deal in 

securities similar to the Rule 144A Notes and selling such Rule 144A Notes to the highest 

such bidder. However, the Issuer 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 the Rule 144A Notes agrees to co-operate with the Issuer and the Transfer 

Agent 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, subject to the transfer restrictions set out herein, and neither the Issuer nor the 

Transfer Agent 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 Transfer 

Agent reserve the right to require any holder of Notes to submit a written certification 

substantiating that it is a QIB/QP or a non-U.S. Person. If such Non-Permitted Holder 

fails to submit any such requested written certification on a timely basis, the Issuer and the 

Transfer Agent have the right to assume that the holder of the Notes from whom such a 

certification is requested is not a QIB/QP or a non-U.S. Person. Furthermore, the Issuer 

and the Transfer Agent reserve the right to refuse to honour a transfer of beneficial 

interests in a Rule 144A Note to any person who is not either a non-U.S. Person or a 

U.S. Person that is a QIB/QP. 

3. Status 

(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 (Security) and, within each Class, shall at all times rank pari 

passu and without any preference amongst themselves. 

(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. Save to the 

extent provided otherwise below, the Notes will be limited recourse debt obligations of the 

Issuer. Payments of interest on the Class I Senior Notes will be senior in right of payment 

to payments of interest on the Class II Senior Notes, the Class III Mezzanine Notes, the 

Class IV Mezzanine Notes and the Subordinated Notes. Payments of principal on the 

Class I Senior Notes will be senior in right of payment to payments of principal on the 

Class II Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine Notes and 

the Subordinated Notes. Payments of interest on the Class II Senior Notes will be 

subordinated in right of payment to payments of interest on the Class I Senior Notes but 

senior in right of payment to payments of interest on the Class III Mezzanine Notes, the 

Class IV Mezzanine Notes and the Subordinated Notes. Payments of principal on the 

Class II Senior Notes will be subordinated in right of payment to payments of principal on 

the Class I Senior Notes but senior in right of payment to payments of principal on the 

Class III Mezzanine Notes, the Class IV Mezzanine Notes and the Subordinated Notes. 

Payments of interest and principal on the Class III Mezzanine Notes will be subordinated 

to payments of interest and principal on the Class I Senior Notes and the Class II Senior 

Notes but senior in right of payment to payments of interest and principal on the Class IV 

Mezzanine Notes and the Subordinated Notes. Payments of interest and principal on the 

Class IV Mezzanine Notes will be subordinated to payments of interest and principal on 

the Class I Senior Notes, the Class II Senior Notes and the Class III Mezzanine Notes but 

senior in right of payment to payments of interest and principal on the Subordinated 

Notes. Payments of principal and interest in respect of the Subordinated Notes will be 

paid out of available Interest Proceeds and Principal Proceeds (each such term as defined 

herein), and such payments will be subordinated in right of payment to payments in 

respect of each of the other Classes of Notes. Each Component of the Structured 

Combination Notes shall rank in accordance with the classes of Notes related thereto. 

Principal Proceeds shall be applied in redemption of the Subordinated Notes on any 

86

(c) 

Payment Date following expiration of the Non-Call Period in accordance with paragraphs 

(Q) and (S) of Condition 3(c)(ii) (Application of Principal Proceeds) on an available funds 

basis. Interest Proceeds shall be applied in payment of accrued interest on the 

Subordinated Notes on each Payment Date in accordance with paragraphs (Y) and (AA) 

of Condition 3(c)(i) (Application of Interest Proceeds) on an available funds basis. Payment 

of principal and interest on the Subordinated Notes will be subordinated in right of 

payment to such payments in respect of the Rated Notes. 

Save to the extent provided otherwise below, no amount of principal in respect of the 

Class II Senior Notes shall become due and payable until redemption and payment in full 

of the Class I Senior Notes, no amount of principal (for the avoidance of doubt, excluding 

Deferred Interest) in respect of the Class III Mezzanine Notes shall become due and 

payable until redemption and payment in full of the Class I Senior Notes and the Class II 

Senior Notes and no amount of principal (for the avoidance of doubt, excluding Deferred 

Interest) in respect of the Class IV Mezzanine Notes shall become due and payable until 

redemption and payment in full of the Class I Senior Notes, the Class II Senior Notes and 

the Class III Mezzanine Notes and no amount of principal in respect of the Subordinated 

Notes shall become due and payable or be paid until redemption and payment in full of 

each of the other Classes of Notes. 

For the purposes of subordination and the Priorities of Payment set out in Condition 3(c) 

(Priorities of Payment), the Structured Combination Notes shall not be treated as separate 

Classes of Notes but the Subordinated Component of the Structured Combination Notes 

and will be treated as Subordinated Notes. 

Priorities of Payment: The Account Bank (acting upon each Note Valuation Report 

prepared by the Collateral Administrator in consultation with the Collateral Manager 

pursuant to the terms of the Collateral Management Agreement on each Determination 

Date) shall, on behalf of the Issuer, on each Payment Date disburse Interest Proceeds and 

Principal Proceeds transferred to the Payment Account on the first Business Day prior 

thereto in accordance with Condition 3(i) (Accounts) in accordance with the following 

Priorities of Payment: 

(i) 

Application of Interest Proceeds: Subject to paragraph (iii) (Determination of Amounts) 

below, Interest Proceeds (and as applicable, monies from the Expense Reserve 

Account) shall be applied in the following order of priority: 

(A) to the payment of taxes owing by the Issuer accrued in respect of the related 

Due Period, as notified by an Authorised Officer of the Issuer to the Trustee, if 

any, save for any value-added tax payable in respect of any Collateral 

Management Fee; 

(B) to the payment of accrued and unpaid Trustee Fees and Expenses pursuant to 

the Trust Deed, including any applicable value added tax thereon, up to an 

amount equal to the Senior Fee Cap; 

(C) to the payment of Administrative Expenses up to an amount equal to the 

Senior Fee Cap less the amounts paid pursuant to paragraph (B) above; 

(D) except upon the Payment Date on which the Subordinated Notes are to be 

redeemed in full, to the payment of an amount equal to the aggregate of 

A75,000 and an amount in Euro equal to 0.04 per cent. of the CDO Principal 

Balance on the related Determination Date into the Expense Reserve Account; 

(E) to the payment on a pro rata and pari passu basis, to the Collateral Manager of 

the Senior Collateral Management Fee due and payable on such Payment Date 

and to the payment of any value added tax, if any, due and payable in respect 

thereof; 

(F) to the payment (on a pro rata basis) of: 

(1) any Scheduled Interest Rate Hedge Issuer Payments due and payable in 

respect thereof; and 

87

(2) any Interest Rate Hedge Termination Payments and any Currency Swap 

Termination Payments, in each case due and payable on or prior to such 

Payment Date and arising as a result of the occurrence of a Priority 

Termination Event on or prior to such Payment Date; 

(G) to the payment of the Interest Amounts due and payable on the Class I Senior 

Notes in respect of the Interest Accrual Period ending on such Payment Date; 

(H) to the payment of the Interest Amounts due and payable on the Class II Senior 

Notes in respect of the Interest Accrual Period ending on such Payment Date; 

(I) in the event either of the Senior Coverage Tests is not satisfied on the related 

Determination Date as calculated by the Collateral Administrator and confirmed 

by the Collateral Manager, to redeem the Class I Senior Notes, in whole or in 

part and, following redemption in full thereof, to redeem the Class II Senior 

Notes, in whole or in part, to the extent necessary to cause the Senior Coverage 

Tests to be met if recalculated following such redemption; 

(J) in payment on a pro rata basis (based on the respective amounts due and 

payable by the Issuer under the Interest Rate Hedge Agreement or the Currency 

Swap Agreements immediately prior to termination thereof) of amounts due and 

payable by the Issuer to any applicable Interest Rate Hedge Counterparty or 

Currency Swap Counterparty in connection with the entry into of a 

Replacement Interest Rate Hedge Agreement or Replacement Currency Swap 

Agreement to the extent that such amounts exceed amounts received by the 

Issuer upon termination of the Interest Rate Hedge Agreement or Currency 

Swap Agreement being replaced, as applicable, and in payment of any costs 

associated with the entry into of additional Interest Rate Hedge Transactions or 

Currency Swap Transactions following the Closing Date by the Issuer; 

(K) to the payment of the Interest Amounts due and payable on the Class III 

Mezzanine Notes in respect of the Interest Accrual Period ending on such 

Payment Date; 

(L) in the event either of the Class III Coverage Tests is not satisfied on the related 




Notes, in whole or in part and, following redemption in full thereof, to redeem 

the Class III Mezzanine Notes, in whole or in part to the extent necessary to 

cause the Class III Coverage Tests to be met if recalculated following such 

redemption; 

(M) to the payment of that element of the principal amount outstanding of the 

Class III Mezzanine Notes which represents Deferred Interest on the Class III 

Mezzanine Notes, which has been capitalised pursuant to Condition 6(c) 

(Deferral of Interest); 

(N) to the payment of the Interest Amounts due and payable on the Class IV 


Payment Date; 

(O) in the event either of the Class IV Coverage Tests is not satisfied on the related 




Notes, in whole or in part and, following redemption in full thereof, to redeem 

the Class III Mezzanine Notes, in whole or in part and, following redemption in 

full thereof, to redeem the Class IV Mezzanine Notes, in whole or in part, to 

the extent necessary to cause the Class IV Coverage Tests to be met if 

recalculated following such redemption; 

88

(P) 

to the payment of that element of the principal amount outstanding of the 

Class IV Mezzanine Notes which represents Deferred Interest on the Class IV 

Mezzanine Notes, which has been capitalised pursuant to Condition 6(c) 

(Deferral of Interest); 

(Q) on the Payment Date (and each subsequent Payment Date to the extent 

required) following each of the Initial Effective Date and the Final Effective 

Date, in the event of the occurrence of an Effective Date Rating Event which is 

continuing on the first Business Day prior to such Payment Date, to redeem the 

Class I Senior Notes, in whole or in part, and following redemption in full 

thereof, to redeem the Class II Senior Notes, in whole or in part, and, following 

redemption in full thereof, to redeem the Class III Mezzanine Notes, in whole 

or in part, and, following redemption in full thereof, to redeem the Class IV 

Mezzanine Notes, in whole or in part until redeemed in full or, if earlier, until 

an Effective Date Rating Event is no longer continuing; 

(R) 

(S) 

(T) 

(U) 

(V) 

to the payment of Trustee Fees and Expenses (if any), including any value 

added tax thereon, to the extent not paid pursuant to paragraph (B) above: 

to the payment of Administrative Expenses (if any) to the extent not paid 

pursuant to paragraph (C) above; 

in the event that the Interest Reinvestment Test is not satisfied on the related 


by the Collateral Manager after giving effect to all payments made pursuant to 

paragraphs (A) to (S) (inclusive) above, an amount not exceeding 25 per cent. 

of all remaining Interest Proceeds shall be (i) used to purchase Substitute 

Collateral Debt Obligations or (ii) deposited in the Principal Account pending 

reinvestment in Substitute Collateral Debt Obligations, in each case to the 

extent necessary to cause the Interest Reinvestment Test to be met if 

recalculated following such purchase or deposit; 

to the payment to the Collateral Manager of the Subordinated Collateral 

Management Fee due and payable on such Payment Date and to the payment 

of any value added tax due and payable in respect thereof, provided that the 

Collateral Manager in its discretion may designate for reinvestment any amount 

of Subordinated Collateral Management Fee otherwise payable pursuant to this 

paragraph (U) on any Payment Date in which case such amount shall be (i) 

used to purchase Substitute Collateral Debt Obligations or (ii) deposited in the 

Principal Account pending reinvestment in Substitute Collateral Debt 

Obligations; 

to the payment of any accrued and unpaid Senior Collateral Management Fee 

or Subordinated Collateral Management Fee (including for the avoidance of 

doubt, any amount designated for reinvestment in paragraph (U) above in 

respect of a previous Payment Date and not subsequently paid to the Collateral 

Manager) due and payable but not paid on any prior Payment Dates and any 

other amounts payable to the Collateral Manager (other than the Incentive 

Collateral Management Fee and other than any Collateral Manager Advances) 

under the Collateral Management Agreement and to the payment of any value 

added tax due and payable in respect of any Collateral Management Fee or 

other such amount; 

(W) in payment of any amounts payable to any applicable Interest Rate Hedge 

Counterparty or Currency Swap Counterparty upon termination of an Interest 

Rate Hedge Agreement or a Currency Swap Agreement, as applicable, other 

than as a result of a Priority Termination Event and to the extent not paid out 

of, respectively, Interest Rate Hedge Termination Receipts and Currency Swap 

Termination Receipts; 

89

(X) 

(Y) 

(Z) 

at the option of the Collateral Manager, save for upon the Payment Date on 

which the Subordinated Notes are to be redeemed in full, to payment into the 

Collateral Enhancement Account up to a maximum aggregate amount (taking 

into account all payments to and disbursements from the Collateral 

Enhancement Account on any prior Payment Date) of A3,000,000 and/or, at the 

option of the Collateral Manager, in repayment of any Collateral Manager 

Advances outstanding (in whole or in part), provided that the total amount paid 

pursuant to this paragraph (X) on any Payment Date does not exceed the 

foregoing maximum aggregate amount; 

until the Subordinated Note Hurdle Return Amount has been reached (taking 

into account all prior payments of interest and principal in respect of the 

Subordinated Notes and any payments made or to be made on the 

Subordinated Notes pursuant to paragraph (Q) of Condition 3(c)(ii) (Application 

of Principal Proceeds), to the Subordinated Noteholders of Interest Amounts in 

respect of Subordinated Note Interest; 

subject to the prior payment of the Subordinated Note Hurdle Return Amount 

(as payable pursuant to paragraph (Y) above and/or paragraph (N) of 

Condition 3(c)(ii) (Application of Principal Proceeds) below), to the payment to 

the Collateral Manager of the Incentive Collateral Management Fee in an 

amount equal to 20 per cent. of any Interest Proceeds remaining and to the 

payment of any value added tax due and payable in respect thereof; and 

(AA) the remainder of any Interest Proceeds to the Subordinated Noteholders in 

payment of accrued Interest Amounts in respect of Subordinated Note Interest 

on a pro rata basis (determined by reference to the proportion that the principal 

amount outstanding of the Subordinated Notes held by such Subordinated 

Noteholder bore to the aggregate principal amount outstanding of the 

Subordinated Notes Outstanding immediately prior to such payment). 

(ii) Application of Principal Proceeds: Subject to paragraph (iii) (Determination of 

Amounts) below, Principal Proceeds shall be applied in the following order of 

priority: 

(A) 

(B) 

(C) 

to the payment of the amounts referred to in paragraphs (A) to (H) (inclusive) 

and, solely in respect of a Payment Date falling on or after the enforcement of 

the security over the Collateral, paragraph (Q) of Condition 3(c)(i) (Application 

of Interest Proceeds) above, but only to the extent not paid in full thereunder; 

in the event that either of the Senior Coverage Tests is not satisfied on the 

related Determination Date as calculated by the Collateral Administrator and 

confirmed by the Collateral Manager (to the extent that application of Interest 

Proceeds for such purpose, as described in Condition 3(c)(i)(I) (Application of 

Interest Proceeds), is insufficient), to redeem the Class I Senior Notes, in whole 

or in part and following redemption in full thereof, to redeem the Class II 

Senior Notes in whole or in part, to the extent necessary to cause the Senior 

Coverage Tests to be met if recalculated following such redemption; 

in payment on a pro rata basis (based on the respective amounts due and 

payable by the Issuer under the Interest Rate Hedge Agreement or the Currency 

Swap Agreements immediately prior to termination thereof) of amounts due and 

payable by the Issuer to any applicable Interest Rate Hedge Counterparty or 

Currency Swap Counterparty in connection with the entry into of a 

Replacement Interest Rate Hedge Agreement or Replacement Currency Swap 

Agreement to the extent that such amounts exceed amounts received by the 

Issuer upon termination of the Interest Rate Hedge Agreement or Currency 

Swap Agreement being replaced, as applicable, and in payment of any costs 

associated with the entry into of additional Interest Rate Hedge Transactions or 

90

Currency Swap Transactions following the Closing Date by the Issuer (to the 

extent that application of Interest Proceeds for such purpose, as described in 

Condition 3(c)(i)(J) (Application of Interest Proceeds), is insufficient); 

(D) 

to the payment of the Interest Amounts due and payable on the Class III 


Payment Date, to the extent not paid pursuant to paragraph (K) of Condition 

3(c)(i) (Application of Interest Proceeds); 

(E) if either of the Class III Coverage Tests is not satisfied on the related 


by the Collateral Manager (to the extent that application of Interest Proceeds 

for such purpose, as described in Condition 3(c)(i)(L) (Application of Interest 

Proceeds), is insufficient), to redeem the Class I Senior Notes, in whole or in 

part, and following redemption in full thereof, to redeem the Class II Senior 

Notes in whole or in part, and, following redemption in full thereof, to redeem 

the Class III Mezzanine Notes, in whole or in part, to the extent necessary to 

cause the Class III Coverage Tests to be met if recalculated following such 

redemption; 

(F) 

(G) 

in payment of that element of the principal amount outstanding of the Class III 

Mezzanine Notes which represents Deferred Interest on the Class III Mezzanine 

Notes, which has been capitalised pursuant to Condition 6(c) (Deferral of 

Interest) to the extent not paid pursuant to paragraph (M) of Condition 3(c)(i) 

(Application of Interest Proceeds); 

to the payment of the Interest Amounts due and payable on the Class IV 


Payment Date, to the extent not paid pursuant to paragraph (N) of Condition 

3(c)(i) (Application of Interest Proceeds); 

(H) if either of the Class IV Coverage Tests is not satisfied on the related 


by the Collateral Manager (to the extent that application of Interest Proceeds 

for such purpose, as described in Condition 3(c)(i)(O) (Application of Interest 

Proceeds), is insufficient), to redeem the Class I Senior Notes, in whole or in 

part, and following redemption in full thereof, to redeem the Class II Senior 

Notes in whole or in part, and, following redemption in full thereof, to redeem 

the Class III Mezzanine Notes in whole or in part, and, following redemption in 

full thereof, to redeem the Class IV Mezzanine Notes to the extent necessary to 

cause the Class IV Coverage Tests to be met if recalculated following such 

redemption; 

(I) 

(J) 

in payment of that element of the principal amount outstanding of the Class IV 

Mezzanine Notes which represents Deferred Interest on the Class IV Mezzanine 

Notes which has been capitalised pursuant to Condition 6(c) (Deferral of 

Interest) to the extent not paid pursuant to paragraph (P) of Condition 3(c)(i) 


on the Payment Date (and on each Subsequent Date to the extent required) 

following each of the Initial Effective Date and the Final Effective Date, in the 

event of the occurrence of an Effective Date Rating Downgrade which is 

continuing on the first Business Day prior to such Payment Date (to the extent 

that application of Interest Proceeds for such purpose, as described in 

paragraph (Q) of Condition 3(c)(i) (Application of Interest Proceeds), is 

insufficient) to redeem the Class I Senior Notes, in whole or in part, and 

following redemption in full thereof, to redeem the Class II Senior Notes, in 

whole or in part, and, following redemption in full thereof, to redeem the Class 

91

III Mezzanine Notes, in whole or in part, and, following redemption in full 

thereof, to redeem the Class IV Mezzanine Notes until redeemed in full, or if 

earlier, until an Effective Date Rating Event is no longer continuing; 

(K) (1) during the Non-Call Period all remaining Principal Proceeds to the 

purchase of Substitute Collateral Debt Obligations or, to the Principal 

Account to be designated for reinvestment in Substitute Collateral Debt 

Obligations at a later date; 

(2) after the Non-Call Period but during the remainder of the Reinvestment 

Period all remaining Principal Proceeds, at the discretion of the Collateral 

Manager, acting on behalf of the Issuer, either, (x) to the purchase of 

Substitute Collateral Debt Obligations or to the Principal Account to be 

designated for reinvestment in Substitute Collateral Debt Obligations at a 

later date or (y) to redeem the Class I Senior Notes, in whole or in part, 

and following redemption in full thereof, to redeem the Class II Senior 

Notes in whole or in part, and, following redemption in full thereof, to 

redeem the Class III Mezzanine Notes, and, following redemption in full 

thereof, to redeem the Class IV Mezzanine Notes, in whole or in part, 

until redeemed in full; 

(3) after expiry of the Reinvestment Period: 

(i) in the case of Unscheduled Principal Proceeds and Sales Proceeds of 

Credit Risk Obligations and Credit Improved Obligations, at the 

discretion of the Collateral Manager, acting on behalf of the Issuer, 

either, (x) to the purchase of Substitute Collateral Debt Obligations 

or to the Principal Account to be designated for reinvestment in 

Substitute Collateral Debt Obligations at a later date or (y) to 


redemption in full thereof, to redeem the Class II Senior Notes in 


redeem the Class III Mezzanine Notes, in whole or in part, and, 

following redemption in full thereof, to redeem the Class IV 

Mezzanine Notes, until redeemed in full; or 

(ii) in the case of Scheduled Principal Proceeds and Sale Proceeds other 

than Sale Proceeds of Credit Risk Obligations and Credit Improved 

Obligations, to redeem the Class I Senior Notes, in whole or in part, 

and following redemption in full thereof, to redeem the Class II 

Senior Notes in whole or in part, and, following redemption in full 

thereof, to redeem the Class III Mezzanine Notes, in whole or in 

part, and, following redemption in full thereof, to redeem the Class 

IV Mezzanine Notes, until redeemed in full; 

(L) to the payment of Trustee Fees and Expenses (if any), including any applicable 

value added tax due and payable thereon, to the extent not paid in full 

pursuant to paragraphs (B) and (R) of Condition 3(c)(i) (Application of Interest 

Proceeds); 

(M) to the payment of Administrative Expenses (if any) to the extent not paid in 

full pursuant to paragraphs (C) and (S) of Condition 3(c)(i) (Application of 

Interest Proceeds); 

(N) to payment of any accrued and unpaid Collateral Management Fee and any 

other amounts payable to the Collateral Manager under the Collateral 

Management Agreement (other than the Incentive Collateral Management Fee 

and other than any Collateral Manager Advances) and to the payment of any 

value added tax due and payable in respect thereof, but only to the extent not 

paid in full pursuant to paragraphs (E), (U), and (V) of Condition 3(c)(i) 


92

(d) 

(iii) 

(O) 

(P) 

(Q) 

(R) 

(S) 

to the payment of amounts referred to in paragraph (W) of Condition 3(c)(i) 

(Application of Interest Proceeds) above, but only to the extent not paid in full 

thereunder; 

at the discretion of the Collateral Manager, other than on the Payment Date on 

which the Subordinated Notes are to be redeemed in full, to payment into the 

Collateral Enhancement Account up to a maximum aggregate amount (taking 

into account all payments to and disbursements from the Collateral 

Enhancement Account on any prior Payment Date) of A3,000,000 and/or, at the 

option of the Collateral Manager, in repayment of any Collateral Manager 

Advances outstanding (in whole or in part), provided that the total amount paid 

pursuant to this paragraph (P) on any Payment Date does not exceed the 

foregoing maximum aggregate amount; 

until the Subordinated Note Hurdle Return Amount has been reached (after 

taking into account all prior payments of interest and principal in respect of the 

Subordinated Notes, and any payments made or to be made on the 

Subordinated Notes pursuant to this paragraph and paragraph (Y) of Condition 

3(c)(i) (Application of Interest Proceeds) on such Payment Date), to the 

Subordinated Noteholders of Interest Amounts in respect of Subordinated Note 

Interest; 

subject to the prior payment of the Subordinated Note Hurdle Return Amount 

(as payable pursuant to paragraph (Z) of Condition 3(c)(i) (Application of 

Interest Proceeds) above), to the payment to the Collateral Manager of the 

Incentive Collateral Management Fee in an amount equal to 20 per cent. of any 

Principal Proceeds remaining and to the payment of any value added tax due 

and payable in respect thereof; and 

the remainder of any Principal Proceeds to the Subordinated Noteholders in 

payment of principal or additional interest on the Subordinated Notes and, in 

the event of redemption in full thereof, in payment of Interest Amounts in 

respect of Subordinated Note Interest to the Subordinated Noteholders on a pro 

rata basis (determined by reference to the proportion that the principal amount 

outstanding of the Subordinated Notes held by such Subordinated Noteholder 

bore to the aggregate principal amount outstanding of the Subordinated Notes 

Outstanding immediately prior to such redemption). 

Interest Proceeds and Principal Proceeds applied in redemption of the Class III 

Mezzanine Notes and the Class IV Mezzanine Notes in accordance with this 

Condition 3(c) shall be applied first towards redemption of that element of 

principal representing Deferred Interest and thereafter towards redemption of 

the original principal amount of such Notes. 

Determination of Amounts: In determining the amount of any disbursement to be 

made pursuant to paragraphs (i) (Application of Interest Proceeds) and (ii) 

(Application of Principal Proceeds) above, as the case may be, the Collateral 

Administrator on behalf of the Issuer shall procure that no such disbursement shall 

be made in the event that it would cause any Coverage Test referred to in any 

paragraph with a higher priority to be breached, if recalculated on a pro forma basis, 

taking into account such disbursement. 

Non-payment of Amounts: Save in the case of the payment of interest on the Class I Senior 

Notes pursuant to the Priorities of Payment or the Class II Senior Notes pursuant to the 

Priorities of Payment, or following redemption and payment in full of the Senior Notes, 

non-payment of interest on the Class III Mezzanine Notes pursuant to the Priorities of 

Payment or (following redemption in full of the Class III Mezzanine Notes) the Class IV 

Mezzanine Notes pursuant to the Priorities of Payment, or non-payment in full of the 

principal amount outstanding of any Class of Notes on any Redemption Date pursuant to 

Conditions 7(a) (Final Redemption), 7(b) (Optional Redemption) and 7(g) (Redemption upon 

93

Failure to Appoint a Replacement Collateral Manager), failure on the part of the Issuer to 

pay any of the amounts referred to in Conditions 3(c)(i) (Application of Interest Proceeds) 

and 3(c)(ii) (Application of Principal Proceeds) to the Noteholders or otherwise, by reason 

solely of the fact that there are insufficient funds standing to the credit of the Payment 

Account or by virtue of the operation of Condition 3(c)(iii) (Determination of Amounts) 

shall not constitute an Event of Default pursuant to Condition 10 (Events of Default). 

Subject always, in the case of Interest Amounts payable in respect of the Class III 

Mezzanine Notes or Class IV Mezzanine Notes, to Condition 6(c) (Deferral of Interest), in 

the event of non-payment of any amounts referred to in Conditions 3(c)(i) (Application of 

Interest Proceeds) and 3(c)(ii) (Application of Principal Proceeds) of this Condition on any 

Payment Date (including any Deferred Interest payable in respect of the Class III 

Mezzanine Notes and/or the Class IV Mezzanine Notes), 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 Conditions 3(c)(i) 

(Application of Interest Proceeds) and 3(c)(ii) (Application of Principal Proceeds) 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 on each 

Determination Date calculate the amounts payable on the applicable Payment Date 

pursuant to Conditions 3(c)(i) (Application of Interest Proceeds) and 3(c)(ii) (Application of 

Principal Proceeds) of this Condition and will notify the Issuer and the Trustee of such 

amounts in the Note Valuation Report relating to such Determination Date. The Account 

Bank (acting upon the Note Valuation Report compiled by the Collateral Administrator 

(in consultation with the Collateral Manager) on behalf of the Issuer) shall on behalf of 

the Issuer not later than 12.00 noon (London time) on the first Business Day preceding 

each Payment Date cause the Balances standing to the credit of the Accounts, to the 

extent required to pay the amounts referred to in paragraphs (i) and (ii) of Condition 3(c) 

(Priorities of Payment), which are payable on such Payment Date to be transferred to the 

Payment Account subject to and in accordance with Condition 3(i) (Accounts). 

(f) 

(g) 

(h) 

De Minimis Amounts: The Collateral Administrator may, in its absolute discretion, adjust 

the amounts required to be applied in payment of principal on the Class I Senior Notes, 

the Class II Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine Notes 

and the 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 I Senior Note, Class II Senior 

Note, Class III Mezzanine Note, Class IV Mezzanine Note and Subordinated Note is a 

whole amount, not involving any fraction of a cent or, at the discretion of the Collateral 

Administrator, part of a Euro. 

Publication of Amounts: The Collateral Administrator will cause details as to the amounts 

of interest and principal paid and any amounts of interest payable but not paid on each 

Payment Date in respect of the Notes to be notified to the Trustee, the Principal Paying 

Agent and the Irish Stock Exchange by no later than 11.00 am (London time) on the 

Business Day following the applicable Determination Date and the Principal Paying Agent 

shall procure that details of such amounts are notified to the Noteholders of each Class in 

accordance with Condition 16 (Notices) as soon as possible after notification thereof to the 

Principal Paying Agent in accordance with the above but in no event later than (to the 

extent applicable) the second Business Day after the last day of the applicable Due Period. 

Notifications 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 will (in the absence of wilful default, bad faith or manifest error) be binding on 

the Issuer, the Collateral Administrator, the Trustee, the Principal Paying Agent, the 

Registrar, the Paying Agent, the Transfer Agents 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 non-exercise by it of its powers, 

duties and discretions under this Condition. 

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(i) 

Accounts: The Issuer shall, prior to the Closing Date, establish the following accounts with 

the Account Bank: 

(A) the Collection Account, which shall be sub-divided in the ledgers of the Account 

Bank into the Principal Account and the Interest Account; 

(B) the Expense Reserve Account; 

(C) the Additional Collateral Account; 

(D) the Collateral Enhancement Account; 

(E) the Payment Account; 

(F) the Currency Accounts; 

(G) the Retained Portion Account; and 

(H) the Counterparty Downgrade Collateral Account. 

The Synthetic Collateral Account, the Custody Account, the OAT Custody Account and 

the Natexis Zero Coupon Notes Custody Account shall be established by the Issuer on the 

Closing Date with the Custodian. The Account Bank shall at all times be a financial 

institution which has the Required Ratings and has the necessary regulatory capacity and 

licences to perform the services required of the Account Bank. In the event that the longterm 

senior unsecured debt or short-term unsecured debt ratings of the Account Bank is 

downgraded below the Required Ratings or such ratings are withdrawn, the Issuer shall 

use reasonable endeavours to procure that a replacement Account Bank, which is 

acceptable to the Trustee and which satisfies the Required Ratings, is appointed within 30 

calendar days of such downgrade in accordance with the provisions of the Agency 

Agreement and the Issuer shall notify the Rating Agencies of such actions as it takes in 

regard to appointing such replacement Account Bank. 

The Balances standing to the credit of the Accounts from time to time may be invested by 

the Collateral Manager on behalf of the Issuer in Eligible Investments with, in each case, 

Stated Maturities occurring no later than the second Business Day prior to the next 

Payment Date and, for the avoidance of doubt, the Balance standing to the credit of any 

Account shall include any such Eligible Investments from time to time. 

(A) Principal Account 

The Issuer will procure that the following amounts are paid into the Collection 

Account and credited to the Principal Account promptly upon receipt thereof: 

(1) all principal payments received during the related Due Period in respect of any 

Collateral Debt Obligation (save for any Non-Euro Obligation) including, 

without limitation, Scheduled Principal Proceeds, Unscheduled Principal 

Proceeds and any par accretion amounts received in respect of Mezzanine 

Obligations in accordance with the terms of such Mezzanine Obligations; 

(2) all payments received by the Issuer under any Currency Swap Transactions, 

including Currency Swap Termination Receipts denominated in Euro, other than 

any periodic payments or other payments both in the nature of interest 

thereunder; 

(3) 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; 

(4) any premium receivable upon redemption of any Collateral Debt Obligation 

(save for any Non-Euro Obligation) at maturity or otherwise or upon exercise 

of any put or call option in respect thereof which is above the principal amount 

outstanding of any such Collateral Debt Obligation; 

(5) all fees and commissions (such as syndication fees) received in connection with 

(i) the purchase or sale of any Collateral Debt Obligation, (ii) any Defaulted 

Obligation, or (iii) the work out or restructuring of any Collateral Debt 

95

Obligation (save in the case of (i) for any such fees and commissions which the 

Collateral Manager is permitted to pay into the Interest Account in accordance 

with, and subject to the limits of, Condition 3(i)(B)(10) (Interest Account)) 

provided that where any such amount is received in respect of any Non-Euro 

Obligation, it shall first be converted into Euro by the Issuer following 

consultation with the Collateral Manager pursuant to the Collateral 

Management Agreement; 

(6) Sale Proceeds received in respect of Collateral Debt Obligations (save for any 

Non-Euro Obligation) and excluding any Sale Proceeds representing accrued 

interest allocated by the Collateral Manager as Interest Proceeds in accordance 

with (and subject to the limits of) Condition 3(i)(B)(8) (Interest Account); 

(7) all Distributions and Sale Proceeds received in respect of Defaulted Equity 

Securities; 

(8) the net proceeds of enforcement of the security over the Collateral; 

(9) all amounts transferred to the Principal Account from the Additional Collateral 

Account, at the discretion of the Collateral Manager, pursuant to paragraph (d) 

of Condition 3(i)(D) (Additional Collateral Account) upon confirmation by the 

Rating Agencies of the ratings assigned to the Class I Senior Notes, the Class II 

Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes 

after the Final Effective Date; 

(10) all amounts received by the Issuer from the Interest Rate Hedge Counterparty 

upon any reduction of the notional amount of the Interest Rate Hedge 

Agreement at the option of the Issuer; 

(11) from the Interest Account, Interest Rate Hedge Replacement Receipts and 

Interest Rate Hedge Termination Receipts, to the extent provided pursuant to 

respectively, paragraphs (d) and (f) of Condition 3(i)(B) (Interest Account) 

below; 

(12) all amounts payable to the Issuer from the Counterparty Downgrade Collateral 

Account upon termination of, or following an Event of Default under, an 

Interest Rate Hedge Transaction or the Currency Hedge Transaction, as the 

case may be; 

(13) amounts transferred to the Principal Account from the Currency Accounts 

pursuant to paragraph (c) of Condition 3(i)(H) (Currency Accounts) below 

following exchange of such amounts into Euro by the Collateral Manager, 

acting on behalf of the Issuer, pursuant to the terms of the Collateral 


(14) amounts to be deposited in the Principal Account in accordance with paragraph 

(T) of Condition 3(c)(i) (Application of Interest Proceeds) and paragraph (K) of 

Condition 3(c)(ii) (Application of Principal Proceeds) for the purposes of 

reinvestment in Substitute Collateral Debt Obligations; 

(15) all other amounts received by the Issuer in respect of Collateral Debt 

Obligations (save for any Non-Euro Obligation) which do not constitute Interest 

Proceeds or are not otherwise required to be deposited in another Account 

pursuant to the Conditions; and 

(16) all amounts representing the element of deferred interest in any payments 

received in respect of any Deferring Mezzanine Obligation. 

The Issuer shall procure payment of the following amounts (and shall ensure 

that payment of no other amount is made) out of the Principal Account: 

96

(a) on the first Business Day prior to each Payment Date, the Balance 

standing to the credit of the Principal Account to the Payment Account to 

the extent required for disbursement pursuant to Condition 3(c)(ii) 

(Application of Principal Proceeds) save for: 

(i) amounts deposited after the end of the related Due Period; and 

(ii) amounts which the Collateral Manager, acting on behalf of the 

Issuer, is permitted to and has designated for reinvestment in 

Substitute Collateral Debt Obligations pursuant to the Collateral 


(b) at any time in accordance with the terms of, and to the extent permitted 

under, the Collateral Management Agreement, in the acquisition of 

Substitute Collateral Debt Obligations or the posting of Synthetic 

Collateral upon the acquisition of any Synthetic Security by the Issuer; 

(c) all interest accrued on the Principal Account to the Interest Account; 

(d) amounts required for the purchase of Notes pursuant to Condition 7(i) 

(Purchase of Notes by the Issuer) subject to the receipt of any Rating 

Agency Confirmation required pursuant to paragraph (i)(D) of Condition 

7(i) (Purchase of Notes by the Issuer); 

(e) at any time (provided that if such sums are required to be dispersed on any 

Payment Date, such will be dispersed as Interest Proceeds), save in the 

event that paragraphs (b)(AA) to (b)(CC) inclusive of Condition 3(i)(H) 

(Currency Accounts)(inclusive) applies, any amount payable by the Issuer 

upon entry into of a Replacement Currency Swap Agreement in 

accordance with the terms of the Collateral Management Agreement up to 

an amount equal to the Balance standing to the credit of the Principal 

Account that represents Currency Swap Termination Receipts in relation 

to the Currency Swap Agreement being terminated and replaced, following 

conversion (if required) into the denomination of the related amount 

payable by the Issuer, to acquire such Replacement Currency Swap 

Transaction; and 

(f) at any time following a Non-Euro Obligation becoming a Defaulted 

Obligation, any amount payable by the Issuer to the Currency Swap 

Counterparty to the extent that any payment has been made by the 

Currency Swap Counterparty prior to the relevant Non-Euro Obligation 

related to such Currency Swap Agreement becoming a Defaulted 

Obligation and in respect of which a corresponding payment had not been 

made by the Issuer. 

(B) 

Interest Account 

The Issuer will procure that the following amounts are paid into the Collection 

Account and credited to the Interest Account promptly upon receipt thereof: 

(1) all cash payments of interest in respect of the Collateral Debt Obligations (save 

for any Non-Euro Obligations and excluding, for the avoidance of doubt, any 

par accretion amount received in respect of any Mezzanine Obligation in 

accordance with the terms of such Mezzanine Obligation) and, in respect of any 

Synthetic Collateral, to the extent no longer subject to the security interest of 

the applicable Synthetic Security Counterparty; 

(2) all coupon or other periodic payments and any other payments each in the 

nature of interest (including, without limitation, amounts in respect of all 

accrued interest included in the proceeds of sale of any Non-Euro Obligation 

that are designated by the Collateral Manager, acting on behalf of the Issuer, as 

Interest Proceeds pursuant to the Collateral Management Agreement) received in 

respect of any Synthetic Security or Currency Swap Transaction, excluding, for 

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the avoidance of doubt, any scheduled or unscheduled termination or 

redemption payments save to the extent that such amounts are attributable to 

accrued interest or periodic payments which are in the nature of interest 

payments; 

(3) all interest accrued in respect of the Balance standing to the credit of each of 

the Accounts from time to time; 

(4) all amendment and waiver fees, all late payment fees and all other fees and 

commission received in connection with any Collateral Debt Obligations (other 

than fees and commissions received in connection with (i) the purchase or sale 

of any Collateral Debt Obligations, (ii) any Defaulted Obligation, or (iii) the 

work out or restructuring of any Collateral Debt Obligation, in each case, 

which shall, subject (in the case of (i) only) to the Collateral Manager 

determining that such be paid into the Interest Account and constitute Interest 

Proceeds in accordance with the terms of the Collateral Management 

Agreement, be payable into the Principal Account and shall constitute Principal 

Proceeds) and, where any such amount is received in respect of any Non-Euro 

Obligation, converted into Euro by the Collateral Manager, acting on behalf of 

the Issuer, pursuant to the Collateral Management Agreement; 

(5) any or all accruals on the cash pay coupon covenant forming part of any Sale 

Proceeds of any Collateral Debt Obligation (save for any Non-Euro Obligation 

and excluding for the avoidance of doubt any par accretion amounts) allocable 

as Interest Proceeds pursuant to the Collateral Management Agreement; 

(6) all amounts transferred to the Interest Account from the Additional Collateral 

Account, at the discretion of the Collateral Manager, pursuant to paragraph (e) 

of Condition 3(i)(D) (Additional Collateral Account) upon confirmation by the 

Rating Agencies of the ratings assigned to the Class I Senior Notes, Class II 

Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes 

after the Final Effective Date; 

(7) all accrued interest included in the amount of any Sale Proceeds received in 

respect of Collateral Debt Obligations to be allocated by the Collateral Manager 

as Interest Proceeds pursuant to the Collateral Management Agreement 

(provided always that such Sale Proceeds may not be allocated as Interest 

Proceeds and shall be allocated to the Principal Account if (i) they constituted 

part of the principal amount of a Collateral Debt Obligation at the time it was 

bought including any Purchased Accrued Interest and any accrued interest or 

other sum that has, under the terms of such Collateral Debt Obligation, been 

capitalised as principal thereafter; and (ii) (a) the Class IV Par Value Ratio is 

less than such ratio as at the Closing Date; or (b) the aggregate of such Sale 

Proceeds is equal to or less than 100% of the purchase price for such Collateral 

Debt Obligations); 

(8) all amounts payable thereto out of the Collateral Enhancement Account 

pursuant to paragraph (1) of Condition 3(i)(E) (Collateral Enhancement 

Account); 

(9) any fees and commissions (such as syndication fees) received no earlier than the 

date falling one year after the Closing Date, in connection with the purchase or 

sale of any Collateral Debt Obligation which the Collateral Manager determines 

shall be paid into the Interest Account and treated as Interest Proceeds 

(provided that the Class IV Par Value Ratio is equal to or above such ratio as 

at the Closing Date); and where any such amount is received in respect of any 

Non-Euro Obligation, such amount converted into Euro by the Collateral 

Manager, acting on behalf of the Issuer, pursuant to the Collateral Management 

Agreement; 

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(10) all amounts payable to the Issuer by the Interest Rate Hedge Counterparty 

under any Interest Rate Hedge Agreement or Interest Rate Hedge Transaction, 

including any Interest Rate Hedge Termination Receipts, any Interest Rate 

Hedge Replacement Receipts and any Scheduled Interest Rate Hedge 

Counterparty Payments; and 

(11) all amounts reimbursed in respect of taxes withheld at source or otherwise 

deductible to the extent that such withholding or other deduction related to 

interest payments or payments in the nature of interest. 

The Issuer shall procure payment of the following amounts out of the Interest 

Account and shall ensure that payment of no other amounts is made out of the 

Interest Account: 

(a) whilst any Rated Notes are Outstanding, if on the Determination Date 

prior to that Payment Date the aggregate Principal Balance of Collateral 

Debt Obligations that provide for Annual Interest Payments exceeds 5 per 

cent. of the CDO Principal Balance, each Retained Portion relating to 

such Due Period to the Retained Portion Account if required by and in 

accordance with the definition of Retained Portion; 

(b) on the Business Day prior to each Payment Date, the Balance standing to 

the credit of the Interest Account to the Payment Account to the extent 

required for disbursement pursuant to Condition 3(c)(i) (Application of 

Interest Proceeds) (save for amounts deposited after the end of the related 

Due Period and any amounts representing Interest Rate Hedge 

Termination Receipts and Interest Rate Hedge Replacement Receipts 

standing to the credit of the Interest Account and pending application 

pursuant to paragraphs (c), (d), (e) and (f) below); 

(c) at any time, to the extent of any Interest Rate Hedge Termination 

Receipts paid into the Interest Account, in payment of amounts payable 

by the Issuer upon entry into of a Replacement Interest Rate Hedge 

Agreement in accordance with the Collateral Management Agreement; 

(d) at any time, to the extent of any Interest Rate Hedge Replacement 

Receipts paid into the Interest Account, in payment of any Interest Rate 

Hedge Termination Payments payable by the Issuer and, thereafter, on the 

next following Payment Date under the Interest Rate Hedge Agreement 

being replaced the amount of any remaining Interest Rate Hedge 

Replacement Receipts paid into the Interest Account shall be paid into the 

Principal Account; 

(e) at any time, in payment by the Issuer: 

(AA) to any Interest Rate Hedge Counterparty in connection with the 

entry into of a Replacement Interest Rate Hedge Agreement to the 

extent such amounts exceed any Interest Rate Hedge Termination 

Receipts payable by the Interest Rate Hedge Counterparty to the 

Issuer under the Interest Rate Hedge Agreement replaced; or 

(BB) in payment of any costs associated with the entry into of additional 

Interest Rate Hedge Agreements following the Closing Date by the 

Issuer in accordance with the Collateral Management Agreement; 

and 

(f) in the case of any Interest Rate Hedge Termination Receipts paid into the 

Interest Account, in the event that: 

(AA) the Issuer, or the Collateral Manager acting on behalf of the Issuer, 

determines not to replace the Interest Rate Hedge Agreement and 

Rating Agency Confirmation is received in respect of such 

determination; or 

99

(BB) termination of the Interest Rate Hedge Agreement under which such 

Interest Rate Hedge Termination Receipts are payable occurs on a 

Redemption Date; or 

(CC) to the extent that such Interest Rate Hedge Termination Receipts 

are not required for application towards costs of entry into a 

Replacement Interest Rate Hedge Agreement, 

in payment of such amounts (save for accrued interest thereon) to the 

Principal Account. 

(C) 

(D) 

Expense Reserve Account 

The Issuer will procure that the following amounts are paid into the Expense Reserve 

Account: 

(1) on the Closing Date, A75,000 and an amount in Euro equal to 0.04 per cent. of 

the Target Par Amount; and 

(2) on each Payment Date (other than the date on which the Subordinated Notes 

are to be redeemed in full following such Payment Date) the amount of Interest 

Proceeds required pursuant to paragraph (D) of Condition 3(c)(i) (Application of 

Interest Proceeds) and, to the extent that such amounts are not paid out of 

Interest Proceeds, the amount of Principal Proceeds required pursuant to 

paragraph (A) of Condition 3(c)(ii) (Application of Principal Proceeds). 

The Issuer shall procure payment of the following amounts (and shall ensure 

that payment of no other amount is made) out of the Expense Reserve 

Account: 

(a) on the first Business Day prior to each Payment Date the Balance 

standing to the credit of the Expense Reserve Account to the Payment 

Account for disbursement in accordance with Condition 3(c)(i) (Application 

of Interest Proceeds); 

(b) at any time, in payment by the Collateral Administrator on behalf of the 

Issuer of any Trustee Fees and Expenses and Administrative Expenses 

which have accrued and become payable prior to any Payment Date, to 

the extent applicable, upon receipt of invoices therefor from the relevant 

creditor; and 

(c) all interest accrued on the Expense Reserve Account to the Interest 

Account. 

Additional Collateral Account 

The Issuer shall procure that the proceeds of the issue of the Notes remaining after 

payment of the aggregate purchase price of the Collateral Debt Obligations purchased 

by or on behalf of the Issuer on or about the Closing Date, the payment of costs of 

entry into any Interest Rate Hedge Transaction and/or Currency Swap Transaction 

entered into on or about the Closing Date, the payment of amounts required to be 

paid into the Expense Reserve Account and the Interest Account on the Closing Date 

and the other fees and expenses of the Issuer payable on the Closing Date are paid 

into the Additional Collateral Account on the Closing Date. 

The Issuer shall procure payment of the following amounts (and shall ensure that 

payment of no other payment is made) out of the Additional Collateral Account: 

(a) during the Investment Period in accordance with the terms of, and to the extent 

permitted under, the Collateral Management Agreement, amounts required in 

the acquisition of Additional Collateral Debt Obligations; 

(b) on the Business Day prior to each Payment Date, to the Payment Account as 

Principal Proceeds for application in accordance with the Priorities of Payment 

set out in Condition 3(c)(ii) (Application of Principal Proceeds) to the extent 

required in order to procure that the Senior Coverage Tests and the Mezzanine 

100

Coverage Tests would each be satisfied if recalculated following such 

application, to the extent only that all other amounts required to be transferred 

to the Payment Account in accordance with this Condition 3(i) (Accounts) for 

application on such Payment Date in accordance with Condition 3(c)(i) 

(Application of Interest Proceeds) and 3(c)(ii) (Application of Principal Proceeds) 

would be insufficient to cause each such Coverage Test to be satisfied upon 

recalculation following such application; 

(c) 

(d) 

in the event of the occurrence of an Effective Date Rating Event the Balance 

standing to the credit of the Additional Collateral Account will, on the first 

Business Day prior to the Payment Date (and each subsequent Payment Date to 

the extent required) falling immediately after the Initial Effective Date or Final 

Effective Date, as applicable, be transferred as Principal Proceeds to the 

Payment Account and shall be applied in redemption of the Class I Senior 

Notes, the Class II Senior Notes and the Class III Mezzanine Notes in 

accordance with the Priorities of Payment to the extent necessary until an 

Effective Date Rating Event is no longer continuing; 

upon confirmation by the Rating Agencies of the Initial Ratings assigned to the 

Rated Notes of each Class after the Final Effective Date, the Balance standing 

to the credit of the Additional Collateral Account shall, at the discretion of the 

Collateral Manager, acting on behalf of the Issuer, be paid to the Interest 

Account or the Principal Account for reinvestment in Substitute Collateral Debt 

Obligations, provided that the amount paid to the Interest Account pursuant to 

this paragraph (d) shall neither (i) exceed an amount equal to one per cent. of 

the aggregate principal amount outstanding of the Notes Outstanding at the 

relevant time nor (ii) reduce the CDO Principal Balance to an amount less than 

the Target Par Amount; 

(e) all interest accrued on the Additional Collateral Account to the Interest 

Account; and 

(f) amounts required for the purchase of Notes pursuant to Condition 7(i) 

(Purchase of Notes by the Issuer). 

(E) 

Collateral Enhancement Account 

The Issuer will procure that the following amounts are paid into the Collateral 

Enhancement Account: 

(1) on each Payment Date, all amounts of interest and principal payable in respect 

of the Subordinated Notes which the Collateral Manager, acting on behalf of 

the Issuer, determines at its discretion shall be applied in payment into the 

Collateral Enhancement Account pursuant to, respectively, paragraph (X) of 

Condition 3(c)(i) (Application of Interest Proceeds) and paragraph (P) of 

Condition 3(c)(ii) (Application of Principal Proceeds), subject to the limit 

specified in such paragraphs; 

(2) all Distributions and Sale Proceeds (including any proceeds of liquidation) 

received in respect of the Collateral Enhancement Obligations; and 

(3) the proceeds of each Collateral Manager Advance to the extent not applied in 

the acquisition of or exercise of rights under Collateral Enhancement 

Obligations. 

The Balance standing to the credit of the Collateral Enhancement Account from 

time to time may be applied (in whole or in part) by the Collateral Manager, 

acting on behalf of the Issuer: 

(a) in the acquisition of any Collateral Enhancement Obligations or the 

exercise of any rights thereunder in accordance with the Collateral 


101

(b) 

(c) 

(d) 

at any time in repayment of any Collateral Manager Advance (and interest 

accrued thereon outstanding); 

at any time at the discretion of the Collateral Manager, acting on behalf 

of the Issuer, in transfer to the Interest Account or the Principal Account; 

and 

on the Business Day prior to the Maturity Date or any Payment Date on 

which the Subordinated Notes are to be redeemed in full, in payment into 

the Payment Account for distribution on such Payment Date as Interest 

Proceeds in accordance with Condition 3(c)(i) (Application of Interest 

Proceeds). 

Amounts may not be paid out of the Collateral Enhancement Account in any other 

circumstances save for interest accrued on the Balance thereof from time to time 

which shall be transferred to the Interest Account. 

(F) 

(G) 

Payment Account 

The Issuer will procure that on the Business Day prior to each Payment Date the 

Balance standing to the credit of each of the Interest Account and the Principal 

Account, together with all Scheduled Interest Rate Hedge Payments due and payable 

to the Issuer on such date and, to the extent applicable, the Balance standing to the 

credit of the Expense Reserve Account and, if applicable, the Additional Collateral 

Account, the Retained Portion Account, the Currency Accounts, and the Collateral 

Enhancement Account which are required to be transferred to the Payment Account 

pursuant to paragraphs (A) to (E) (inclusive) and (H) (I) and (J) of this Condition 

3(i) (Accounts) are so transferred and, on such Payment Date, the Collateral 

Administrator, acting on behalf of the Issuer, shall disburse such amounts in 

accordance with the Priorities of Payment. No amounts shall be transferred to or 

withdrawn from the Payment Account at any other time or in any other 

circumstances, save that all interest accrued on the Payment Account shall be credited 

to the Interest Account and save for the discretionary payments from the Collateral 

Enhancement Account. 

Synthetic Collateral Account 

The Issuer shall procure that sums and/or securities posted 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 separate segregated sub accounts (each 

relating to individual Synthetic Counterparties) within the Synthetic Collateral 

Account. 

The Issuer shall procure payment of the following amounts (and shall ensure that 

payment of no other amount is made) out of the Synthetic Collateral Account: 

(a) 

(b) 

(c) 

(d) 

(e) 

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 to the Principal Account; 

all payments in the nature of interest received by the Issuer in respect of any 

Synthetic Collateral to the extent no longer subject to the security interest of the 

applicable Synthetic Counterparty to the Interest Account; 

in payment of any amounts due and payable by the Issuer under any Synthetic 

Security; 

for the purpose of investment in Eligible Investments to the extent permitted by, 

and in accordance with, the Collateral Management Agreement; and 

all interest accrued on the Synthetic Collateral Account to the Interest Account. 

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(H) 

Currency Accounts 

The Issuer will procure that all amounts received in respect of (1) any Non-Euro 

Obligations and (2) Currency Swap Transactions (other than in Euro) are paid into 

the appropriate Currency Account in the currency of receipt thereof. 

The Issuer will procure payment of the following amounts (and shall ensure that 

payment of no other amount is made) out of the appropriate Currency Account: 

(a) at any time, all amounts payable by the Issuer to the Currency Swap 

Counterparty under any Currency Swap Transaction; 

(b) at any time, any amount payable by the Issuer upon entry into a Replacement 

Currency Swap Agreement in accordance with the Collateral Management 

Agreement up to an amount equal to the Currency Swap Termination Receipts 

received by the Issuer upon termination of the Currency Swap Agreement which 

is being replaced, except for: 

(AA) in the event that the Issuer, following consultation with the Collateral 

Manager (acting on behalf of the Issuer), determines not to replace a 

Currency Swap Agreement or certain transactions thereunder and Rating 

Agency Confirmation is received in respect of such determination; or 

(BB) if a Currency Swap Agreement is terminated on a Redemption Date 

pursuant to Conditions 7(a) (Final Redemption), 7(b) (Optional 

Redemption), 7(g) (Redemption upon Failure to Appoint a Replacement 

Collateral Manager) or 10 (Events of Default) and Currency Swap 

Termination Receipts are payable on a Redemption Date; or 

(CC) to the extent that such Currency Swap Termination Receipts are not 

required for application towards costs of entry into a Replacement 

Currency Swap Agreement, 

the Balance in the case of paragraphs (AA) to (CC) (inclusive) above standing 

to the credit of the appropriate Currency Account that comprises Currency 

Swap Termination Receipts in relation to the Currency Swap Agreement being 

terminated and replaced shall be converted into Euro by the Collateral 

Manager, acting on behalf of the Issuer, and transferred to the Principal 

Account in accordance with paragraph (12) of Condition 3(i)(A) (Principal 

Account); 

(c) on the Business Day prior to any Redemption Date in the event of redemption 

of the Notes in whole, all amounts standing to the credit of any Currency 

Account received by the Issuer under any Non-Euro Obligation other than any 

periodic payments or other payments in the nature of interest, to the extent not 

subject to the terms of a Currency Swap Agreement, shall be converted into 

Euro by the Collateral Manager, acting on behalf of the Issuer, and transferred 

to the Principal Account for disbursement as Principal Proceeds in accordance 

with Condition 3(c)(ii) (Application of Principal Proceeds); and 

(d) all other amounts on account of interest received in respect of Non-Euro 

Obligations (including accrued interest included in the amount of any Sale 

Proceeds received in respect of a Non-Euro Obligation) and interest accrued on 

the Currency Accounts to the extent not subject to the terms of a Currency 

Swap Agreement, which are converted into Euros by the Collateral Manager, 

acting on behalf of the Issuer, in accordance with the Collateral Management 

Agreement, to the Interest Account. 

Pursuant to the Collateral Management Agreement, the Collateral Manager 

may, acting on behalf of the Issuer, enter into foreign exchange transactions to 

convert any non-Euro amounts which are payable into the Principal Account or 

Interest Account into Euro on the date of receipt thereof. 

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(I) 

(J) 

(K) 

(L) 

The Retained Portion Account 

The Issuer shall procure that each Retained Portion (if any) is paid into the Retained 

Portion Account on the Business Day prior to each Payment Date. The Issuer shall 

procure the payment of the following amounts (and shall ensure that payment of no 

other amount is made) out of the Retained Portion Account as follows: 

(a) 

(b) 

the Retained Portion Release Amount to the Payment Account to be distributed 

as Interest Proceeds or, as the case may be, Principal Proceeds in accordance 

with the Priorities of Payment; and 

all interest accrued on the Retained Portion Account to the Interest Account. 

Counterparty Downgrade Collateral Account 

The Issuer shall procure that all Counterparty Downgrade Collateral posted pursuant 

to the terms of a Hedge Agreement will be deposited with the Custodian in a 

segregated account or sub-account in respect of each different entity that is a Hedge 

Counterparty. The only permitted withdrawal from or application of funds on deposit 

in, or otherwise to the credit of, the Counterparty Downgrade Collateral Account will 

be (i) for the application to obligations of the Hedge Counterparty to the Issuer 

under the Hedge Agreement if such agreement becomes subject to early termination 

or upon default by the relevant Hedge Counterparty or (ii) to return collateral to the 

relevant Hedge Counterparty when and as required by the Hedge Agreement. Funds 

credited to the Counterparty Downgrade Collateral Account will be applied as 

contemplated in the Hedge Agreement. All amounts deposited in the Counterparty 

Downgrade Collateral Account will be deposited in overnight funds in Eligible 

Investments. 

OAT Custody Account 

The Issuer shall procure that, prior to the Closing Date, the OAT Custody Account 

is established as a single segregated trust account in the name of the Issuer subject to 

the security interests created in favour of the Trustee for the benefit of the Class V 

Structured Combination Noteholders. All OAT Strips shall be deposited in the OAT 

Custody Account and shall be held by the Custodian as part of the Collateral. The 

OAT Strips forming the OAT Strips Portion will be applied solely for the benefit of 

the Class V Structured Combination Noteholders. 

Natexis Zero Coupon Notes Custody Account 

The Issuer shall procure that, prior to the Closing Date, the Natexis Zero Coupon 

Notes Custody Account is established as a single segregated trust account in the 

name of the Issuer subject to the security interests created in favour of the Trustee 

for the benefit of the Class VI Structured Combination Noteholders. All Natexis Zero 

Coupon Notes shall be deposited in the Natexis Zero Coupon Notes Custody 

Account and shall be held by the Custodian as part of the Collateral. The Natexis 

Zero Coupon Notes forming the Natexis Zero Coupon Notes Portion will be applied 

solely for the benefit of the Class VI Structured Combination Noteholders. 

4. Security 

(a) Security: Pursuant to the Trust Deed and subject to the security arrangements in respect of 

the OAT Strips for the holders of the Class V Structured Combination Notes and the 

Natexis Zero Coupon Notes for the holders of the Class VI Structured Combination 

Notes, the obligations of the Issuer under the Notes of each Class, the Trust Deed, the 

Agency Agreement, the Depositary Agreement, the Collateral Management Agreement, the 

Interest Rate Hedge Agreements, the Currency Swap Agreements, and the Subscription 

Agreement (together with the obligations owed by the Issuer to the other Secured Parties 

secured by the Trust Deed) are secured in favour of the Trustee for the benefit of the 

Secured Parties by: 

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(i) 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

an assignment by way of security of all the Issuer’s present and future rights, title and 

interest (and all entitlements or other benefits relating thereto) in respect of all Senior 

Secured Loans, Second Lien Loans, Mezzanine Obligations, Structured Finance Securities, 

Collateral Enhancement Obligations, Defaulted Equity Securities and Eligible Investments 

and any other investments 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, 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; 

a first fixed charge and first priority security interest granted over the Issuer’s present and 

future rights, title and interest (and all entitlements or other benefits relating thereto) in 

respect of all Senior Secured Loans, Second Lien Loans, Mezzanine Obligations, Structured 

Finance Securities, Defaulted Equity Securities, Collateral Enhancement Obligations and 

Eligible Investments and any other investments held by the Issuer from time to time 

(where such obligations are securities or contractual rights not assigned by way of security 

pursuant to paragraph (i) above and which are capable of being the subject of a first fixed 

charge and first priority security interest), 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; 

a first fixed charge and a first priority security interest over all rights, title and interest 

(present and future) of the Issuer in respect of each of the Accounts other than the 

Synthetic Collateral Account and all moneys from time to time standing to the credit of 

the Accounts other than the Synthetic Collateral Account, and the debts represented 

thereby and including, without limitation, all interest accrued and other moneys received in 

respect thereof; 

a first fixed charge and first priority security interest (where the applicable assets are 

securities) or an assignment by way of security (where the applicable rights are contractual 

obligations) over, all present and future rights of the Issuer in respect of, any Synthetic 

Collateral 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 and over the Synthetic Collateral Account and all 

moneys from time to time standing to the credit of the Synthetic Collateral Account and 

the debts represented thereby, subject, in each case, to the rights of any Synthetic 

Counterparty to require payment or delivery of any such Synthetic Collateral pursuant to 

the terms of the applicable Synthetic Security and to any security interest there over 

granted in favour of the Trustee for the benefit of such Synthetic Counterparty pursuant to 

the applicable Synthetic Security; 

an assignment by way of security of the Issuer’s rights, title and interest (present and 

future) against the Custodian under the Agency Agreement (other than in respect of (a) 

the OAT Strips, the OAT Strips Custody Account and the OAT Strips Sale Proceeds; and 

(b) the Natexis Zero Coupon Notes and the Natexis Zero Coupon Notes Custody 

Account) and a first fixed charge over the Custody Account (including each cash account 

relating to the Custody Account, any cash held therein and the debt represented thereby), 

excluding for the avoidance of doubt, the OAT Custody Account and the Natexis Zero 

Coupon Notes Custody Account; 

an assignment by way of security of all of the Issuer’s rights, title and interest (present and 

future) under each Currency Swap Agreement and each Interest Rate Hedge Agreement 

(including the Issuer’s rights under any guarantee or credit support annex entered into 

105

pursuant thereto provided that such assignment 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); 

(vii) an assignment by way of security of the Issuer’s rights, title and interest (present and 

future) under the Collateral Management Agreement; 

(viii) a first fixed charge over all moneys held from time to time by the Principal Paying Agent 

(and each Paying Agent) or the Registrar (as the case may be) for payment of principal, 

interest or other amounts on the Notes (if any); 

(ix) assignment by way of security of the Issuer’s rights, title and interest (present and future) 

under the Agency Agreement (other than in respect of the OAT Strips, the OAT Custody 

Account and the OAT Strips Sale Proceeds and other than in respect of the Natexis Zero 

Coupon Notes and the Natexis Zero Coupon Notes Custody Account; 

(x) an assignment by way of security of the Issuer’s rights, title and interest (present and 

future) under the Depositary Agreement; 

(xi) an assignment by way of security of the Issuer’s rights, title and interest (present and 

future) under the Corporate Services Agreement; 

(xii) an assignment by way of security of the Issuer’s rights, title and interest (present and 

future) under the Collateral Acquisition Documents; and 

(xiii) a floating charge over the whole of the Issuer’s undertaking and assets (other than the 

Balance standing to the credit of the Issuer Irish Account) to the extent that such 

undertaking and assets are not subject to any other security referred to in this Condition 4 

(Security), the OAT Strip Pledge Agreement, the Natexis Zero Coupon Notes Pledge 

Agreement or the Euroclear Pledge Agreement. 

The Issuer may from time to time grant security: 

(1) 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 the relevant Synthetic Security; and/or 

(2) subject to receipt of Rating Agency Confirmation, in connection with Collateral Debt 

Obligations in which the Issuer participates by way of guarantee to a funding bank, 

collateralised by a deposit placed by the Issuer with the funding bank, by way of a first 

priority security interest over such deposit to secure all or part of the liabilities of an 

obligor to the funding bank which the Issuer has agreed to guarantee or undertake to pay. 

All deeds, documents, assignments, instruments, bonds, notes, negotiable instruments, papers and 

any other instruments comprising, evidencing, representing and/or transferring the Portfolio will be 

deposited with or held by or on behalf of the Custodian in accordance with the Agency Agreement 

until the security over such obligations is irrevocably discharged in accordance with the provisions of 

the Trust Deed. In the event that the long-term senior unsecured debt or the short-term senior 

unsecured debt of the Custodian is rated below the applicable Required Ratings or its long-term debt 

rating is withdrawn, the Issuer shall use reasonable endeavours to procure that a replacement 

custodian is appointed within 30 calendar days who is acceptable to the Trustee and whose long-term 

senior unsecured debt and short-term senior unsecured debt is rated not less than the applicable 

Required Ratings, in accordance with the provisions of the Agency Agreement. 

Pursuant to the terms of the Trust Deed the Trustee is exempt from any liability in respect of 

any loss or theft 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 Collateral 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. 

106

Pursuant to the Euroclear Pledge Agreement, the Issuer has also created a Belgian law pledge 

over the Issuer’s entitlement to the Collateral Debt Obligations from time to time held in Euroclear. 

Pursuant to the OAT Strips Pledge Agreement, the Issuer has created a Belgian law pledge in 

favour of the Trustee (held for the benefit of the holders of the Class V Structured Combination 

Notes only) over the Issuer’s entitlement to the OAT Strips Portion. 

Pursuant to the Trust Deed, the obligations of the Issuer under the Class V Structured 

Combination Notes are also secured in favour of the Trustee for the benefit of the Class V Structured 

Combination Noteholders by: 

(i) 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 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 therefor and the proceeds of sale 

repayment and redemption thereof; and 

(ii) an assignment by way of security of all of the Issuer’s rights, title and interest (present and 

future) against the Custodian under the Agency Agreement to the extent that such rights 

relate to the OAT Strips, the OAT Custody Account and the OAT Strips Sale Proceeds 

only. 


provisions of the Trust Deed specified above, the Trustee shall have regard to the interests of the 

holder of the Class V Structured Combination Notes only. 

Pursuant to the Natexis Zero Coupon Notes Pledge Agreement, the Issuer has created a Belgian 

law pledge in favour of the Trustee (held for the benefit of the holders of the Class VI Structured 

Combination Notes only) over the Issuer’s entitlement to the Natexis Zero Coupon Notes Portion. 

Pursuant to the Trust Deed, the obligations of the Issuer under the Class VI Structured 

Combination Notes are also secured in favour of the Trustee for the benefit of the Class VI 

Structured Combination Noteholders by: 

(i) 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 Natexis Zero 

Coupon Notes, 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; and 

(ii) an assignment by way of security of all of the Issuer’s rights, title and interest (present and 

future) against the Custodian under the Agency Agreement to the extent that such rights 

relate to the Natexis Zero Coupon Notes and the Natexis Zero Coupon Notes Custody 

Account only. 


Agreement and the provisions of the Trust Deed specified above, the Trustee shall have regard to the 

interests of the holder of the Class VI Structured Combination Notes only. 

(b) 

(c) 

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 and the Euroclear Pledge Agreement shall be applied in 

accordance with the Priorities of Payment. 

Limited Recourse: The obligations of the Issuer to pay amounts due and payable in respect 

of the Notes and to the other Transaction Creditors at any time shall be limited to the 

proceeds available at such time to make such payment in accordance with these Conditions 

and the Trust Deed. If the net proceeds of realisation of the security constituted by the 

Trust Deed and the Euroclear Pledge Agreement upon enforcement thereof in accordance 

with Condition 11 (Enforcement) and the provisions of the Trust Deed and the Euroclear 

Pledge Agreement are less than the aggregate amount payable in such circumstances by the 

Issuer in respect of the Notes and to the other Transaction Creditors (such negative 

107

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 Transaction Creditors 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 (if any) of the Issuer 

will not be available for payment of such shortfall which shall be borne by the Transaction 

Creditors in accordance with the Priorities of Payment (applied in reverse order), the rights 

of the Transaction Creditors to receive any further amounts in respect of such obligations 

shall be extinguished and none of the Noteholders of each Class or the other Transaction 

Creditors may take any further action to recover such amounts. Except as provided in the 

Trust Deed, none of the Noteholders of any Class, the Trustee or the other Transaction 

Creditors (nor any other person acting on behalf of any of them) shall be entitled at any 

time until two years and one day after the date of redemption of the latest maturing Note 

to institute against the Issuer, or join in any institution against the Issuer of, any 

bankruptcy, reorganisation, arrangement, insolvency, winding-up or liquidation proceedings 

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 Transaction Creditors, 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. 

None of the Trustee, the Corporate Administrator, the Lead Manager, the Joint Lead 

Managers, the Collateral Managers, the Collateral Administrator 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 

such Class. 

The Components shall be limited recourse obligations of the Issuer to the extent of the 

Underlying Notes to which they relate and each Class of Structured Combination Notes shall be 

limited recourse obligations of the Issuer to the extent of their respective Components. The Class V 

Structured Combination Notes are limited recourse obligations of the Issuer to the extent (i) in the 

case of the OAT Strips Portion, the OAT Security Component and (ii) in the case of the Class V 

Subordinated Component, the Subordinated Notes. The Class VI Combination Notes are limited 

recourse obligations of the Issuer to the extent (i) in the case of the Natexis Zero Coupon Notes 

Portion, the Natexis Zero Coupon Security Component and (ii) in the case of the Class VI 

Subordinated Component, the Subordinated Notes. 

(d) 

Acquisition and Sale of Portfolio: The Collateral Managers are required to manage the 

Portfolio and 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 Collateral 

Management Agreement. The duties of the Collateral Managers thereunder in managing 

the Portfolio include (among other things): (i) the making of investment decisions in 

relation to the purchase of Collateral Debt Obligations to be purchased on or about the 

Closing Date; (ii) the acquisition on behalf of the Issuer during the Investment Period of 

Additional Collateral Debt Obligations pursuant to the Collateral Management Agreement; 

(iii) the investment in Eligible Investments; (iv) the sale of certain of the Collateral Debt 

Obligations during the Reinvestment Period (subject to, inter alia, a yearly limit in respect 

of such sales to 20 per cent. of the CDO Principal Balance as at the beginning of such 

year (but such limit to exclude the sale of any Credit Improved Obligations, Credit Risk 

Obligations and Defaulted Obligations) and thereafter (v) in certain circumstances the 

acquisition of Substitute Collateral Debt Obligations. The Collateral Managers are 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, a Defaulted 

Equity Security or become a Credit improved Obligation, Defaulted Obligation or Credit 

Risk Obligation, provided that, if they fail to do so, except by reason of acts constituting 

bad faith, wilful misconduct or negligence in the performance of its obligations, no 

Noteholder, shall have any recourse against any of the Issuer, the Collateral Managers, the 

Collateral Administrator, the Custodian, the Registrar or the Trustee for any loss suffered 

as a result of such failure. 

108

(e) 

(f) 

Exercise of Rights in Respect of the Portfolio: Pursuant to, and subject as provided in, the 

Collateral Management Agreement, the Issuer authorises the Collateral Managers, prior to 

enforcement of the security over the Collateral, 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 Collateral Managers are authorised 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 Collateral Debt Obligations 

forming part of the Portfolio. 

Information Regarding the Portfolio: The Issuer shall procure that a copy of each Monthly 

Report and any Note Valuation Report is mailed electronically or made available by 

posting on a website upon publication thereof (or is delivered in another manner approved 

by the Trustee), within two Business Days of such publication (to the address specified in 

each of the requests referred to below which address shall be an electronic mail address or 

other address in connection with any other method of delivery approved by the Trustee) to 

each Noteholder of each Class upon request in writing therefor, together with a 

Subordinated Noteholder Report to, and upon written request from, any Subordinated 

Noteholder and that copies of each such Report are made available electronically (either 

by mailing electronically or by posting on a website or in another manner approved by the 

Trustee) to the Trustee, the Collateral Manager and each Rating Agency within two 

Business Days of publication thereof. 

5. Covenants of and Restrictions on the Issuer 

(a) Covenants of the Issuer: As more fully described in the Trust Deed, for so long as any of 

the Notes remains Outstanding, the Issuer covenants to the holders of such Outstanding 

Notes that it will: 

(i) 

take such steps as are reasonable to enforce all its rights: 

(A) 

(B) 

(C) 

under the Trust Deed; 

in respect of the Collateral; and 

under each Transaction Document; 

(ii) 

(iii) 

(iv) 

(v) 

(vi) 

comply with its obligations under the Notes and the Transaction Documents which 

are expressed to be binding on it; 

keep proper books of account; 

at all times (a) maintain its residence for the purposes of taxation (i) in Ireland, and 

(ii) outside France, the United Kingdom and the United States and (b) will not 

establish a branch, agency or place of business or register as a company in France, 

the United Kingdom or the United States; 

at all times ensure that each of its Directors is an Independent Director (where 

‘‘Independent Director’’ means a duly appointed member of the board of directors of 

the Issuer who has not been, at the time of such appointment or at any time in the 

five years preceding such appointment, (a) a direct or indirect legal or beneficial 

owner in either of the Collateral Managers or any of their respective Affiliates 

(excluding de minimis ownership interests), (b) a creditor, supplier, employee, officer, 

director, family member, manager, or contractor of the Collateral Managers or any 

of their respective Affiliates, or (c) a person who controls (whether directly, indirectly, 

or otherwise) the Collateral Managers or any of their respective Affiliates or any 

creditor, supplier, employee, officer, director, manager, or contractor of the Collateral 

Managers or any of their respective Affiliates); 

maintain its books, records and accounts separately from any other Person; 

(vii) conduct its business in its own name; 

109

(b) 

(viii) pay its debts generally as they fall due; 

(ix) do all such things as are necessary to maintain its corporate existence and not agree 

to any dissolution; 

(x) 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, and if 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 determine; 

(xi) supply such information to each Rating Agency as it may reasonably request; 

(xii) use all reasonable efforts to maintain its ‘‘centre of main interest’’ (within the 

meaning of Council Regulation (EC) No. 1346/2000 on Insolvency Proceedings) in 

Ireland and not to have any ‘‘establishment’’ (within the meaning of Council 

Regulation (EC) No. 1346/2000 on Insolvency Proceedings) outside Ireland; and 

(xiii) use all reasonable efforts to comply with its obligations set out in the Letter of 

Undertaking. 

Restrictions on the Issuer: As more fully described in the Trust Deed, for so long as any of 

the Notes remains Outstanding, save as contemplated in the Transaction Documents the 

Issuer covenants to the holders of such Outstanding Notes that (to the extent applicable) it 

will not, without the written consent of the Trustee and Rating Agency Confirmation: 

(i) 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 right, title or interest in or to the Collateral, 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 OAT Strip 

Pledge Agreement, the Natexis Zero Coupon Notes Pledge Agreement or other 

Transaction Document and other than in respect of Synthetic Collateral or these 

Conditions; 

(ii) engage in any business other than: 

(A) acquiring, managing and holding any property, assets or rights that are capable 

of being effectively charged 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 OAT Strip Pledge Agreement, the Natexis Zero Coupon Notes Pledge 

Agreement and/or the Euroclear Pledge Agreement; 

(B) issuing and performing its obligations under the Notes; 

(C) entering into, exercising its rights and performing its obligations under or 

enforcing its rights under the Transaction Documents; or 

(D) performing any act incidental to or necessary in connection with the above; 

(iii) amend any term or condition of the Notes of any Class (save in accordance with 

these Conditions and the Trust Deed); 

(iv) agree to any amendment to any provision of or grant any waiver or consent under 

any of the Transaction Documents; 

(v) incur any indebtedness for borrowed money other than in respect of the Notes or 

any document entered into in connection with the Notes or the sale thereof, including 

in respect of a Synthetic Security in respect of which Synthetic Collateral has been 

provided or in respect of Collateral Manager Advances or as otherwise permitted 

pursuant to the Trust Deed or the Collateral Management Agreement; 

(vi) amend its constitutional documents; 

(vii) have any subsidiaries; 

110

(viii) have any employees; 

(ix) enter into any reconstruction, amalgamation, merger or consolidation; 

(x) 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 and except for dividends payable to Deutsche International Finance 

(Ireland) Limited; 

(xi) issue any shares (other than such shares as are in issue as at the Closing Date) nor 

redeem or purchase any of its issued share capital; 

(xii) otherwise than as contemplated in these Conditions, the Trust Deed, the Agency 

Agreement or, as the case may be, the Collateral Management Agreement, release 

from or terminate the appointment of the Custodian or the Account Bank under the 

Agency Agreement, the Collateral Manager or the Collateral Administrator under the 

Collateral Management Agreement or, in each case, from any executory obligation 

thereunder; or 

(xiii) enter into any lease in respect of, or own, premises; 

(xiv) enter into any material agreement or contract with any Person, unless such contract 

or agreement contains ‘‘limited recourse’’ and ‘‘non-petition’’ provisions similar to 

those set out in clause 27 (Limited Recourse and Non-Petition) of the Trust Deed and 

such Person agrees that 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; 

or 

(xv) commingle any of its assets with those of any other Person (save as provided in the 

Trust Deed and Agency Agreement). 

6. Interest 

(a) Payment Dates: 

(i) Senior Notes and Mezzanine Notes: The Senior Notes, the Mezzanine Notes and 

(subject to paragraph (ii) below) the Subordinated Notes each bear interest from the 

Closing Date and such interest will be payable semi-annually in arrear on each 

Payment Date. 

(ii) Subordinated Notes: Interest on the Subordinated Notes (‘‘Subordinated Note 

Interest’’) will be treated as accruing from day to day and will be payable on an 

available funds basis in accordance with Condition 3(c)(i) (Application of Interest 

Proceeds) on each Payment Date, and shall continue to be so payable in accordance 

with this Condition 6 (Interest) notwithstanding redemption in full of any 

Subordinated Note at its applicable Redemption Price. 

(b) Interest Accrual: 

(i) Senior Notes and Mezzanine Notes: The Senior Notes and the Mezzanine Notes bear 

interest on their principal amount outstanding from the Closing Date. Each Senior 

Note and each Mezzanine 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 (i) the day 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 (ii) the day seven 

days after the Trustee or the Registrar has notified the Noteholders of such Class of 

111

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). 

(ii) 

Subordinated Notes: Interest on the Subordinated Notes will be treated as accruing 

from day to day and will be payable on each Payment Date subject to available 

funds pursuant to the Priorities of Payment. Interest shall cease to be payable in 

respect of each Subordinated Note upon the date that all of the Collateral has been 

realised and no Interest Proceeds or Principal Proceeds remain available for 

distribution in accordance with the Priorities of Payment and no Balance remains in 

respect of the Collateral Enhancement Account. In the event that the aggregate of 

income and gains earned by the Issuer during an accounting period exceeds the costs 

and expenses accrued for that period, such excess shall accrue as additional interest 

on the Subordinated Notes but (for the avoidance of doubt) shall only be payable on 

any Payment Date following payment in full of all amounts payable pursuant to the 

Priorities of Payment on such Payment Date. 

(c) 

Deferral of Interest: 

For so long as any of the Senior Notes remains Outstanding, the Issuer shall, and shall 

only be obliged to, pay any Interest Amount payable in respect of the Class III Mezzanine 

Notes and/or the Class IV Mezzanine Notes in full on any Payment Date to the extent 

that there are Interest Proceeds or Principal Proceeds available for payment thereof in 

accordance with the Priorities of Payment. For so long as any of the Senior Notes, remain 

Outstanding, an amount of interest equal to any shortfall in payment of the Interest 

Amount due and payable in respect of the Class III Mezzanine Notes and/or the Class IV 

Mezzanine Notes (as the case may be) on any Payment Date (each such amount being 

referred to as ‘‘Deferred Interest’’) shall be deferred and shall, with effect from and 

including such Payment Date, be added to the aggregate principal amount outstanding of 

the Mezzanine Notes Outstanding and the principal amount outstanding 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 from such date. 

If at any time the Class III Mezzanine Notes are the most senior Class of Notes that are 

Outstanding at such time, no Deferred Interest shall be allowed and the non payment by 

the Issuer of the Interest Amount due and owing thereon will result in an Event of 

Default. However, for so long as any of the Class III Mezzanine Notes remains 

Outstanding, the Issuer shall, and shall only be obliged to, pay any Interest Amount 

payable in respect of the Class IV Mezzanine Notes in full on any Payment Date to the 

extent that there are Interest Proceeds or Principal Proceeds available for payment thereof 

in accordance with the Priorities of Payment. For so long as any of the Class III 

Mezzanine Notes remain Outstanding, an amount of interest equal to any shortfall in 

payment of the Interest Amount due and payable in respect of the Class IV Mezzanine 

Notes on any Payment Date (each such amount being referred to as ‘‘Deferred Interest’’) 

shall be deferred and shall, with effect from and including such Payment Date, be added 

to the aggregate principal amount outstanding of the Class IV Mezzanine Notes 

Outstanding and the principal amount outstanding 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 from such date. 

(d) 

Payment of Deferred Interest: 

Deferred Interest in respect of any Class III Mezzanine Notes and/or Class IV Mezzanine 

Notes (as the case may be) shall only become payable by the Issuer in accordance with 

paragraphs (M) and (P) of Condition 3(c)(i) (Application of Interest Proceeds) and 

paragraphs (F) and (I) of Condition 3(c)(ii) (Application of Principal Proceeds) to the 

extent that Interest Proceeds or Principal Proceeds are available to make such payment in 

accordance with the Priorities of Payment. 

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(e) 

Interest on the Rated Notes: 

(i) Rate of Interest: Subject as provided in paragraph (iii) below, the rate of interest 

from time to time in respect of the Class I Senior Notes (the ‘‘Class I Floating Rate 

of Interest’’), the Class II Senior Notes (the ‘‘Class II Floating Rate of Interest’’), the 

Class III Mezzanine Notes (the ‘‘Class III Floating Rate of Interest’’) and the Class 

IV Mezzanine Notes (the ‘‘Class IV Floating Rate of Interest’’) will be determined by 

the Collateral Administrator on the following basis: 

(A) On the second Business Day in London before the beginning of each Interest 

Accrual Period (the ‘‘Interest Determination Date’’) the Calculation Agent will 

determine the offered rate for six-month Euro deposits as at 11.00 am (Brussels 

time) on the Interest Determination Date in question and notify such rate to the 

Collateral Administrator (provided that, in respect of the first Interest Accrual 

Period, the rate shall be determined by linear interpolation with reference to sixmonth 

and nine-month Euro deposits). 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 I Floating Rate of Interest for such Interest Accrual Period 

shall be the aggregate of the Class I Margin (as defined in this Condition 

below) and the rate which so appears; the Class II Floating Rate of Interest for 

such Interest Accrual Period shall be the aggregate of the Class II Margin (as 

defined in this Condition below) and the rate which so appears; the Class III 

Floating Rate of Interest for such Interest Accrual Period shall be the aggregate 

of the Class III Margin (as defined in this Condition below) and the rate which 

so appears; the Class IV Floating Rate of Interest for such Interest Accrual 

Period shall be the aggregate of the Class IV Margin (as defined in this 

Condition below) and the rate which so appears, all as determined by the 

Calculation Agent and notified to the Collateral Administrator. 

(B) If the offered rate so appearing is replaced by the corresponding rates of more 

than one bank then paragraph (A) 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 0.00005 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 as at 11.00 am (Brussels time) on the Interest 

Determination Date in question. The Class I Floating Rate of Interest for such 

Interest Accrual Period shall be the aggregate of the Class I Margin and the 

arithmetic mean (rounded, if necessary, to the nearest one hundred-thousandth 

of a percentage point (with 0.0005 being rounded upwards)) of such quotations 

(or of such of them, being at least two, as are so provided); the Class II 


of the Class II Margin and the arithmetic mean (rounded, if necessary, to the 


rounded upwards)) of such quotations (or of such of them, being at least two, 

as are so provided); the Class III Floating Rate of Interest for such Interest 

Accrual Period shall be the aggregate of the Class III Margin and the arithmetic 

mean (rounded, if necessary, to the nearest one hundred-thousandth 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) and the Class IV 


of the Class IV Margin and the arithmetic mean (rounded, if necessary, to the 

113


rounded upwards)) of such quotations (or of such of them, being at least two, 

as are so provided). 

(C) 

(D) 

If on any Interest Determination Date one only or none of the Reference Banks 

provides such quotation, the Class I Floating Rate of Interest, the Class II 

Floating Rate of Interest, Class III Floating Rate of Interest and Class IV 

Floating Rate of Interest, respectively, for the next Interest Accrual Period shall 

be the rate per annum which the Calculation Agent determines to be either the 

arithmetic mean (rounded, if necessary, to the nearest one hundred- thousandth 

of a percentage point (with 0.0005 being rounded upwards)) of the Euro lending 

rates which major banks in the Euro-zone selected by the Calculation Agent are 

quoting, on the relevant Interest Determination Date, for loans in Euro for a 

period of six months to leading European banks plus, in the case of the Class I 

Floating Rate of Interest, the Class I Margin; plus, in the case of the Class III 

Floating Rate of Interest, the Class III Margin; plus, in the case of the Class IV 

Floating Rate of Interest, the Class IV Margin. 

Where: 

‘‘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; 

‘‘Class I Margin’’ means 0.25 per cent. per annum; 

‘‘Class II Margin’’ means 0.40 per cent. per annum; 

‘‘Class III Margin’’ means 1.45 per cent. per annum; and 

‘‘Class IV Margin’’ means 4.10 per cent. per annum. 

(ii) 

(iii) 

Determination of Floating Rate of Interest and Calculation of Interest Amount: 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 in 

London after such date, determine the Class I Floating Rate of Interest and/or the 

Class II Floating Rate of Interest and/or Class III Floating Rate of Interest and/or 

Class IV Floating Rate of Interest, as the case may be, and calculate the Interest 

Amount payable in respect of each A1,000 in principal amount outstanding of Class I 

Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes and the Class 

IV Mezzanine Notes for the relevant Interest Accrual Period. The Interest Amount in 

respect of the Class I Senior Notes, the Class II Senior Notes, the Class III 

Mezzanine Notes and the Class IV Mezzanine Notes for each Authorised 

Denomination shall be calculated by applying the Rate of Interest on the Class I 

Senior Notes, the Class II Senior Notes, the Class III Mezzanine Notes and the Class 

IV Mezzanine Notes respectively, to the principal amount outstanding of each such 

Note, multiplying the product by the actual number of days in the Interest Accrual 

Period concerned divided by 360 and rounding the resultant figure to the nearest cent 

(half a cent being rounded upwards). 

Reference Banks and Collateral Administrator: The Issuer will procure that, so long as 

any Class I Senior Note, Class II Senior Note, Class III Mezzanine Note or Class IV 

Mezzanine Note remains Outstanding: 

(A) 

a Calculation Agent shall be appointed and maintained for the purposes of 

determining the interest rate and interest amount payable in respect of the Class 

I Senior Notes and/or the Class II Senior Notes, and/or Class III Mezzanine 

Notes and/or Class IV Mezzanine Notes, as applicable; and 

114

(B) in the event that the Class I Floating Rate of Interest and/or the Class II 

Floating Rate of Interest and/or Class III Floating Rate of Interest and/or Class 

IV Floating Rate of Interest is to be calculated by Reference Banks pursuant to 

Condition 6(e)(i)(B), 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 Calculation 

Agent for the purpose of calculating interest hereunder or fails duly to establish the 

Class I Floating Rate of Interest and/or the Class II Floating Rate of Interest and/or 

Class III Floating Rate of Interest and/or Class IV Floating Rate of Interest for any 

Accrual Period or to calculate the Interest Amount on the Class I Senior Notes and/ 

or the Class II Senior Notes and/or Class III Mezzanine Notes and/or Class IV 

Mezzanine Notes, the Issuer shall (with the prior approval of the Trustee) appoint 

some other 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 Structured Combination Notes: Each Component of a Structured 

Combination Note bears interest at the same rate, or receives interest or any other amount 

by way of return in the same manner, as the Underlying Notes represented by that 

Component (and which shall calculated by the Collateral Administrator, on each 

Determination Date). 

(g) 

(h) 

(i) 

Interest on the Subordinated Notes: Subordinated Note Interest shall be payable on an 

available funds basis as provided in paragraphs (Y) and (AA) of Condition 3(c)(i) 

(Application of Interest Proceeds). The Collateral Administrator will, on each Determination 

Date, calculate in respect of the Subordinated Note Interest the Interest Amount payable 

in respect of each A1,000 in original principal amount of the Subordinated Notes for the 

relevant Interest Accrual Period. The Interest Amount payable in respect of the 

Subordinated Note Interest on each Subordinated Note on each Payment Date shall be 

determined by reference to the proportion that the principal amount outstanding of such 

Subordinated Note bears to the aggregate principal amount of the Subordinated Notes 

outstanding and, upon redemption in full thereof, by reference to that proportion 

immediately prior to such redemption. 

Publication of Floating Rates of Interest and Interest Amounts: The Calculation Agent will 

cause the Class I Floating Rate of Interest, the Class II Floating Rate of Interest, the 

Class III Floating Rate of Interest and the Class IV Floating Rate of Interest and the 

Interest Amount payable in respect of each Class of Notes for each Interest Accrual Period 

and Payment Date and any Deferred Interest in respect of the Class III Mezzanine Notes 

and Class IV Mezzanine Notes to be notified to the Principal Paying Agent, the Trustee 

and the Irish Stock Exchange as soon as possible after their determination but in no event 

later than the fourth Business Day thereafter, and the Principal Paying Agent 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 

Principal Paying Agent but in no event later than the third Business Day after such 

notification. The Interest Amounts, Payment Date and any Deferred Interest in respect of 

the Class III Mezzanine Notes and/or the Class IV Mezzanine Notes 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 Interest 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 Collateral Administrator in accordance with this Condition but no 

publication of the applicable Interest Amounts shall be made unless the Trustee so 

determines. 

Determination or Calculation by Trustee: If the Calculation Agent does not at any time for 

any reason so determine the Class I Floating Rate of Interest, the Class II Floating Rate 

of Interest, the Class III Floating Rate of Interest or the Class IV Floating Rate of 

Interest or calculate the Interest Amounts payable in respect of the Class I Senior Notes, 

115

the Class II Senior Notes the Class III Mezzanine Notes or the Class IV Mezzanine Notes 

for an Interest Accrual Period, the Trustee (or a person appointed by it for the purpose) 

may do so and such determination or calculation shall be deemed to have been made by 

the Collateral Administrator and shall be binding as 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 in reliance 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 it may make pursuant to this Condition 6(j) (Determination or 

Calculation by Trustee). 

(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 wilful default, bad faith or 

manifest error) be binding on the Issuer, the Reference Banks, the Collateral 

Administrator, the Calculation Agent, the Trustee, the Principal Paying Agent, the 

Registrar, the Paying Agents, the Transfer Agents and 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. 

7. Redemption and Purchase 

(a) Final Redemption: Save to the extent previously redeemed 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 7(a) (Final Redemption), the Rated Notes of each Class will be 

redeemed at their principal amount outstanding, the Subordinated Notes will be redeemed 

at an amount equal to the remaining Principal Proceeds to be applied towards such 

redemption pursuant to paragraph (S) of Condition 3(c)(ii) (Application of Principal 

Proceeds). Notes may not be redeemed other than in accordance with this Condition 7 

(Redemption and Purchase). 

(b) 

Optional Redemption: 

(i) 

Redemption at the Option of the Subordinated Noteholders: Subject to the provisions 

of Condition 7(b)(ii) (Conditions to Optional Redemption), the Class I Senior Notes, 

the Class II Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine 

Notes and the Subordinated Notes (including, for the avoidance of doubt, the 

relevant Components of the Structured Combination Notes) shall be redeemable by 

the Issuer, in whole but not in part, at the applicable Redemption Prices, from the 

proceeds of liquidation or realisation of the Collateral (subject to the establishment of 

a reasonable reserve (as determined by the Trustee in its discretion) following 

consultation with the Collateral Administrator for all administrative and other fees 

and expenses payable in such circumstances in accordance with the Priorities of 

Payment prior to the payment of the principal of the Class I Senior Notes, the Class 

II Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes) 

(x) on any Payment Date falling after expiry of the Non-Call Period, commencing on 

the Payment Date falling on or about 26 September 2010, or (y) upon the occurrence 

of a Relevant Tax Event on any Payment Date falling after such occurrence, in each 

case, at the request of the holders of the Subordinated Notes acting by Extraordinary 

Resolution. The Issuer shall procure that notice of such redemption, including the 

applicable Redemption Date, shall be given to the Noteholders 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 7(b)(i) (Redemption at the Option of the Subordinated Noteholders). 

116

A ‘‘Relevant Tax Event’’ shall have occurred in the event that the aggregate of the 

Gross Up Tax Amounts and Tax Charges is equal to or greater than ten per cent. of 

the aggregate interest payments on all of the Collateral Debt Obligations during any 

Due Period, where: 

(A) 

(B) 

‘‘Gross Up Tax Amounts’’ means, in relation to any portion of any payment due 

from any issuer or obligor under any Collateral Debt Obligation which, due to 

the introduction of a new, or any change in, home jurisdiction or foreign tax 

statute, treaty, regulation, rule, ruling, practice, procedure or judicial decision or 

interpretation, becomes properly subject to the imposition of home jurisdiction 

or foreign withholding tax which withholding tax is not compensated for by a 

‘‘gross-up’’ provision in the terms of the Collateral Debt Obligation, the grossup 

amount which would be required to cover any shortfall in such Due Period; 

and 

‘‘Tax Charges’’ means any taxes for which the Issuer becomes liable to any 

competent taxation authority in such Due Period which are in excess of any 

taxes known on the Closing Date to be payable by the Issuer at any time. 

(ii) Conditions to Optional Redemption: Following receipt of confirmation from the 

Principal Paying Agent of receipt of a direction from the requisite percentage of 

Subordinated Noteholders (and the Structured Combination Noteholders to the extent 

of the Subordinated Components thereof) to exercise any right of optional 

redemption pursuant to this Condition, the Collateral Administrator shall, as soon as 

practicable, and in any event not later than seven Business Days prior to the 

scheduled Redemption Date (the ‘‘Redemption Determination Date’’) calculate the 

‘‘Redemption Threshold Amount’’ which amount shall be the aggregate of the amounts 

which would be due and payable on redemption of the Notes on the scheduled 

Redemption Date pursuant to Condition 11 (Enforcement) which rank in priority to 

payments in respect of the Subordinated Notes in accordance with the Priorities of 

Payment. 

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 Collateral 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 (i)(A) the entry into 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 and in respect of which Rating Agency Confirmation 

has been received by the Trustee) 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 at least ‘‘A-1’’ (or, if no rating is available from Moody’s, 

has a long-term senior unsecured credit rating from S&P of at least ‘‘A’’, or in 

respect of which Rating Agency Confirmation has been received) and/or (B) (subject 

in each case to Rating Agency Confirmation) one or more funds or other investment 

vehicles established for the purpose of acquiring assets similar to the Portfolio, in 

each case with settlement dates on or prior to two Business Days immediately 

preceding the scheduled Redemption Date 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 

prior to 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: 

117

(A) 

(B) 

(C) 

in respect of each Collateral Debt Obligation in the Portfolio, one of the 

following: 

(i) in the case of entry into a binding agreement with a financial institution or 

funds or other investment vehicles satisfying the requirements described 

above, the purchase price payable in respect thereof; or 

(ii) otherwise: 

(I) the Market Value thereof if such Collateral Debt Obligation is to be 

sold on the Business Day of the certification of any such Expected 

Net Proceeds; or otherwise; 

(II) 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 Collateral Manager’s estimate thereof (expressed as a 

Euro amount) based upon its reasonable commercial judgment; 

the sum of the Balances of the Accounts (to the extent not payable to any 

entity other than the Issuer) provided that, for such purposes Eligible 

Investments shall only be included in the Balance of the relevant Account to the 

extent of the aggregate of the amounts to be realised from Eligible Investments 

maturing on or prior to the Redemption Date (as determined by the Collateral 

Manager based upon its reasonable commercial judgment); and 

amounts scheduled to be received under any Interest Rate Hedge Agreement 

and/or Currency Swap Agreement prior to the Redemption Date. 

Collateral Type 

Senior Secured Loans and Second Lien 

Loans with a Market Value: 

Number of Business Days Between 

Certification and Expected Sale 

(iii) 

0to2 3to5 6to15 

of 90% or more ........................................ 93% 92% 88% 

below 90% ................................................ 80% 73% 60% 

Other Collateral Debt Obligations with a 

rating of at least ‘‘B3’’ by Moody’s and 

‘‘B-’’ by S&P and a Market Value of 90% 

or more..................................................... 89% 85% 75% 

All other Collateral Obligations............... 75% 65% 45% 

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 Collateral 

Management Agreement and shall notify the Issuer, the Trustee, the Collateral 

Manager and the Principal Paying Agent, whereupon the Principal Paying Agent shall 

notify the Noteholders (in accordance with the Condition 16 (Notices)) of such 

amount. 

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 Subordinated 

Noteholders (and if applicable, Structured Combination 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 and Subordinated Note so delivered may be withdrawn without the prior 

consent of the Issuer. The Principal Paying Agent shall copy each Redemption Notice 

118

eceived to each of the Issuer, the Trustee, the Collateral Administrator and the 

Collateral Manager. In the event that the holders of the Subordinated Notes acting 

by Extraordinary Resolution deliver such Redemption Notices and Subordinated 

Notes to the Transfer Agents as provided in this paragraph (iii), the Principal Paying 

Agent shall, within no less than 15 Business Days prior to the applicable Redemption 

Date, notify the Issuer, the Trustee, the Collateral Manager and the Noteholders (in 

accordance with Condition 16 (Notices)) of such failure to exercise the option and all 

such Subordinated Notes and Structured Combination Notes and accompanying 

Redemption Notices shall be returned to such Noteholders. 

Notwithstanding the above, where the Subordinated Notes are represented by one or 

more Global Notes, the Subordinated Noteholders’ option in this Condition may be 

exercised by the holder of such Global Note representing Subordinated Notes giving 

notice to the Principal Paying Agent of the principal amount outstanding of 

Subordinated Notes in respect of which the option is exercised and presenting such 

Global Note for endorsement of exercise within the time limit specified above. 

The Collateral Administrator shall notify the Issuer, the Trustee, the Collateral 

Manager and the Noteholders upon satisfaction of any of the conditions set out in 

paragraph (ii) above and the Collateral Manager shall arrange for liquidation and/or 

realisation of the Collateral on behalf of the Issuer in accordance with the Collateral 

Management Agreement. The Issuer shall deposit, or cause to be deposited, the funds 

required for an optional redemption of the Notes in accordance with Condition 7(b) 

(Optional Redemption) 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 the Priorities 

of Payment. 

(c) 

Redemption upon Breach of Coverage Tests: 

(i) Senior Notes: If either of the Senior Coverage Tests is not met on any Determination 

Date as calculated by the Collateral Administrator and confirmed by the Collateral 

Manager, Interest Proceeds transferred to the Payment Account (including, if 

necessary, amounts transferred from the Additional Collateral Account) immediately 

prior to the related Payment Date, net of amounts payable pursuant to paragraphs 

(A) through (H) of Condition 3(c)(i) (Application of Interest Proceeds), will be used, 

in accordance with the Priorities of Payment, to redeem the Class I Senior Notes, in 

whole or in part, and following redemption thereof, to redeem the Class II Senior 

Notes in whole or in part, until each such Coverage Test is satisfied if recalculated 

following such redemption and, to the extent that either of such Coverage Tests is 

not satisfied following the payment of such Interest Proceeds, the Principal Proceeds 

transferred to the Payment Account immediately prior to the related Payment Date, 

net of amounts payable pursuant to paragraph (A) of Condition 3(c)(ii) (Application 

of Principal Proceeds), will be used to redeem the Senior Notes as provided above, 

until each such Coverage Test is satisfied, if recalculated following such redemption. 

(ii) Class III Mezzanine Notes: If either of the Class III Coverage Tests is not met on 

any Determination Date as calculated by the Collateral Administrator and confirmed 

by the Collateral Manager, Interest Proceeds transferred to the Payment Account 

(including, if necessary, amounts transferred from the Additional Collateral Account) 

immediately prior to the related Payment Date, net of amounts payable pursuant to 

paragraphs (A) to (K) of Condition 3(c)(i) (Application of Interest Proceeds), will be 

used in accordance with the Priorities of Payment, to redeem the Class I Senior 

Notes, in whole or in part, and following redemption in full thereof, to redeem the 

Class II in whole or in part, and, following redemption in full thereof, to redeem the 

Class III Mezzanine Notes, on the related Payment Date until each such Coverage 

Test is satisfied if recalculated following such redemption and, to the extent that 

either of such Class III Coverage Tests is not satisfied following the payment of such 

Interest Proceeds, the Principal Proceeds transferred to the Payment Account 

119


paragraph (A) of Condition 3(c)(ii) (Application of Principal Proceeds), will be used to 

redeem the Class I Senior Notes, the Class II Senior Notes and the Class III 

Mezzanine Notes as provided above until each such Class III Coverage Test is 

satisfied, if recalculated following such redemption. 

(iii) 

Class IV Mezzanine Notes: If either of the Class IV Coverage Tests is not met on 

any Determination Date as calculated by the Collateral Administrator and confirmed 

by the Collateral Manager, Interest Proceeds transferred to the Payment Account 

(including, if necessary, amounts transferred from the Additional Collateral Account) 


paragraphs (A) to (N) of Condition 3(c)(i) (Application of Interest Proceeds), will be 

used in accordance with the Priorities of Payment, to redeem the Class I Senior 

Notes, in whole or in part, and following redemption in full thereof, to redeem the 

Class II Senior Notes in whole or in part, and, following redemption in full thereof, 

to redeem the Class III Mezzanine Notes and, following redemption in full thereof, 

to redeem the Class IV Mezzanine Notes, in whole or in part, on the related 

Payment Date until each such Coverage Test is satisfied if recalculated following such 

redemption and, to the extent that either of such Class IV Coverage Tests is not 

satisfied following the payment of such Interest Proceeds, the Principal Proceeds 

transferred to the Payment Account immediately prior to the related Payment Date, 

net of amounts payable pursuant to paragraph (A) of Condition 3(c)(ii) (Application 

of Principal Proceeds), will be used to redeem the Class I Senior Notes, the Class II 

Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes as 

provided above until each such Class IV Coverage Test is satisfied, if recalculated 

following such redemption. 

(d) 

(e) 

Redemption upon an Effective Date Rating Event: In the event that an Effective Date 

Rating Event has occurred and is continuing on the first Business Day prior to the 

Payment Dates (and each subsequent Payment Date thereafter to the extent required) next 

following the Initial Effective Date or the Final Effective Date, Interest Proceeds and 

thereafter Principal Proceeds will be applied on such Payment Date to redeem the Class I 

Senior Notes, in whole or in part, and following redemption in full thereof, to redeem the 

Class II Senior Notes, in whole or in part, and, following redemption in full thereof, to 

redeem the Class III Mezzanine Notes, in whole or in part, and, following redemption in 

full thereof, to redeem the Class IV Mezzanine Notes, in whole or in part, until fully 

redeemed or, if earlier, until an Effective Date Rating Event is no longer continuing. 

Redemption at the Option of the Collateral Manager: The Issuer shall, on each Payment 

Date occurring on and after the end of the Non-Call Period but during the remainder of 

the Reinvestment Period, at the direction and discretion of the Collateral Manager (acting 

on behalf of the Issuer pursuant to the Collateral Management Agreement), apply any or 

all of the Principal Proceeds received in the related Due Period, in redemption of the Class 

I Senior Notes (on a pro rata basis); the Class II Senior Notes (on a pro rata basis); the 

Class III Mezzanine Notes (on a pro rata basis); and the Class IV Mezzanine Notes (on a 

pro rata basis) in whole or in part on such date in accordance with paragraph (K)(2) of 

Condition 3(c)(ii) (Application of Principal Proceeds) in accordance with the Priorities of 

Payment. 

(f) 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 received in the related Due Period other than Unscheduled Principal 

Proceeds and Sales Proceeds which the Collateral Manager at its discretion, acting on 

behalf of the Issuer, has designated for reinvestment to redeem the Class I Senior Notes, in 

whole or in part, and following redemption in full thereof, to redeem the Class II Senior 

Notes, in whole or in part, and, following redemption in full thereof, to redeem the Class 

III Mezzanine Notes, in whole or in part, and, following redemption in full thereof, to 

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(g) 

(h) 

(i) 

redeem the Class IV Mezzanine Notes, in whole or in part, and following redemption in 

full thereof, to redeem the Subordinated Notes, in each case in accordance with the 

Priorities of Payment set out in Condition 3(c)(ii) (Application of Principal Proceeds). 

Redemption upon Failure to Appoint a Replacement Collateral Manager: In the event that a 

replacement Collateral Manager has not been appointed within 90 days of receipt of notice 

of resignation of either or both of the existing Collateral Managers or notice of 

termination of such Collateral Manager by the Issuer or the Trustee, the Notes shall be 

redeemed at their applicable Redemption Prices (including the Components of the 

Structured Combination Notes), on the next following Payment Date in accordance with 

the Priorities of Payment set out in Condition 3(c)(ii) (Application of Principal Proceeds) 

subject to the payment of any prior ranking amounts and subject to the condition set out 

in the last sentence of this paragraph. The Issuer shall notify the Trustee, the Collateral 

Managers, the Collateral Administrator and the Noteholders of the occurrence of any such 

event, following which the Collateral Manager shall arrange for liquidation and/or 

realisation of the Collateral on behalf of the Issuer in accordance with the Collateral 

Management Agreement in order to procure that the Collateral is in immediately available 

funds by the applicable Redemption Date, subject to the following condition. The Issuer, 

based on the certification of the Collateral 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 (i) the entry into 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 one or more funds or other 

investment vehicles established for the purpose of acquiring assets similar to the Portfolio, 

in each case with settlement dates on or prior to two Business Days immediately preceding 

the scheduled Redemption Date and/or (ii) the liquidation proceeds of the Portfolio which 

shall be held by or on behalf of the Issuer in immediately available funds not later than 

two Business Days immediately prior to the scheduled Redemption Date, will equal or 

exceed the Redemption Price of the Rated Notes. 

Redemption: All Notes in respect of which any notice of redemption is given under this 

Condition 7 (Redemption and Purchase) 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. 

Purchase of Notes by the Issuer: 

(i) Rated Notes: The Issuer may at any time, subject to the approval of the Collateral 

Manager, purchase Class I Senior Notes, Class II Senior Notes, Class III Mezzanine 

Notes or Class IV Mezzanine Notes (but not any Structured Combination Notes 

which shall be required to be exchanged for Notes corresponding to Components of 

which they are comprised prior to any purchase thereof) in the open market or in 

privately negotiated transactions or otherwise, at a price not exceeding 100 per cent. 

of their respective principal amount outstanding plus accrued interest; provided 

however that no such Note shall be purchased unless: 

(A) (1) in the case of Class II Senior Notes, all the Class I Senior Notes have 

been redeemed in full; 

(2) in the case of Class III Mezzanine Notes, all the Class I Senior Notes and 

the Class II Senior Notes have been redeemed in full; and 

(3) in the case of Class IV Mezzanine Notes, all the Class I Senior Notes, the 

Class II Senior Notes, the Class III Mezzanine Notes, have been redeemed 

in full 

(B) after giving effect to such purchase, the Coverage Tests (save to the extent no 

longer applicable following redemption and payment in full of the Class of 

Notes to which any such tests relate) will be maintained or improved, as 

notified by the Collateral Administrator to the Trustee; 

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(C) 

(D) 

the Collateral Administrator notifies to the Trustee in writing that an amount 

sufficient to pay interest on the Class I Senior Notes, or in the event that the 

Class I Senior Notes have been redeemed in full, on the Class II Senior Notes, 

or in the event that the Class II Senior Notes have been redeemed in full, on 

the Class III Mezzanine Notes, or in the event that the Class III Mezzanine 

Notes have been redeemed in full, on the Class IV Mezzanine Notes, not so 

purchased on the next Payment Date and all amounts required to be paid on 

such Payment Date prior to such interest in accordance with the Priorities of 

Payment is standing to the credit of the Interest Account and Retained Portion 

Account; and 

the Issuer and the Trustee have received Rating Agency Confirmation in respect 

of such purchase. 

(ii) 

(iii) 

Subordinated Notes: The Issuer may at any time purchase Subordinated Notes in the 

open market or in privately negotiated transactions or otherwise provided however 

that no Subordinated Note shall be purchased unless all the Class I Senior Notes, the 

Class II Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine 

Notes have been redeemed in full. 

Conditions to Purchase: The Collateral Manager on behalf of the Issuer shall use 

either cash amounts standing to the credit of the Principal Account or the Additional 

Collateral Account on the date of purchase or may sell one or more Collateral Debt 

Obligations, Eligible Investments, Collateral Enhancement Obligations and/or 

Defaulted Equity Securities and use the Sale Proceeds thereof to acquire any Notes to 

be purchased pursuant to this Condition 7 (Redemption and Purchase), provided that 

the Collateral Manager may not sell (and the Trustee shall not be required to release) 

a Collateral Debt Obligation, Eligible Investment, Collateral Enhancement Obligation 

and/or Defaulted Equity Security pursuant to this Condition 7 (Redemption and 

Purchase) unless the Collateral Manager certifies to the Trustee that: 

(A) 

(B) 

the Sale Proceeds from the sale of such Collateral Debt Obligations, Eligible 

Investments, Collateral Enhancement Obligations and/or Defaulted Equity 

Securities (based on commitments to purchase such Collateral Debt Obligations, 

Eligible Investments, Collateral Enhancement Obligation and/or Defaulted 

Equity Securities received by the Collateral Manager on behalf of the Issuer) 

together with all or part of the amounts standing to the credit of the Principal 

Account and/or Additional Collateral Account to be applied towards such 

purchase will be sufficient to pay the purchase price of such Notes; and 

in the case of any purchase of Subordinated Notes only, the market value of 

the Collateral Debt Obligations, Eligible Investments, Collateral Enhancement 

Obligations and/or Defaulted Equity Securities to be sold in such circumstances 

(as determined by the Collateral Manager in its absolute discretion) does not 

exceed the pro rata share of all Collateral Debt Obligations, Eligible 

Investments, Collateral Enhancement Obligations and Defaulted Equity 

Securities forming part of the Collateral at such time which is allocable to the 

Subordinated Notes to be purchased (such allocation to be determined by 

reference to the percentage which the Principal amount outstanding of the 

Subordinated Notes to be purchased bear to the aggregate principal amount 

outstanding of all Subordinated Notes Outstanding immediately prior to 

purchase thereof). 

(j) Cancellation: All Notes redeemed in full or purchased in accordance with this Condition 7 

(Redemption and Purchase) will be cancelled and may not be reissued or resold. 

Cancellation of any Note represented by a Global Note required by these Conditions to be 

cancelled will be effected by a reduction in the principal amount outstanding of the 

applicable Global Note. 

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(k) 

(l) 

Notice of Partial Redemption: The Issuer shall procure that the Irish Stock Exchange is 

notified of any partial redemption of the Notes, including details of the principal amount 

outstanding of each Class of Notes Outstanding following any such partial redemption. 

For the avoidance of doubt, any partial redemption of the Notes (either within a single 

Class or among two or more Classes) pursuant to this Condition 7 (Redemption and 

Purchase) will be made on a pro rata basis. 

Redemption of the Structured Combination Notes: The Class V Structured Combination 

Notes will be redeemed with respect to the OAT Security Component, by allocation of 

OAT Strips Sale Proceeds and proceeds of any matured OAT Strips (or in the case of an 

early redemption, by delivery of the OAT Strips relating to such Component taking into 

account any previous distributions of OAT Strips Sale Proceeds); and with respect to the 

Class V Subordinated Component, by allocation of redemption payments in respect of the 

Subordinated Notes to such Component. Once the principal amount outstanding of the 

Class V Structured Combination Note has been reduced to A1.00 (pursuant to the 

redemption of the OAT Security Component, the realisation of proceeds of the OAT Strips 

or otherwise), on any applicable Payment Date thereafter all distributions received in 

respect of the Components thereof shall be distributed as interest on the Class V 

Structured Combination Note (other than the A1.00 which shall be repaid as a principal 

reimbursement at maturity of the Class V Combination Note). The Class VI Structured 

Combination Notes will be redeemed with respect to the Natexis Zero Coupon Note 

Security Component, by allocation of proceeds of matured Natexis Zero Coupon Notes (or 

in the case of an early redemption, by delivery of the Natexis Zero Coupon Notes relating 

to such Component) and with respect to the Class VI Subordinated Component, by 

allocation of redemption payments in respect of the Subordinated Notes relating to such 

Component. Once the principal amount outstanding of the Class VI Structured 

Combination Note has been reduced to A1.00 (pursuant to the redemption of the Natexis 

Zero Coupon Security Component, the realisation of proceeds of the Natexis Zero Coupon 

Notes or otherwise), on any applicable Payment Date thereafter all distributions received in 

respect of the Components thereof shall be distributed as interest on the Class VI 

Structured Combination Note (other than the A1.00 which shall be repaid as a principal 

reimbursement at maturity of the Class VI Combination Note). Notwithstanding any other 

provision of these Conditions, on the final Redemption Date of the Structured 

Combination Notes, such Notes shall be deemed to be redeemed in full by the application 

of the full amount of the redemption payments in respect of the relevant Components. 

8. Payments 

(a) Method of Payment: 

(i) 

(ii) 

On Bearer Notes: Payments of principal and interest in respect of Notes represented 

by a Global Note will be made against presentation for endorsement and, if no 

further payment falls to be made in respect of the relevant Notes, surrender of such 

Global Note to or to the order of the Principal Paying Agent or such other Paying 

Agent as shall have been notified to the relevant Noteholders for such purpose. A 

record of each payment so made will be endorsed in the appropriate schedule to the 

relevant Global Note, which endorsement will be prima facie evidence that such 

payment has been made in respect of the relevant Notes. 

On Registered Notes: Payments of principal upon final redemption in respect of each 

Note will be made against presentation and surrender (or, in the case of part 

payment only, endorsement) of the Definitive Certificate representing such Note at 

the specified office of the Registrar or any Transfer Agent by Euro cheque drawn on 

a bank in Europe. Payments of interest on each Note represented by a Definitive 

Certificate and, prior to redemption in full thereof, principal in respect of each Note 

represented by a Definitive Certificate, will be made by Euro cheque drawn on a 

bank in Europe and posted on the Business Day immediately preceding the relevant 

due date to the holder (or to the first named of joint holders) of the Note appearing 

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(b) 

(c) 

on the Register at the close of business on the fifteenth day before the relevant due 

date (the ‘‘Record Date’’) at his address shown on the register on the Record Date. 

Upon application of the holder to the specified office of the Registrar or any 

Transfer 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 the Definitive Certificate representing 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 Europe. 

Payments Subject to Fiscal Laws: 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. 

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 is 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 

and no additional payment will be payable in respect thereof. 

(d) 

(e) 

Registrar and Transfer Agents: The names of the initial Principal Paying Agent, Registrar, 

Paying Agents and Transfer Agents 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, the Registrar and any Transfer Agent and 

appoint additional or other Agents, provided that it will maintain (i) a Principal Paying 

Agent, (ii) a Registrar and (iii) Paying Agents and Transfer Agents having specified offices 

in at least two major European cities approved by the Trustee (including the City of 

Dublin for so long as the Notes of any Class are admitted to listing and trading on the 

Irish Stock Exchange and the rules of that exchange so require) and shall at all times 

procure that it shall at all times maintain a Custodian, Account Bank, Collateral Manager 

and Collateral Administrator. As a result of the implementation of the European Union 

Directive on the Taxation of Savings Income (Directive 2003/48/EC) (the ‘‘EU Savings 

Directive’’), the Issuer will also maintain a Paying Agent in a European member state that 

will not be obliged to withhold or deduct tax pursuant to that directive, or any law 

implementing or complying with, or introduced in order to comply with, such directive, in 

each case as approved by the Trustee. Notice of any change in any Agent or their specified 

offices or in the Custodian, Account Bank, Collateral Manager or Collateral Administrator 

will promptly be given to the Noteholders by the Principal Paying Agent on behalf of the 

Issuer in accordance with Condition 16 (Notices). 

Payment on the Structured Combination Notes: On each Payment Date on which payments 

of principal, interest on, redemption amounts, or other payments are made on the 

Subordinated Notes, such payments shall be allocated to the Structured Combination 

Notes in the proportion that the principal amount outstanding of the relevant 

Subordinated Component bears to the principal amount outstanding of the Subordinated 

Notes represented by such Component (including the related Components) and in 

accordance with Condition 6(f) (Interest on the Structured Combination Notes) and 

Condition 7(1) (Redemption of Structured Combination Notes). On each Payment Date 

upon which a payment of interest on the Subordinated Notes is made in accordance with 

the Priorities of Payment, the Issuer shall sell or where applicable, receive the proceeds 

from the maturity of, a portion of the OAT Strips representing the OAT Security 

Component of the Class V Structured Combination Notes. The portion of the OAT Strips 

to be sold shall be determined in accordance with the OAT Sale Formula and the Issuer 

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shall apply the proceeds thereof in or towards the redemption of the principal amount 

outstanding of the Class V Structured Combination Notes (but for the avoidance of doubt, 

such payment shall not reduce the Class V Subordinated Component). 

The Issuer shall apply all proceeds received by it in respect of any maturing OAT Strips in 

redemption of the Class V Structured Combination Notes in respect of the OAT Security Component 

on the next Payment Date following such receipt. Once the principal amount outstanding of the Class 

V Structured Combination Note has been reduced to A1.00 (pursuant to redemption of the OAT 

Security Component, the realisation of proceeds of the OAT Strips or otherwise), on any applicable 

Payment Date thereafter, all distributions received in respect of the Components shall be distributed 

as interest on the Class V Structured Combination Notes without any redemption taking place other 

than in respect of the principal amount of A1.00 which shall be repaid at maturity. 

The Issuer shall apply all proceeds received by it in respect of any maturing Natexis Zero 

Coupon Notes in redemption of the Class VI Structured Combination Notes in respect of the Natexis 

Zero Coupon Security Component on the next Payment Date following such receipt. Once the 

principal amount outstanding of the Class VI Structured Combination Note has been reduced to 

A1.00 (pursuant to the redemption of the Natexis Zero Coupon Security Component, the realisation 

of proceeds of the Natexis Zero Coupon Notes or otherwise), on any applicable Payment Date 

thereafter, all distributions received in respect of the Components shall be distributed as interest on 

the Class VI Structured Combination Notes without any redemption taking place other than in 

respect of the principal amount A1.00 which shall be repaid at maturity. 

No other payments will be made on a Structured 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 by or within Ireland, or any political 

sub-division or any authority therein or thereof having power to tax, unless such withholding or 

deduction is required by law. 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 Irish law to 

withhold or account for tax so that it would be unable to make payment of the full amount then 

due, 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 and 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 respect of such substitution or change (subject to receipt of such 

information and/or opinions as the Rating Agencies may require). 

Notwithstanding the above, if the Issuer has or will become obliged by Irish law to withhold or 

account for tax, as referred to in this Condition 9 (Taxation): 

(a) 

(b) 

(c) 

due to the connection of any Noteholder with Ireland 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 by the relevant tax authority to establish an exemption from such tax; 

or 

in respect of a payment to an individual and such withholding or deduction is required to 

be made pursuant to the EU Savings Directive or any law implementing or complying 

with, or introduced in order to conform to, the EU Savings Directive; or 

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(d) 

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 Note to another 

Transfer Agent in a member state of the European Union, 

the requirement to substitute the Issuer as the 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) 

(ii) 

(iii) 

(iv) 

(v) 

Non-payment of interest: the Issuer fails to pay any interest in respect of any Senior 

Note (if applicable) when the same becomes due and payable or, following 

redemption and payment in full of the Senior Notes, the Issuer fails to pay any 

interest on the Class III Mezzanine Notes (save for any previously deferred interest 

on such Class III Mezzanine Notes) when the same becomes due and payable or, 

following redemption and payment in full of the Class III Mezzanine Notes, the 

Issuer fails to pay any interest on the Class IV Mezzanine Notes (save for any 

previously deferred interest on such Class IV Mezzanine Notes) 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)), provided that any such failure to pay such interest continues 

for a period of three days; 

Non-payment of principal: without prejudice to Condition 3(c)(d) (Non-payment of 

Amounts) the Issuer fails to pay any principal when the same becomes due and 

payable on any Note on any Redemption Date; 

Default under Priorities of Payment: the Issuer fails on any Payment Date to disburse 

amounts available in the Payment Account in accordance with the Priorities of 

Payment, which failure (save for such failure as described in paragraphs (i) and (ii) 

above) continues for a period of five days; 

Collateral Debt Obligations: on any Measurement Date after the Final Effective Date, 

in the event that the sum of (a) the aggregate of the Principal Balances of Collateral 

Debt Obligations (other than Non-Euro Obligations), (b) in the case of Non-Euro 

Obligations, the aggregate amount in Euro (calculated using the applicable Currency 

Swap Transaction Exchange Rate) of the nominal amount of each Currency Swap 

Transaction relating to a Non-Euro Obligation; (c) the aggregate of the Balances 

standing to the credit of the Principal Account and the Additional Collateral 

Account; (d) the Euro Equivalent of the amount standing to the credit of the 

Currency Accounts, solely to the extent that such amounts are yet to be transferred 

to the Principal Account; and (e) the aggregate of the Principal Balances of the 

Eligible Investments (to the extent not included in (c) and (d) above) are less than 

100 per cent. of the aggregate principal amount outstanding of the Controlling Class 

then Outstanding; 

Breach of Other Obligations: without prejudice to Condition 3(d) (Non-payment of 

Amounts), the Issuer does not perform or comply with any other covenant, warranty 

or other agreement of the Issuer under the Notes, the Trust Deed, the Agency 

Agreement, the Depositary Agreement, the Euroclear Pledge Agreement or the 

Collateral Management 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) (Events of Default) and other than the failure to meet any 

Collateral Quality Test or Coverage Test), or any representation, warranty or 

statement of the Issuer made in the Trust Deed 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 Trustee is of the 

opinion that such default, breach or failure is materially prejudicial to the 

126

Noteholders of any Class 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 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 a winding up petition is presented in respect of or a distress 

or execution or other process is levied or enforced upon or sued out against the 

whole or any substantial part of the undertaking or assets of the Issuer and, in any 

of the foregoing cases except in relation to the appointment of a Receiver, is not 

discharged within 30 days; or the Issuer becomes or is, or could be deemed by law or 

a court to be, insolvent or bankrupt or unable to pay its debts, 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) Curing of Default: At any time after a notice of acceleration of the maturity of the Notes 

has been made following the occurrence of an Event of Default and prior to enforcement 

of the security pursuant to Condition 11 (Enforcement), the Trustee, at its discretion may 

or, if requested by an Extraordinary Resolution of the holders of the Controlling Class, 

shall (in each case, subject to being indemnified 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), rescind and 

annul the notice of acceleration under paragraph (c)(i) below or automatic acceleration 

under paragraph (c)(ii) (as the case may be) and its consequences if: 

(i) the Issuer has paid or deposited with the Trustee a sum sufficient to pay: 

(A) all overdue payments of interest and principal on, and all Deferred Interest 

payable in respect of, the Notes other than the Subordinated Notes; 

(B) all due but unpaid taxes owing by the Issuer as certified by an Authorised 

Officer of the Issuer to the Trustee; 

(C) all unpaid Administrative Expenses and Trustee Fees and Expenses up to the 

Senior Fee Cap; 

(D) any unpaid Senior Collateral Management Fee; 

(E) all amounts due and payable under any Interest Rate Hedge Agreement and 

Currency Swap Agreement; 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 that have become due solely by 

such acceleration, have been cured or waived. 

Any previous rescission and annulment of a notice of acceleration pursuant to this paragraph 

(b) shall not prevent the subsequent acceleration of the Notes if the Trustee at its discretion 

accelerates or if the Trustee is subsequently requested or directed to accelerate the Notes in 

accordance with paragraph (c)(i) below or upon subsequent automatic acceleration in accordance with 

paragraph (c)(ii) below (as the case may be). 

(c) Acceleration 

127

(d) 

(e) 

(i) 

(ii) 

If an Event of Default (other than an Event of Default pursuant to Condition 

10(a)(i) (Non-payment of interest) where the Issuer has not failed to pay interest on 

the Class I Senior Notes and other than an Event of Default pursuant to Condition 

10(a)(ii) (Non-payment of principal)) occurs and is continuing, the Trustee, at its 

discretion, may and, if any Event of Default occurs the Trustee shall, if so directed 

by an Extraordinary Resolution of the holders of the Controlling Class at such time 

(subject to being indemnified 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), give notice to the 

Issuer that all the Notes are to be immediately due and payable. 

Upon any such notice being given to the Issuer in accordance with paragraph (i) of 

this Condition 10(c) (Acceleration) all of the Notes shall immediately become due and 

repayable at their applicable Redemption Prices, provided that no such notice shall be 

required in the case of the Event of Default referred to in Condition 10(a)(vi) 

(Insolvency Proceedings), the occurrence of which shall result in automatic acceleration 

of the Notes in accordance with this Condition. 

Restriction on Acceleration of Notes: No acceleration of the Notes shall be permitted 

pursuant to this Condition by the holders of any Class of Notes other than the holders of 

the Controlling Class as provided in Condition 10(c) (Acceleration) or unless and until the 

acceleration of any other Class of Notes is simultaneous with, or occurs subsequent to, 

acceleration by the holders of such Controlling Class. 

Notification and Confirmation of No Default: The Issuer shall promptly notify the Trustee, 

the Collateral Manager and the Rating Agencies upon becoming aware of the occurrence 

of an Event of Default or Potential Event of Default. The Trust Deed contains provisions 

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 or Potential Event of Default has 

occurred and that no other matter which is required (pursuant thereto) to be brought to 

the Trustee’s attention has occurred. 

11. Enforcement 

(a) Security Becoming Enforceable: The security constituted under the Trust Deed, the 

Euroclear Pledge Agreement, the Natexis Zero Coupon Notes Pledge Agreement and the 

OAT Strips Pledge Agreement over the Collateral shall become enforceable upon an 

acceleration 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, the Euroclear Pledge Agreement, the OAT Strips Pledge Agreement and 

the Natexis Zero Coupon Notes Pledge Agreement becomes enforceable, the Trustee may 

at its discretion and without further notice institute such proceedings against the Issuer as 

it may think fit to enforce the terms of the Trust Deed, the Euroclear Pledge Agreement, 

the OAT Strips Pledge Agreement, the Natexis Zero Coupon Notes Pledge Agreement and 

the Notes and pursuant and subject to the terms of the Trust Deed, the Euroclear Pledge 

Agreement, the OAT Strips Pledge Agreement and the Natexis Zero Coupon Notes Pledge 

Agreement, realise and/or otherwise liquidate the Collateral, OAT Strip Collateral and 

Natexis Zero Coupon Collateral and/or take such action as may be permitted under 

applicable laws against any obligor in respect of the Collateral, OAT Strips Collateral and 

Natexis Zero Coupon Collateral and/or take any other action to enforce the security over 

the Collateral, OAT Strips Collateral and Natexis Zero Coupon Collateral, 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(d) (Entitlement of the Trustee and Conflicts of 

Interest)) to the effect of such action on individual Noteholders of any Class or any other 

Secured Party. 

The Trustee shall not be bound to institute any such proceedings or take any such other 

action unless it is directed by an Extraordinary Resolution of the holders of the 

Controlling Class (including the Components of a Structured Combination Note 

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corresponding to such Class) at such time, or in relation to the OAT Strips Pledge 

Agreement, unless it is directed by an Extraordinary Resolution of the holders of the Class 

V Structured Combination Notes or in relation to the Natexis Zero Coupon Notes Pledge 

Agreement, unless it is directed by an Extraordinary Resolution of the holders of the Class 

VI Structured Combination Notes; and, in each case, the Trustee is indemnified 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. Following redemption and payment in full of the Class I Senior 

Notes, the Class II Senior Notes, the Class III Mezzanine Notes and the Class IV 

Mezzanine Notes, the Trustee shall, (provided it is indemnified 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 as directed by an Extraordinary Resolution of the Subordinated Noteholders. 

The net proceeds of enforcement of the security over the Collateral (save for the net 

proceeds of enforcement of the OAT Strip Pledge Agreement which shall be paid pari 

passu and rateably only to the Class V Structured Combination Noteholders in respect of 

the OAT Security Component; and save for the net proceeds of enforcement of the Natexis 

Zero Coupon Notes Pledge Agreement, which shall be paid pari passu and rateably only to 

the Class VI Structured Combination Noteholders in respect of the Natexis Zero Coupon 

Security Component) shall be credited to the Principal Account or such other account as 

the Class of Noteholders entitled to direct the Trustee with respect to enforcement (in 

accordance with the previous paragraph) shall designate to the Trustee and the Interest 

Proceeds and Principal Proceeds so realised shall be distributed in accordance with the 

Priorities of Payment. 

(c) 

Only Trustee to Act: Only the Trustee may pursue the remedies available under the Trust 

Deed, the Euroclear Pledge Agreement, the OAT Strips Pledge Agreement and the Natexis 

Zero Coupon Notes Pledge Agreement to enforce the rights of the Noteholders or of any 

of the other Secured Parties under the Trust Deed, the Euroclear Pledge Agreement, the 

OAT Strips Pledge Agreement and the Natexis Zero Coupon Notes Pledge Agreement 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, the Euroclear Pledge Agreement, the OAT 

Strips Pledge Agreement and the Natexis Zero Coupon Notes Pledge Agreement fails or 

neglects to do so within a reasonable period 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, no Noteholder or other Transaction 

Creditor 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 Transaction Creditor and all claims 

against the Issuer to recover any sum still unpaid in respect of the Notes or the Issuer’s 

obligations to such Transaction Creditor and all claims against the Issuer in respect of 

such sums unpaid shall be extinguished. 

(d) 

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 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 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. 

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12. Prescription 

(a) Note represented by a Global Note: Claims against the Issuer in respect of principal and 

interest on the Notes while the Notes are represented by a Global Note 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 appropriate Relevant Date. 

(b) 

Note represented by a Definitive Certificate: Claims against the Issuer in respect of principal 

and interest on the Notes while the Notes are represented by a Definitive Certificate 

payable on redemption in full of the relevant Notes will become void unless presentation 

for payment is made as required by Condition 8 (Payments) within a period of five years, 

in the case of interest, and ten years, in the case of principal, from the appropriate 

Relevant Date. 

13. Replacement of Definitive Certificates 

If any Definitive Certificate 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 Definitive Certificates must be surrendered before replacements will be issued. 

14. Meetings of Noteholders, Modification, Waiver and Substitution 

(a) Meetings of Noteholders: The Trust Deed contains provisions for convening meetings of the 

Noteholders of each Class to consider matters affecting the interests of such Noteholders, 

including the sanctioning by Extraordinary Resolution of the Noteholders of a Class of a 

modification of certain of these Conditions or certain provisions of the Transaction 

Documents. Meetings of the Noteholders of a Class may be convened by two or more 

Noteholders of such Class holding not less than 10 per cent. in principal amount 

outstanding of the Notes of that Class Outstanding. The quorum for any meeting 

convened to consider an Extraordinary Resolution of the Noteholders of such Class will be 

two or more persons holding or representing greater than 50 per cent. in principal amount 

outstanding of the Notes of such Class Outstanding, or at any adjourned meeting two or 

more persons holding or representing Notes of such Class whatever the principal amount 

outstanding of the Notes Outstanding held or represented. 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 A1,000 of principal amount outstanding of Notes for 

which the relevant Global Note may be exchanged. No proposal to sanction, amongst 

other things: 

(i) 

(ii) 

(iii) 

(iv) 

the exchange or substitution for the Notes of the relevant Class, or the conversion of 

the Notes of the relevant Class into, shares, bonds or other obligations or securities 

of the Issuer or (except as provided in Condition 14(c) (Substitution)) any other 

entity; 

the modification of any provision relating to the timing and/or circumstances of 

redemption of the Notes of the relevant Class at maturity or otherwise (including the 

circumstances in which the maturity of such Notes may be accelerated); 

the modification of the timing and/or determination of the amount of interest, 

principal or other amounts payable in respect of the Notes of the relevant Class from 

time to time; 

the adjustment of the principal amount outstanding of the Notes Outstanding of the 

relevant Class other than in connection with a further issue of Notes pursuant to 

Condition 17 (Further Issues); 

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(v) a change in the currency of payment of the Notes of the relevant Class or any other 

amounts payable under the Priorities of Payment (subject as provided in the 

Collateral Management Agreement in connection with the appointment of a successor 

Collateral Manager); 

(vi) any change in the Priorities of Payment or in the calculation or determination of any 

amounts payable thereunder including, without limitation, the Collateral Management 

Fees (subject as provided in the Collateral Management Agreement in connection 

with the appointment of a successor Collateral Manager); 

(vii) the modification of the provisions concerning the quorum required at any meeting of 

Noteholders of the relevant Class or the majority 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 outstanding of the Notes of 

any Class Outstanding; 

(viii) the modification of any provision relating to the security over the Collateral 

constituted by the Trust Deed and the Euroclear Pledge Agreement, except as 

contemplated by these Conditions, the Trust Deed and the Euroclear Pledge 

Agreement,; and 

(ix) any modification of this Condition 14(a) (Meetings of Noteholders), 

shall be effective unless approved by each Class of Notes Outstanding acting by Extraordinary 

Resolution (including, in each case, the Components of a Structured Combination Note corresponding 

to such Class). 

The Trust Deed does not contain any provisions requiring higher quorums in any circumstances. 

Any Extraordinary Resolution of the Noteholders of a Class duly passed shall be binding on all 

Noteholders of such Class (whether or not they were present at the meeting at which such resolution 

was passed). 

For so long as any Notes are admitted to listing and trading on the Irish Stock Exchange, the 

Issuer will notify (or procure the notification of) the Irish Stock Exchange of any material 

modifications to the Trust Deed. 

(b) 

Modification, Supplement and Waiver: The Trust Deed and the Collateral Management 

Agreement both provide that, without the consent of the Noteholders (save as provided 

below), the Issuer may amend, modify, supplement and/or waive the relevant provisions of 

the Trust Deed and/or the Collateral Management Agreement and/or any other 

Transaction Documents (subject to the consent of the other parties thereto)(as applicable), 

in each case, subject to the prior consent of the Trustee, for any of the following purposes: 

(i) 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 Collateral 

Management Agreement (as applicable) conferred upon the Issuer; 

(ii) to charge, convey, transfer, assign, mortgage or pledge any property to or with the 

Trustee; 

(iii) to correct or amplify the description of any property at any time subject to the 

security of the Trust Deed, the Euroclear Pledge Agreement, the OAT Strips Pledge 

Agreement or the Natexis Zero Coupon Notes 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, the Euroclear Pledge Agreement, the OAT Strips 

Pledge Agreement or the Natexis Zero Coupon Notes Pledge Agreement (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, the Euroclear Pledge 

Agreement, the OAT Strips Pledge Agreement or the Natexis Zero Coupon Notes 

Pledge Agreement any additional property; 

(iv) 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 

131

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; 

(v) 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 to the restrictions 

on and procedures for resales and other transfers of Notes as shall be necessary or 

advisable; 

(vi) to make such changes as shall be necessary or advisable in order for the Notes to be 

(or to remain) admitted to listing and trading on the Irish Stock Exchange or any 

other exchange; 

(vii) save as contemplated pursuant to paragraph (c) (Substitution) below, to take any 

action advisable to prevent the Issuer from becoming subject to withholding or other 

taxes, fees or assessments; 

(viii) to take any action advisable to prevent the Issuer from being treated as resident in 

France for tax purposes or having a permanent establishment in France for tax 

purposes; 

(ix) to take any action advisable to prevent the Issuer from being subject to French VAT 

in respect of Collateral Management Fees; 

(x) 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 the United States federal, 

state or local income tax on a net income basis; 

(xi) subject to the consent of the Class I Senior Noteholders acting by Ordinary 

Resolution and subject to Rating Agency Confirmation, to enter into any additional 

agreements not expressly prohibited by the Trust Deed or the Collateral Management 

Agreement (as applicable) which is, in the opinion of the Trustee, not materially 

prejudicial to the interests of the Noteholders of any Class; 

(xii) to modify any of the Collateral Quality Tests, the Portfolio Profile Tests or the 

Coverage Tests to correspond with changes in the guidelines, methodology or 

standards established by any applicable Rating Agencies, subject to receipt of Rating 

Agency Confirmation and the consent of the Class I Senior Noteholders acting by 

Ordinary Resolution which is, in the opinion of the Trustee, not materially prejudicial 

to the interests of the Noteholders of any Class; 

(xiii) to make any other modification of any of the provisions of the Trust Deed, the 

Collateral 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; and 

(xiv) to make any other modification (save as otherwise provided in the Trust Deed the 

Collateral 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, provided that the Trustee shall be entitled to consider as a relevant 

factor receipt of a Rating Agency Confirmation in forming its opinion as to whether 

such modification, waiver or authorisation will be materially prejudicial to the 

interests of the Noteholders of any Class, and provided further that the Issuer has 

notified the Controlling Class pursuant to Condition 16 (Notices) of and has not 

received an objection to such proposed modification, waiver or authorisation of any 

breach or proposed breach from the holders of a majority in principal amount 

outstanding of the Notes of the Controlling Class within 30 days of such notification. 

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Any such modification, authorisation or waiver shall be binding on all Noteholders 

and shall be subject to Rating Agency Confirmation and shall be notified to the 

Noteholders as soon as practicable in accordance with Condition 16 (Notices). 

provided that the Trustee shall not be obliged to agree to such modification, waiver or 

authorisation within 21 calendar days of the receipt of any request to do so and may, in 

connection with such request, procure such professional assistance, including legal opinions, 

from such professional advisers as it may think fit, the cost of which shall be treated as Trustee 

Fees and Expenses. 

(c) 

(d) 

Substitution: The Trust Deed contains provisions permitting the Trustee to agree, subject to 

such amendment of the Trust Deed and, for so long as any of the Notes are admitted to 

listing and trading on the Irish Stock Exchange, compliance with the rules of the Irish 

Stock Exchange (including, without limitation, the provision of notice of such substitution 

of the Issuer to the Irish Stock Exchange and the preparation of a supplemental 

prospectus in accordance with the rules of the Irish Stock Exchange), and such other 

conditions as the Trustee may require, but 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 pursuant to Condition 9 (Taxation) set forth above. 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 (on the basis of such information 

and/or opinions as the Rating Agencies 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 Condition 14(c) (Substitution) 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 (on the basis of such information and/or opinions 

as the Rating Agencies may require), 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 pursuant to Condition 9 (Taxation) set forth above is fully 

effective and complies with such other requirements which are in the interests of the 

Noteholders as it may reasonably direct. 

The Trustee shall not be obliged to agree to such change of the place of residence or 

substitution of the Issuer within 21 calendar days of the receipt of any request to do so 

and may, in connection with such request, procure such professional assistance, including 

legal opinions, from such professional advisers as it may think fit, the cost of which shall 

be treated as Trustee Fees and Expenses. 

If, pursuant to this Condition 14(c) (Substitution), either (i) another company is substituted 

in place of the Issuer or any previously substituted company or (ii) the residence of the 

Issuer is changed, then references to ‘‘Irish’’ and ‘‘Ireland’’ in Condition 9 (Taxation) shall 

also be deemed to include references to the jurisdiction in which the company that is being 

substituted for the Issuer (or any previously substituted company) is incorporated, 

domiciled or resident for tax purposes and to any jurisdiction to which the residence of the 

Issuer is changed. 

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). 

133

Except where expressly provided otherwise, where in the opinion of the Trustee there is a 

conflict between the interests of different Classes of Noteholders, the Trustee shall give priority to the 

interests of the holders of the Controlling Class, whose interests shall prevail and shall act in 

accordance with the directions of such Noteholders. 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 (i) 

the Class II Senior Noteholders over the Class III Mezzanine Noteholders, the Class IV Mezzanine 

Noteholders and the Subordinated Noteholders and (ii) the Class III Mezzanine Noteholders over the 

Class IV Mezzanine Noteholders and the Subordinated Noteholders and (iii) the Class IV Mezzanine 

Noteholders over the 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 other Class 

given priority as described in this paragraph), each representing less than the majority by principal 

amount outstanding 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 amount of Notes 

Outstanding of such Class. The Trustee shall not be obliged to consider the interests of the holders of 

any other Class of Notes. 

For this purpose, the holders of the Structured Combination Notes shall not be deemed to have 

an interest except to the extent of each of the Components of such Notes of a Class. To the extent of 

the Subordinated Components of the Structured Combination Notes, the Trustee shall have no regard 

to the interests of the holders of the Structured Combination Notes except to the extent of each of 

the Components of such Class of Notes. 


provisions of the Trust Deed relating to the OAT Strip Collateral, the Trustee shall have regard to 

the interests of the holders of the Class V Structured Combination Notes only. 


Agreement and the provisions of the Trust Deed relating to the Natexis Zero Coupon Collateral, the 

Trustee shall have regard for the interests of the holders of the Class VI Structured Combination 

Notes only. 

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 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, the Trustee is not under any such obligation under the Trust Deed) 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 Collateral 

Manager or the Collateral Administrator of any of their duties under the Collateral 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 the request by the Collateral Manager to release any of the Collateral 

from time to time. 

For so long as the Notes are represented by a Global Note, in considering the interests of 

Noteholders while such Global Note is held on behalf of a clearing system, the Trustee may have 

regard to and shall be entitled (but not bound) to rely on 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 the Global Note and may consider such interests as if such account 

holders were the holders of such Global Note. 

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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 admitted to listing and trading on the Irish Stock Exchange and the rules of the Irish 

Stock Exchange so require) shall be sent to the Irish Paying and Transfer Agent at its registered 

office with a copy of such notice in final form sent to the Company Announcement Office of the 

Irish Stock Exchange no later than the day of dispatch. 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. Notwithstanding the foregoing, for so 

long as any Notes are represented by a Global Note and such Global Note 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 these Conditions provided that such notice is also published in a daily 

newspaper of general circulation in Ireland (which is expected to be the Irish Times) for so long as 

the Notes of any Class are admitted to listing and trading on the Irish Stock Exchange and such 

publication is required by the rules of the Irish Stock Exchange. 

17. Further Issues 

The Issuer may from time to time without consent of the Noteholders (save the prior written 

consent of Noteholders representing not less than 50 per cent. of the aggregate principal amount of 

Notes of the Controlling Class) and by written notice to the Trustee, create and issue further 

securities having the same terms and conditions as the Class I Senior Notes, the Class II Senior 

Notes, the Class III Mezzanine Notes, the Class IV Mezzanine Notes, the Class V Structured 

Combination Notes, the Class VI Structured Combination Notes and/or the Subordinated Notes in all 

respects (or in all respects except for the first payment of interest thereon) which shall be consolidated 

and form a single series with the Outstanding Notes of such Class, and may use the proceeds of sale 

thereof to purchase additional Collateral Debt Obligations, provided the following conditions are met: 

(a) the terms of the Notes issued are identical to the terms of previously issued Notes of the 

Class of which such Notes are a part (save for the first payment of interest on them); 

(b) none of the ratings of any of the Rated Notes have decreased or been withdrawn since the 

Closing Date and the Issuer and the Trustee receive Rating Agency Confirmation in 

respect of such additional issuance; 

(c) any such further issue of Notes does not result in a breach by the Issuer of the laws and 

regulations (including, without limitation, the banking and securities laws and regulations) 

of Ireland; and 

(d) the Trustee has been fully indemnified and/or secured to its satisfaction in respect of its 

fees, costs and expenses in respect of any such further issue. 

References in these Conditions to the ‘‘Notes’’ include (unless the context requires otherwise) 

any other securities issued pursuant to this Condition and forming a single series with the Notes. Any 

further securities forming a single series with Notes constituted by the Trust Deed or any deed 

supplemental to it shall, and any other securities may (with the consent of the Trustee), be 

constituted by a deed supplemental to the Trust Deed. 

18. Structured Combination Notes 

Except as otherwise expressly provided in these Conditions, to the extent of the Subordinated 

Components of the Structured Combination Notes, such Notes will be treated as Subordinated Notes 

represented by such Components for the purposes of requests, demands, authorisations, directions, 

notices, consents, waivers or other actions. The Structured Combination Noteholders shall be entitled 

to vote in respect of the Subordinated Notes related to such Component of the Structured 

135

Combination Notes, in the proportion that such Component bears to the principal amount 

outstanding of the related Subordinated Notes. 

19. Governing Law 

(a) Governing Law: The Trust Deed and each Class of Notes 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 at 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. 

20. Third Party Rights 

No person shall have any rights to enforce any term or condition of the Notes under the 

Contracts (Rights of Third Parties) Act 1999 but this does not effect any right or remedy of a third 

party which exists or is available apart from under that Act. 

136

USE OF PROCEEDS 

The net proceeds from the issuance of the Notes on the Closing Date after payment of certain 

fees and expenses payable on the Closing Date (as set forth in the Subscription Agreement) are 

expected to be approximately A300,000,000. Such proceeds will be applied by the Issuer as follows: (a) 

in payment of all amounts due and payable in connection with the acquisition of certain Collateral 

Debt Obligations purchased by the Issuer on or about the Closing Date in the amount of 

approximately A200,000,000, (b) in payment of the costs of entry (if any) into the Interest Rate Hedge 

Transactions and the Currency Swap Transactions to be entered into on the Closing Date, (c) in 

payment of A195,000 into the Expense Reserve Account, (d) in payment of all amounts due and 

payable in connection with the acquisition of OAT Strips comprising the OAT Security Component 

of the Class V Structured Combination Notes (e) in payment of all amounts due and payable in 

connection with the acquisition of Natexis Zero Coupon Notes comprising the Natexis Zero Coupon 

Security Component of the Class VI Structured Combination Notes and (f) any proceeds remaining, 

in payment into the Additional Collateral Account for application towards the purchase of Additional 

Collateral Debt Obligations from time to time. The Lead Manager’s and Joint Lead Managers’ 

underwriting and placement fees and expenses will be deducted from the gross proceeds of the issue 

of the Notes. See ‘‘Subscription and Sale’’ below. 

137

FORM OF THE NOTES 

References below to Notes and to the Definitive Certificates representing such Notes are to each 

respective Class of Notes. 

1. Initial Issue of Notes 

The Notes of each Class sold in reliance on Regulation S under the Securities Act will be 

represented on issue by permanent global notes in bearer form of such Class, without interest 

coupons or principal receipts attached (each, a ‘‘Regulation S Global Note’’). The Regulation S Global 

Notes will be deposited on or about the Closing Date with the Depositary pursuant to the Depositary 

Agreement and, on the basis of the depositary arrangements described below, will be treated as being 

issued in registered form for U.S. federal income tax purposes. Beneficial interests in a Regulation S 

Global Note may be held only through, and transfers thereof may only be effected through, 

Euroclear or Clearstream, Luxembourg at any time. Except in limited circumstances, owners of 

beneficial interests in the Regulation S Global Notes will not be entitled to receive physical delivery 

of Regulation S Definitive Certificates (see 2. ‘‘Exchange for Definitive Certificates’’). Beneficial 

interests in a Regulation S Global Note may not be held by 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 Note, the purchaser thereof will be deemed to represent, amongst other things, that it is a 

QIB/QP and that, if in the future it determines to transfer such beneficial interest, it will transfer such 

interest in accordance with the procedures and restrictions contained in the Trust Deed. See ‘‘Transfer 

Restrictions’’. 

The Notes of each Class sold in reliance on Rule 144A under the Securities Act will be 

represented by permanent global notes in bearer form of such Class, without interest coupons or 

principal receipts attached (each, a ‘‘Rule 144A Global Note’’ and, together with the Regulation S 

Global Notes referred to herein, the ‘‘Global Notes’’). The Rule 144A Global Notes will be deposited 

on or about the Closing Date with the Depositary pursuant to the Depositary Agreement and, on the 

basis of the depositary arrangements described below, will be treated as being issued in registered 

form for U.S. federal income tax purposes. Beneficial interests in a Rule 144A Global Note may be 

held only through, and transfers thereof may only be effected through, Euroclear or Clearstream, 

Luxembourg at any time. Except in limited circumstances, owners of beneficial interests in the Rule 

144A Global Notes will not be entitled to receive physical delivery of Rule 144A Definitive 

Certificates (see 2. ‘‘Exchange for Definitive Certificates’’). By acquisition of a beneficial interest in a 

Rule 144A Global Note, the purchaser thereof will be deemed to represent, amongst other things, 

that it is a QIB/QP and that, if in the future it determines to transfer such beneficial interest, it will 

transfer such interest in accordance with the procedures and restrictions contained in the Trust Deed. 

See ‘‘Transfer Restrictions’’. 

Initial Issue of Certificated Depositary Interests 

It is anticipated that the Depositary will (i) issue a certificated depositary interest (each, a 

‘‘CDI’’) in respect of each Regulation S Global Note to HSBC Bank plc as common depositary (the 

‘‘Common Depositary’’) for Euroclear Bank S.A./N.V., as operator of the Euroclear System 

(‘‘Euroclear’’) and Clearstream Banking, société anonyme (‘‘Clearstream, Luxembourg’’) and their 

respective participants and (ii) issue a CDI in respect of each Rule 144A Global Note to HSBC Bank 

plc as Common Depositary for Euroclear and Clearstream, Luxembourg and their respective 

participants. Each of Euroclear and Clearstream, Luxembourg will record the beneficial interests in 

the CDIs representing the Regulation S Global Notes and the Rule 144A Global Notes, as the case 

may be (‘‘Book-Entry Interests’’). Book-Entry Interests in such CDIs will be shown on, and transfers 

thereof will be effected only through, records maintained in book-entry form by Euroclear and/or 

Clearstream, Luxembourg, and their respective participants. See ‘‘Book-Entry Clearance Procedures 

and Certain Relevant Provisions of the Depositary Agreement’’. Except in the limited circumstances 

described under 2.– ‘‘Exchange for Definitive Certificates’’ below, Notes in definitive fully registered 

form (each, a ‘‘Definitive Certificate’’) will not be issued in exchange for beneficial interests in the 

Global Notes. 

138

Restrictions on Transfer 

Beneficial interests in Global Notes will be subject to certain restrictions on transfer set forth 

therein and in the Trust Deed and, in the case of Rule 144A Global Notes, as set forth in Rule 144A 

and the Global Notes will bear the applicable legends regarding the restrictions set forth under 

‘‘Transfer Restrictions’’. A beneficial interest in a Regulation S Global Note may be transferred to a 

person who takes delivery in the form of an interest in a Rule 144A Global Note in denominations 

greater than or equal to the minimum denominations applicable to interests in such Rule 144A 

Global Note only upon receipt by the Trustee of a written certification (in the form provided in the 

Trust Deed) to the effect that the transferee is a qualified institutional buyer within the meaning of 

Rule 144A in a transaction meeting the requirements of Rule 144A, is a qualified purchaser within 

the meaning of and for purposes of Section 3(c)(7) of the Investment Company Act and in 

accordance with any applicable securities laws of any state of the United States or any other 

jurisdiction. Beneficial interests in the Rule 144A Global Notes may be transferred to a person who 

takes delivery in the form of an interest in a Regulation S Global Note only upon receipt by the 

Trustee of a written certification (in the form provided in the Trust Deed) 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. 

Any beneficial interest in a Regulation S Global Note that is transferred to a person who takes 

delivery in the form of an interest in a Rule 144A Global Note will, upon transfer, cease to be an 

interest in such Regulation S Global Note and become an interest in the Rule 144A Global Note 

and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable 

to beneficial interests in a Rule 144A Global Note for as long as it remains such an interest. Any 

beneficial interest in a Rule 144A Global Note that is transferred to a person who takes delivery in 

the form of an interest in a Regulation S Global Note will, upon transfer, cease to be an interest in a 

Rule 144A Global Note and become an interest in the Regulation S Global Note and, accordingly, 

will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial 

interests in a Regulation S Global Note 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 Trustee 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 

Notes will not be entitled to receive physical delivery of certificated Notes. 

2. Exchange for Definitive Certificates 

2.1 Exchange 

Each Global Note will be exchangeable, free of charge to the holder, on or after its Exchange 

Date (as defined below), in whole but not in part, for Notes in definitive registered form (Definitive 

Certificates) if: 

(a) 

(b) 

either Euroclear or 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, statute or otherwise) or announces its intention permanently to cease 

business or does in fact do so; or 

if the Depositary is at any time unwilling or unable to continue as Depositary and a 

successor Depositary is not appointed by the Issuer with the prior written consent of the 

Trustee within 90 days of the current Depositary notifying the Issuer and the Trustee of 

such unwillingness or inability. 

The Registrar will not register the transfer of, or exchange of interests in, a Global Note for 

Definitive Certificates for a period of 15 calendar days ending on the date for any payment of 

principal or interest in respect of the Notes. 

If only one of the Global Notes (the ‘‘Exchanged Global Note’’) 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 

139

interests in the Exchanged Global Note and, on the other hand, persons wishing to purchase 

beneficial interests in the other Global Note. 

‘‘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 and any Transfer Agent is located. 

2.2 Delivery 

In such circumstances, the relevant Global Note 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 for completion, authentication and dispatch 

to the relevant Noteholders. A person having an interest in a Global Note must provide the Registrar 

with (a) a written order containing instructions and such other information as the Issuer and the 

Registrar may require to complete, execute and deliver such Notes and (b) in the case of a Rule 

144A Global Note 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 

a Rule 144A Global Note shall bear the legends applicable to transfers pursuant to Rule 144A, as set 

out under ‘‘Transfer Restrictions’’. 

2.3 Legends 

The holder of a Definitive Certificate may transfer the Notes represented thereby in whole or in 

part in the applicable Minimum Denomination by surrendering it at the specified office of the 

Registrar or any Transfer Agent, together with the completed form of transfer thereon. Upon the 

transfer, exchange or replacement of a Definitive Certificate bearing the legend referred to under 

‘‘Transfer Restrictions’’, or upon specific request for removal of the legend 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 forth therein are required to ensure compliance 

with the provisions of the Securities Act and the Investment Company Act. 

3. Exchange of Structured Combination Notes 

So long as a Structured Combination Note remains Outstanding, exchanges of a Structured 

Combination Note, in whole or in part, for the Classes represented by its Components may be made, 

and shall only be made, as follows: 

(a) A holder of a beneficial interest in a Structured Combination Note represented by a 

Regulation S Global Note or Rule 144A Global Note may exchange such interest for (A) 

interests in the Regulation S or Rule 144A (as the case may be) Global Notes of the 

Subordinated Notes equal to the relevant Subordinated Component of such Structured 

Combination Note and (B) (i) OAT Strips in an amount equal to that secured under the 

OAT Security Component of such Structured Combination Note, in the case of a Class V 

Structured Combination Note or (ii) Natexis Zero Coupon Notes in an amount equal to 

that secured under the Natexis Zero Coupon Security Component of such Structured 

Combination Note, in the case of a Class VI Structured Combination Note, by delivering 

to any Transfer Agent and the Custodian and Principal Paying Agent instructions to so 

exchange the interest. Upon receipt by the Issuer, the Principal Paying Agent and the 

Custodian and the Transfer Agent of exchange instructions in a certificate in the form 

specified in the Trust Deed given by the holder of such beneficial interest, the Transfer 

Agent shall cause the principal amount of the Regulation S or Rule 144A (as the case may 

be) Global Note representing the Structured Combination Notes to be reduced by the 

principal amount exchanged (and the holder’s Euroclear or Clearstream, Luxembourg 

account to be debited accordingly) and each Regulation S or Rule 144A (as the case may 

140

(b) 

(c) 

(d) 

be) Global Note representing the Exchange Class to be increased by the principal amount 

of the related Component exchanged (and the holder’s Euroclear or Clearstream, 

Luxembourg account to be credited accordingly). 

A holder of a beneficial interest in a Structured Combination Note represented by a 

Definitive Certificate may exchange such interest in whole (but not in part) for interests in 

the related Exchange Class and Underlying Notes, as described in (a) and (b) above by 

delivering to any Transfer Agent such holder’s Definitive Certificate properly endorsed for 

such exchange and in addition, delivering to the Custodian and Principal Paying Agent 

exchange instructions in a certificate in the form specified in the Trust Deed (the form of 

which certificate is available at the office of any Transfer Agent) given by the holder of 

such Definitive Certificate. Upon receipt thereof, the Registrar shall (A) cancel such 

Definitive Certificate, (B) authenticate and deliver a Definitive Certificate of Subordinated 

Notes in the same principal amount as the Subordinated Component of such Structured 

Combination Note, registered in the same name as the Definitive Certificate surrendered 

for exchange (such delivery to be by mail, courier or to take place in person as determined 

by the Noteholder or the Issuer (and acceptable to the Noteholder)), (C) cause the 

principal amount of the Structured Combination Notes (and its respective Components) to 

be reduced in the Register by the principal amount exchanged; and (D) cause the principal 

amount of the Subordinated Notes in the Register to be increased in the same principal 

amount as the Subordinated Component of such Structured Combination Note exchanged. 

The exchange of OAT Strips or Natexis Zero Coupon Notes, as the case may be, for the 

relevant Component(s) of the Structured Combination Notes shall be made in accordance 

with procedures set out in the Agency Agreement. 

If any exchange pursuant to this paragraph 3(b) (Exchange of Structured Combination 

Notes) 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. 

Any exchange of an interest in a Structured Combination Note for interests in the 

Subordinated Notes shall be subject to the interests in the Subordinated Notes being equal 

to denominations of such Exchange Classes of the applicable Minimum Denomination and 

integral multiples of the applicable Authorised Denomination thereafter. 

141

BOOK-ENTRY CLEARANCE PROCEDURES AND CERTAIN RELEVANT 

PROVISIONS OF THE DEPOSITARY AGREEMENT 

The information set out below has been obtained from sources that the Issuer believes to be reliable 

and the Issuer accepts responsibility for correctly reproducing this information, 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 reinterpretation of the rules, regulations and procedures of 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 Registrar, the Trustee, the Lead Manager, the Joint Lead Managers 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. 

Euroclear and Clearstream, Luxembourg 

Custodial and depositary links have been established between Euroclear and Clearstream, 

Luxembourg to facilitate the initial issue of the Notes and cross-market transfers of the CDIs 

associated with secondary market trading. (See ‘‘Settlement and Transfer of Interests in CDIs’’ 

below). 

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 world-wide 

financial institutions including underwriters, securities brokers and dealers, banks, trust companies and 

clearing corporations. Investors may hold their interests in such CDIs 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. 

Distributions of payments with respect to interests in the CDIs, held through Euroclear or 

Clearstream, Luxembourg will be credited, to the extent received by the Depositary, to the cash 

accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant 

system’s rules and procedures. 

The laws of some U.S. states require that certain persons take physical delivery of securities in 

certificated form. Consequently, the ability to transfer beneficial interests in a CDI to such persons 

may be limited. 

As Euroclear and Clearstream, Luxembourg act on behalf of their respective accountholders 

only, who in turn may act on behalf of their respective clients, the ability of beneficial owners who 

are not accountholders with Euroclear or Clearstream, Luxembourg to pledge interests in the CDIs to 

persons or entities that are not accountholders with Euroclear or Clearstream, Luxembourg, or 

otherwise take action in respect of interests in the CDIs, may be limited. 

Interests in the CDIs have not been accepted for clearance through the Depository Trust 

Company. 

142

Book-Entry Ownership 

Each Regulation S CDI and each Rule 144A CDI will have an ISIN and a Common Code and 

will be registered in the name of HSBC Issuer Services Common Depositary Nominee UK Limited as 

nominee for, and deposited with HSBC Bank plc as common depositary on behalf of, Euroclear and 

Clearstream, Luxembourg. 

Payments on Global Notes 

Payments of any amounts owing in respect of the Global Notes will be made by the Issuer, in 

euro, to the Depositary. The Depositary will, in turn, arrange for payments of such amounts to be 

made to the common depositary for Euroclear or Clearstream, Luxembourg, or its nominee, which 

will distribute such payments to Participants who hold interests in the CDIs in accordance with their 

procedures. 

Under the terms of the Trust Deed, the Issuer and the Trustee will treat the registered holder of 

the CDIs (being the common depositary for Euroclear or Clearstream, Luxembourg (or its nominee)) 

as the owner thereof for the purposes of receiving payments and for all other purposes. Consequently, 

none of the Issuer, the Trustee or any agent of the Issuer or the Trustee has or will have any 

responsibility or liability for: 

(a) 

(b) 

any aspect of the records of Euroclear or Clearstream, Luxembourg or any Participant or 

Indirect Participant relating to or payments made on account of an ownership interest in a 

CDI (a ‘‘Book-Entry Interest’’) or for maintaining, supervising or reviewing any of the 

records of Euroclear or Clearstream, Luxembourg or any Participant or Indirect 

Participant relating to or payments made on account of a Book-Entry Interest; or 

Euroclear or Clearstream, Luxembourg or any Participant or Indirect Participant. 

The Trustee is entitled to rely on any certificate or other document issued by any Clearing 

System for determining the identity of the several persons who are for the time being the beneficial 

holders of any Class of Notes. 

Payments by Participants to owners of Book-Entry Interests in the CDIs held through these 

Participants are the responsibility of such Participants, as is now the case with securities held for the 

accounts of customers registered in ‘‘street name’’. 

Settlement and Transfer of Interests in CDIs 

Subject to the rules and procedures of each applicable Clearing System, purchases of interests in 

CDIs held within a Clearing System must be made by or through Direct Participants, which will 

receive a credit for such interests in CDIs on the Clearing System’s records. The ownership interest of 

each actual purchaser of each such interest in a CDI (the ‘‘Beneficial Owner’’) will in turn to be 

recorded on the Direct 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 or Indirect Participant through which such Beneficial Owner entered 

into the transaction. Transfers of ownership interests in CDIs 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 CDIs, 

unless, and, until interests in any CDI held within a Clearing System is exchanged for Definitive 

Certificates. 

No Clearing System has knowledge of the actual Beneficial Owners of the CDIs held within 

such Clearing Systems and their records will reflect only the identity of the Direct Participants to 

whose accounts such CDIs 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. 

143

Book-Entry Interests owned through Euroclear and Clearstream, Luxembourg accounts will 

follow the settlement procedures applicable to conventional eurobonds in registered form. Book-Entry 

Interests will be credited to the securities custody accounts of Euroclear and Clearstream, 

Luxembourg holders on the business day following the settlement date against payment for value on 

the settlement date. 

Initial Settlement 

Upon the issuance of the Global Notes by the Issuer and the issuance of the CDIs by the 

Depositary, Euroclear and Clearstream, Luxembourg will credit the respective principal amounts of 

the individual beneficial interests in the CDIs to the relevant accountholder(s), as notified by or on 

behalf of the Lead Manager or the Joint Lead Managers. Ownership of beneficial interests in the 

CDIs will be limited to persons who maintain accounts with Euroclear and Clearstream, Luxembourg 

or persons who hold interests through such persons. Ownership of beneficial interests in the CDIs will 

be shown on, and the transfer of such interests will be effected only through, records maintained by 

Euroclear and Clearstream, Luxembourg and in accordance with the applicable procedures of 

Euroclear and Clearstream, Luxembourg. 

Unless Definitive Certificates are issued, owners of beneficial interests in Global Notes 

represented by a CDI will not be entitled to have any portions of such Global Notes or of a CDI 

registered in their names, will not receive or be entitled to receive physical delivery of Notes in 

certificated form and will not be considered the owners or holders of such Global Note or CDI (or 

any Notes represented thereby) under the Trust Deed or the Notes. 

In the event of an increase or decrease in the aggregate principal amount outstanding of Notes 

represented by any Global Note, whether pursuant to redemption, exchange for an interest in another 

Global Note, the issue of additional Notes to be represented by such Global Note, the issue of 

Definitive Certificates or the repurchase and cancellation of Notes represented by such Global Note 

or otherwise, the holder will present such Global Note to the Issuer or its agent for increase or 

decrease, as the case may be, of the aggregate principal amount outstanding of Notes represented by 

such Global Note by annotation thereon. The Issuer will procure that the CDI representing such 

Global Note is increased or decreased correspondingly. 

Neither the Issuer, the Trustee nor any of their respective agents will have any responsibility or 

liability for any aspect of the records relating to beneficial ownership interests in the Global Notes or 

the CDIs or for maintaining, supervising or reviewing any records relating to such beneficial 

ownership interests. 

Initial settlement for the Notes and the CDIs will be made in Euros. 

Secondary Market Trading 

The Book-Entry Interests will trade through Participants of Euroclear and Clearstream, 

Luxembourg and will settle in same-day funds. 

Since the purchase determines the place of delivery, it is important to establish at the time of 

trading of any Book-Entry Interests where both the purchaser’s and seller’s accounts are located to 

ensure that settlement can be made on the desired value date. 

Transfers between accountholders in Euroclear and Clearstream, Luxembourg will be effected in 

the ordinary way in accordance with their respective rules and operating procedures. Such transfers 

may be subject to certain restrictions. See ‘‘Transfer Restrictions’’. 

General 

The Issuer will not impose any fees in respect of the Notes; however, holders of book-entry 

interests in the CDIs may incur fees normally payable in respect of the maintenance and operation of 

accounts in Euroclear and Clearstream, Luxembourg. 

Although the foregoing sets out a general summary of the procedures of Euroclear and 

Clearstream, Luxembourg in order to facilitate the transfers of interests in the CDIs among 

participants of Euroclear and Clearstream, Luxembourg neither of Euroclear nor Clearstream, 

144

Luxembourg is under any obligation to perform or continue to perform such procedures, and such 

procedures may be discontinued at any time. 

None of the Issuer nor the Trustee nor any of their agents will have any responsibility or 

liability for the performance by Euroclear or Clearstream, Luxembourg or their respective 

accountholders of their respective obligations under the rules and procedures governing their 

operations. 

Redemption 

In the event that any Global Note is redeemed, it is anticipated that the Depositary will deliver 

all amounts received by it in respect of the redemption of such Global Note to the nominee of the 

Common Depositary, and, upon final payment, surrender such Global Note to or to the order of the 

Principal Paying Agent for cancellation. The redemption price payable in connection with the 

redemption of Book-Entry Interests will be equal to the amount received by the Depositary in 

connection with the redemption of the Global Note relating thereto. 

Transfers and Transfer Restrictions 

All transfers of Book-Entry Interests will be recorded in accordance with the book-entry systems 

maintained by Euroclear or Clearstream, Luxembourg, as applicable, pursuant to customary 

procedures established by each respective system and its participants. 

Each Rule 144A Global Note will bear a legend substantially identical to that appearing under 

‘‘Transfer Restrictions’’, and no Rule 144A Global Note nor any Book-Entry Interest in such Rule 

144A Global Note may be transferred except in compliance with the transfer restrictions set forth in 

such legend. A Book-Entry Interest in a Rule 144A Global Note of one class may be transferred to a 

person who takes delivery in the form of a Book-Entry Interest in the Regulation S Global Note of 

the same class only upon receipt by the Depositary of a written certification from the transferor (in 

the form provided in the Depositary Agreement) to the effect that such transfer is being made in 

accordance with Rule 903 or Rule 904 of Regulation S or Rule 144 under the Securities Act (if 

available) and that the interest transferred will be held immediately thereafter through Euroclear or 

Clearstream, Luxembourg. 

Book-Entry Interests in a Regulation S Global Note may be held only through Euroclear or 

Clearstream, Luxembourg, unless transfer and delivery is made through the Rule 144A Global Note 

relating thereto. A Book-Entry Interest in a Regulation S Global Note of one class may be 

transferred to a person who takes delivery in the form of a Book-Entry Interest in the Rule 144A 

Global Note of the same class only upon receipt by the Depositary of written certification from the 

transferor (in the form provided in the Depositary Agreement) to the effect that such transfer is being 

made to a person whom the transferor reasonably believes is purchasing for its own account or for 

an account or accounts as to which it exercises sole investment discretion and that such person and 

such account or accounts is a ‘‘qualified institutional buyer’’ within the meaning of Rule 144A and a 

Qualified Purchaser for the purpose of section 3(c)(7) of the Investment Company Act, in each case, 

in a transaction meeting the requirements of Rule 144A and in accordance with any applicable 

securities laws of any state of the United States or any other jurisdiction. 

Any Book-Entry Interest in a Regulation S Global Note of one Class that is transferred to a 

person who takes delivery in the form of a Book-Entry Interest in the Rule 144A Global Note of the 

same class will, upon transfer, cease to be represented by a Book-Entry Interest in such Regulation S 

Global Note and will become represented by a Book-Entry Interest in such Rule 144A Global Note 

and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable 

to Book-Entry Interests in a Rule 144A Global Note for as long as it remains such a Book-Entry 

Interest. Any Book-Entry Interest in a Rule 144A Global Note of one Class that is transferred to a 

person who takes delivery in the form of a Book-Entry Interest in the Regulation S Global Note of 

the same class will, upon transfer, cease to be represented by a Book-Entry Interest in such Rule 

144A Global Note and will become represented by a Book-Entry Interest in such Regulation S 

Global Note and, accordingly, will thereafter be subject to all transfer restrictions and other 

procedures applicable to Book-Entry Interests in a Regulation S Global Note as long as it remains 

such a Book-Entry Interest. 

145

A person acquiring a Book-Entry Interest in a Rule 144A Global Note shall be deemed to have 

agreed to be bound by the transfer restrictions applicable to such Note and may be requested to 

agree in writing to be so bound. These transfer restrictions are set forth in ‘‘Transfer Restrictions’’. 

Certain Relevant Provisions of the Depositary Agreement 

Payments 

Pursuant to the Depositary Agreement, the Depositary will make payments in Euros to the 

holders of the CDIs. Subject to Condition 9 (Taxation) of the Conditions, all payments made on a 

Global Note will be made without deduction or withholding for any taxes or other governmental 

charges. 

Transfer of Global Notes 

Pursuant to the terms of the Depositary Agreement, the Regulation S Global Notes and the 

Rule 144A Global Notes may be transferred by the Depositary only to a successor Depositary under 

the Depositary Agreement. 

Action in Respect of Global Notes and Book-Entry Interests 

The Depositary will promptly, and in no event later than 10 days from receipt of any notices in 

respect of the Global Notes or any notice of solicitation of consents or requests for a waiver or other 

action by the holder of the Global Notes or holders of Book-Entry Interests, deliver to Euroclear and 

Clearstream, Luxembourg, a notice containing (a) such information as is contained in such notice 

received, (b) a statement that at the close of business on a specified record date Euroclear and 

Clearstream, Luxembourg will be entitled to instruct the Depositary as to the consent, waiver or 

other action, if any, pertaining to the Book-Entry Interests or the Global Notes and (c) a statement 

as to the manner in which such instructions may be given. Upon the written request of Euroclear and 

Clearstream, Luxembourg, as applicable, the Depositary shall endeavour insofar as practicable to take 

such action regarding the requested consent, waiver or other action in respect of the Book-Entry 

Interests or the Global Notes in accordance with any instructions set forth in such request. Euroclear 

and Clearstream, Luxembourg are expected to follow the procedures described above with respect to 

soliciting instructions from their respective participants. The Depositary will not itself exercise any 

discretion in the granting of consents or waivers or the taking of any other action in respect of the 

Book-Entry Interests or the Global Notes. 

Notices and Reports 

The Depositary will promptly send to the holder of a CDI a copy of any notices, reports and 

other communications received from the Issuer (save where such notice, report of other 

communication contains information which is not permitted to be distributed to any person holding a 

beneficial interest in a CDI under any applicable law) which are both (a) received by the Depositary 

as holder of the relevant Global Note, and (b) made generally available by the Issuer to holders of 

the Notes represented by such Global Note. 

Action by Depositary 

Upon the occurrence of an Event of Default with respect to the Global Notes, or in connection 

with any other right of the holder of the Global Notes under the Trust Deed or the Depositary 

Agreement, if requested in writing by Euroclear, Clearstream, Luxembourg, as applicable (acting on 

the instructions of their respective participants in accordance with their respective procedures) the 

Depositary will take any such action as shall be requested in such notice, subject to, if required by 

the Depositary, such reasonable security or indemnity from the participants against the costs, 

expenses and liabilities that the Depositary might properly incur in compliance with such request. 

Charges of Depositary 

The Issuer has agreed to pay all charges of the Depositary under the Depositary Agreement. 

The Issuer has also agreed to indemnify the Depositary against certain liabilities incurred by it under 

the Depositary Agreement. 

146

Amendment and Termination 

The Depositary Agreement may be amended by agreement among the Issuer, the Depositary 

and the Trustee. The consent of Euroclear and Clearstream, Luxembourg shall not be required in 

connection with any amendment made to the Depositary Agreement: (i) to cure any inconsistency, 

omission, defect or ambiguity in such agreement; (ii) to add to the covenants and agreements of the 

Depositary or the Issuer; (iii) to effect the assignment of the Depositary’s rights and duties to a 

qualified successor; (iv) to comply with the Securities Act, the Exchange Act, or the U.S. Investment 

Company Act of 1940, as amended; or (v) to modify, alter, amend or supplement the Depositary 

Agreement in any other respect which, in the opinion of the Trustee, is not materially prejudicial to 

the holders of Book-Entry Interests. Except as set forth above, no amendment that adversely effects 

the holders of the Book-Entry interests may be made to the Depositary Agreement or the Book-Entry 

Interests without the consent of the holders of Book-Entry Interests. 

Upon the issuance of Definitive Certificates, the Depositary Agreement will terminate. The 

Depositary Agreement may be terminated upon the resignation of the Depositary if no successor has 

been appointed within 90 days as set forth under ‘‘Resignation or Removal of Depositary’’ below. 

Resignation or Removal of Depositary 

The Depositary may at any time resign as Depositary upon 90 days’ written notice delivered to 

each of the Issuer and the Trustee. The Issuer may remove the Depositary at any time upon 90 days’ 

written notice delivered to the Depositary. No resignation or removal of the Depositary and no 

appointment of a successor Depositary shall become effective until (i) the acceptance of appointment 

by the successor Depositary or (ii) the issue of Definitive Certificates. 

Obligation of Depositary 

The Depositary will assume no obligation or liability under the Depositary Agreement other 

than to use good faith and reasonable care in the performance of its duties under such Agreement. 

147

RATINGS OF THE NOTES 

It is a condition of the issuance and offering that the Notes (except for the Subordinated Notes 

and the Structured Combination Notes) be issued with at least the following ratings assigned by 

Moody’s and S&P: Class I Senior Notes: ‘‘Aaa’’ from Moody’s and ‘‘AAA’’ from S&P; Class II 

Senior Notes: ‘‘Aa2’’ from Moody’s and ‘‘AA’’ from S&P; Class III Mezzanine Notes: ‘‘Baa2’’ from 

Moody’s and ‘‘BBB’’ from S&P; Class IV Mezzanine Notes: ‘‘Ba2’’ from Moody’s and ‘‘BB’’ from 

S&P. The Subordinated Notes being offered hereby will not be rated. 

The ratings assigned by S&P to the Class I Senior Notes and the Class II Senior Notes address 

the timely payment of interest and the ultimate payment of principal. The ratings assigned by S&P to 

the Class III Mezzanine Notes and the Class IV Mezzanine Notes address the ultimate payment of 

principal and interest. 

It is expected that the Class V Structured Combination Notes will be rated AAA by S&P. It is 

not a condition of the issue and sale of the Notes that the Class V Structured Combination Notes be 

rated. The rating assigned by S&P to the Class V Structured Combination Notes address the ultimate 

payment of principal only. The rating does not address any residual interest. 

The ratings by Moody’s addresses the expected loss posed to investors by the Maturity Date. 

While the Moody’s rating primarily addresses expected loss, in respect of the Senior Notes, Moody’s 

has also assessed the likelihood of timely cash payment of interest on these particular obligations and 

views it at closing as consistent with the expected loss rating assigned. 

Moody’s 

The ratings assigned to the Rated 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 Rated 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 Subordinated Notes and, in the case of the 

Class I Senior Notes, subordination of the Class II Senior Notes, the Class III Mezzanine Notes and 

the Class IV Mezzanine Notes, in the case of the Class II Senior Notes, subordination of the Class 

III Mezzanine Notes and the Class IV Mezzanine Notes), and in the case of the Class III Mezzanine 

Notes, the subordination of the Class IV Mezzanine Notes and the diversification requirements that 

the Collateral Debt Obligations are required to satisfy. 

Moody’s ratings address the expected loss posed to investors by the Maturity Date. While the 

Moody’s rating primarily addresses expected loss, in respect of the Senior Notes, Moody’s has also 

assessed the likelihood of timely cash payment of interest on these particular obligations and views it 

at closing as consistent with the expected loss rating assigned. 

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 Collateral 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 will not be rated by Moody’s but will 

be assigned a rating pursuant to the methodology described herein. See ‘‘The Collateral Quality Tests 

– Maximum Portfolio Rating Test’’. 

S&P 

S&P’s credit rating analysis includes the application of its dynamic, analytical computer model, 

as it may be modified by S&P from time to time (the ‘‘S&P CDO Monitor’’), which is used to 

148

estimate the default rate the portfolio is likely to experience. The S&P CDO Monitor will be provided 

by S&P to the Collateral Manager and the Collateral Administrator on the Final Effective Date, 

together with necessary instructions and assumptions. 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 recognises and analyses the effects of substituting Collateral Debt 

Obligations, investments of Principal Proceeds in Eligible Investments, rating changes on Collateral 

Debt Obligations and amortisation and payment of Collateral Debt Obligations. In addition to the 

other constraints set out herein, any purchase or sale of a Collateral Debt Obligation must satisfy or 

not worsen the S&P CDO Monitor Test, except that Credit Impaired Obligations and Defaulted 

Obligations may also be sold regardless whether such sale satisfies or improves the S&P CDO 

Monitor Test. 

In addition to its quantitative tests, S&P’s ratings take into account qualitative features of a 

transaction, including the legal structure and the risks associated with such structure, such rating 

agency’s view as to the quality of the participants in the transaction and other factors that it deems 

relevant. 

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EXPECTED AVERAGE LIVES OF THE NOTES 

The Maturity Date of the Notes of each Class is 26 September 2022; however, the average life 

of each Class of the Notes is expected to be shorter than the number of years to their Maturity Date. 

Average life refers to the average amount of time that will elapse from the date of issue of each Class 

of Notes until each Euro of the principal of such Note will be paid to the holder thereof. 

The actual average lives and actual maturities of each Class of the Notes will be determined by 

the amount and frequency of principal payments in respect of such Class, which are dependent upon, 

among other things, the amount of sinking fund payments and any other payments received at or in 

advance of the scheduled maturity of Collateral Debt Obligations (whether through sale, maturity, 

redemption, default or other liquidation or disposition). The actual average lives and actual maturities 

of each Class of the Notes will be affected by the structure of the Notes and the financial condition 

of each of the obligors of the underlying Collateral Debt Obligations and the characteristics of such 

Collateral Debt Obligations, 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 and the actual level of recoveries on any Defaulted Obligations, the frequency of tender 

or exchange offers for such Collateral Debt Obligations and any sales of Collateral Debt Obligations, 

mandatory prepayments of principal on the Notes upon failure of applicable Coverage Tests, any 

sales of Collateral Debt Obligations and the ability of the Collateral Manager, acting on behalf of the 

Issuer, to reinvest Sale Proceeds in Substitute Collateral Debt Obligations. Certain of the Collateral 

Debt Obligations may be subject to sinking fund or optional redemption by the obligors of such 

Collateral Debt Obligations. Any disposition of a Collateral Debt Obligation may change the 

composition and characteristics of the Collateral Debt Obligations and the rate of payment thereon, 

and, accordingly, may affect the actual average lives of each Class of the Notes. The rate of future 

defaults and the amount and timing of any cash realisation from Defaulted Obligations will also 

affect the maturity and average lives of each Class of the Notes. The ability of the Collateral 

Manager to reinvest Principal Proceeds in the manner described under ‘‘Description of the Portfolio’’ 

will also affect the average lives of each Class of the Notes. 

Based on the portfolio of Collateral Debt Obligations expected to have been purchased and 

settled by the Issuer on or about the Closing Date, under a hypothetical scenario in which gross 

default rates are 0.0 per cent. per annum and the Collateral Debt Obligations have the longest 

possible maturity profile permissible under the Reinvestment Criteria, 10.0 to 30.0 per cent. annual 

prepayment and no optional redemptions are made on the Collateral Debt Obligations, the average 

life of each Class of the Notes would be expected to be as follows: Class I Senior Notes: 8.9-9.5 

years; Class II Senior Notes: 10.7-11.6 years; Class III Mezzanine Notes: 11.4-12.3 years and Class IV 

Mezzanine Notes: 12.0-12.5. The Subordinated Notes will not have an average life. 

The approximations in the preceding paragraph are not predictive; in fact as referred to above, 

the average lives of each Class of the Notes will be affected by the financial condition of the obligors 

of the underlying Collateral Debt Obligations and the characteristics of such obligations, including the 

amount and frequency of prepayments, the existence and frequency of exercise of any optional 

redemption, mandatory prepayment or sinking fund features, the prevailing level of interest rates, the 

redemption price, the actual default rate and the actual level of recoveries on any Defaulted 

Obligations, the frequency of tender or exchange offers for the Collateral Debt Obligations, and any 

sales of Collateral Debt Obligations. See ‘‘Description of the Portfolio – Management of the 

Portfolio’’. 

150

THE ISSUER 

General 

The Issuer is a public company with limited liability, incorporated on 17 May 2006, under the 

laws of Ireland, having its registered office at 5 Harbourmaster Place, IFSC, Dublin 1, Ireland and 

registered under the Companies Acts 1963 to 2005 of Ireland under number 420288 and having Irish 

VAT registration number of IE6440288J. The telephone number of the Issuer at its registered office is 

+353 1 6806000. The Issuer has been incorporated for an indefinite period. The Issuer has been 

established as a special purpose vehicle for the purpose of issuing asset backed securities. 

Corporate Purpose of the Issuer 

The Issuer’s Memorandum and Articles of Association includes the following objects at Clause 3 

thereof: 

(a) 

(b) 

(c) 

to raise funds whether, inter alia, by way of loan, debentures, securities or any other 

appropriate methods of financing, the use of other forms of derivatives or hedge 

arrangements and to use the funds to, inter alia, enter into or acquire (interests in) loans, 

debentures, securities, stocks, participations and other similar forms of financial 

instruments and derivatives; 

to grant security for its obligations and debts; 

to enter into agreements and documents (of whatever description), including, but not 

limited to, interest and/or currency hedging agreements and other financial derivative 

agreements in connection with the objects mentioned under paragraphs (a) and (b) above; 

and 

(d) to appoint and act through any agents, administrators, contractors or delegates in 

connection with the undertaking and business of the Issuer (including, without limitation, 

in connection with the administration and management of financial instruments and assets 

and/or any related security). 

Business Activity 

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 (as defined in ‘‘Subscription and Sale’’), the Agency Agreement, the 

Depositary Agreement, the Trust Deed, the Collateral Management Agreement, the Corporate 

Services Agreement (as defined below), each Collateral Acquisition Document, each Interest Rate 

Hedge Agreement, each Currency Swap Agreement and the other documents and agreements entered 

into in connection with the issue of the Notes and the purchase of the Portfolio. 

Corporate Administration 

Pursuant to a corporate services agreement (expected to be dated on or about 26 July 2006) 

(such agreement as may be amended form time to time thereafter, the ‘‘Corporate Services 

Agreement’’) between the Issuer, the Corporate Administrator and the Trustee, the Issuer will appoint 

Deutsche International Corporate Services (Ireland) Limited as corporate administrator (the 

‘‘Corporate Administrator’’) to provide corporate secretarial and administrative services to the Issuer. 

The register of members is maintained by the Corporate Administrator at its office. 

Capital and Shares 

The authorised and subscribed capital of the Issuer is set at A40,000, divided into 40,000 fully 

paid up, ordinary shares with a par value of A1.00 each. 

The Issuer has issued 40,000 ordinary shares with a nominal value of A1, all of which are fully 

paid. 39,994 of the issued shares are held by Deutsche International Finance (Ireland) Limited and six 

nominees hold one issued share each on behalf of Deutsche International Finance (Ireland) Limited. 

151

Deutsche International Finance (Ireland) Limited holds its legal and beneficial interest in the share 

capital on trust for certain charitable purposes. 

None of the Collateral Manager, the Collateral Administrator, the Corporate Administrator, the 

Trustee or any company affiliated with any of them, directly or indirectly, owns any of the share 

capital of the Issuer. 

Capitalisation 

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 the last published accounts. 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. 

Indebtedness 

The Issuer has no indebtedness as at the date of this Prospectus, other than that which the 

Issuer has incurred or shall incur in relation to the transactions contemplated herein. 

Management 

The Issuer is managed by its board of directors, who are appointed by the shareholders. The 

current directors (the ‘‘Directors’’) of the Issuer are: 

Michael Whelan 

Michael Whelan joined Deutsche International (Ireland) Limited in 1996 and is the Head of 

Structured Products. He is also a Director of Deutsche Bank’s Corporate Services Division in Ireland. 

Mr Whelan is a director of a number of other Irish based investment companies. Mr Whelan was 

Managing Director of the Irish Futures and Options Exchange until 1996. A qualified accountant, he 

had previously worked at the Central Bank of Ireland in the area of financial control and regulation. 

Conor Blake 

Conor Blake is a director of Deutsche International Corporate Services (Ireland) Limited and a 

number of other DB Group companies. He is a chartered management accountant with a Masters in 

Business Studies and Bachelor of Commerce degree from University College Dublin. He spent 4 years 

with Morgan Stanley in London as a financial controller prior to joining Deutsche Bank in Ireland in 

2001. 

Jennifer Coyne 

Jennifer Coyne is a Transaction Manager based in the Dublin office of Deutsche Bank. Jennifer 

is a solicitor with a Bachelor in Laws degree from Trinity College Dublin. Jennifer trained as a 

solicitor with Matheson Ormsby Prentice in Dublin, where she worked in the Banking and Financial 

Services department until joining Deutsche Bank in October 2005. She has also worked with Brown 

Brothers Harriman in New York as a quantitative analyst, involved in the provision of foreign 

exchange advisory services to U.S. multinationals. Jennifer is a director of several special purpose 

vehicles. 

The business address of the Directors is 5 Harbourmaster Place, International Financial Services 

Centre, Dublin 1, Ireland. 

The Directors are all resident in Ireland and have agreed to act as the directors of the Issuer 

and will receive fees for their services. The business of the Issuer shall be conducted from Ireland, 

and in particular all board meetings of the Directors will take place in Ireland. 

The Issuer has covenanted in the Trust Deed that it will ensure at all times that it is resident in 

Ireland for Irish tax purposes; it is entitled to the full benefit of the France-Ireland tax treaty; it is 

the beneficial owner of the Portfolio for Irish tax purposes; and the income arising from the Portfolio 

shall be included in the taxable income of the Issuer for Irish corporation tax purposes and it will be 

subject to Irish corporation tax on its profits. In addition, under the Trust Deed the Issuer has agreed 

152

that it shall at all times maintain its residence outside the United Kingdom, for the purpose of 

United Kingdom taxation, outside the United States for the purpose of United States taxation and 

outside France for the purpose of French taxation and, shall not establish a branch, agency or place 

of business or register as a company within the United Kingdom, the United States or France and 

shall at all times use its best efforts to minimise any applicable taxes. 

The Directors will hold board meetings in Ireland at least quarterly to review the performance 

of the Portfolio and the Collateral Managers. 

Deutsche International Corporate Services (Ireland) Limited of 5 Harbourmaster Place, 

International Financial Services Centre, Dublin 1, Ireland is the administrator of the Issuer. Its duties 

include the provision of certain administrative and related services including acting as company 

secretary. The appointment of the administrator may be terminated and the administrator may retire 

upon 90 days’ written notice subject to the appointment of an alternative administrator. 

No potential conflict of interest has come to the knowledge of the Issuer as regards its Directors 

and the respective personal interests of such Directors. 

Subsidiaries 

The Issuer has no subsidiaries or affiliates. 

Administrative Expenses of the Issuer 

The Issuer is expected to incur certain Administrative Expenses as set forth in the definition of 

‘‘Administrative Expenses’’ in Condition 1 (Definitions) in ‘‘Conditions of the Notes’’ above. 

Financial Statements 

No financial statements of the Issuer have been prepared as at the date of this Prospectus. The 

Issuer intends to publish its first audited financial statements in respect of the period beginning on the 

date of incorporation of the Issuer and ending on 31 December 2006. Any further published audited 

financial statements prepared by the Issuer (which will, in each case, be in respect of the year ending 

on 31 December) will be available from the registered office of the Issuer and at the office of 

Deutsche International Corporate Services (Ireland) Limited. The auditors of the Issuer are KPMG of 

1 Harbourmaster Place, IFSC, Dublin 1, who are chartered accountants and are members of the 

Institute of Chartered Accountants in Ireland (ICAI) and are qualified to practise in Ireland. 

153

DESCRIPTION OF THE COLLATERAL MANAGERS 

THE COLLATERAL MANAGERS 

Under the Collateral Management Agreement, Natexis Banques Populaires (together with any of 

its successors in interest) in relation to all investment and management functions with respect to the 

Collateral except in respect of Financial Instruments and Natexis Asset Management in relation to all 

investment and management functions with respect to Financial Instruments (as defined below) only, 

(in each case, the ‘‘Collateral Manager’’ and together, the ‘‘Collateral Managers’’) have each agreed to 

act as the Issuer’s collateral manager and to act in specific circumstances on behalf of the Issuer and 

to carry out the functions described below. For the purposes of the foregoing, ‘‘Financial Instruments’’ 

means any financial instrument (instrument financier) within the meaning of article L.211-1 of the 

French Code Monétaire et Financier including any Mezzanine Obligations held in the form of debt 

securities, Synthetic Securities, Collateral Enhancement Obligations, Structured Finance Securities held 

in the form of debt securities, Currency Swap Transactions and any Interest Rate Hedge 

Transactions. In the event that Natexis Banques Populaires is granted an agrément de société de 

gestion (license to provide portfolio asset management services) from the Autorité des Marchés 

Financiers (or any relevant successor authority), and the scope of its authorised programme of 

activities (programme d’activité) covers the management of Financial Instruments (including Synthetic 

Securities) for other legal entities in accordance with applicable French law and regulations, Natexis 

Banques Populaires may at its option assume the rights and obligations of Natexis Asset 

Management under the Collateral Management Agreement (together with any other Transaction 

Document to which Natexis Asset Management is party). 

NATEXIS BANQUES POPULAIRES 

Profile 

Natexis Banques Populaires, the Banque Populaire Group’s listed entity, is a financing, 

investment banking and services bank that also offers a unique range of services in receivables 

management. 

With more than 12,900 employees and a network of 155 offices, including 117 abroad, Natexis 

Banques Populaires builds long-term domestic and international partnerships with its clientele of large 

and medium-sized companies, financial institutions and the Banque Populaire network. 

Drawing on its expertise in a wide range of complementary areas, Natexis Banques Populaires 

provides not only traditional banking services but also high value-added technology-based services. In 

order to meet its clients’ needs and ensure the highest quality standards, the bank offers specialist 

services in each of its businesses. 

A prominent player in financing activities, Natexis Banques Populaires maintains relationships 

with virtually all major French companies. Through its subsidiary Coface, it is one of the world’s 

leading providers of credit insurance and credit management services. At the same time, Natexis 

Banques Populaires is ranked among the leaders in private equity and financial engineering, and is 

one of the foremost brokerage firms. It also ranks among the top providers of high-tech services. 

Finally, it is a well-known and highly respected player in the bancassurance and asset management 

segments and the leading employee savings plan manager in France. 

Key Consolidated Figures of Natexis Banques Populaires 

As of 31 December 2005 

– 155 offices, including 117 outside France; 

– 150,000 shareholders (approximately); and 

– 12,973 employees. 

154

Long-term ratings (as of 31 December 2005) 

‘‘Aa3’’ Moody’s 

‘‘AA-’’ 

Standard & Poor’s 

in millions of euros* 2005 2004 

Net banking income........................................................................................... 3,091 2,707 

Gross operating income..................................................................................... 1,034 843 

Net income attributable to equity holders of the parent .................................. 695 488 

in billions of euros* 12/31/2005 1/1/2005 

Total assets ........................................................................................................ 168.3 140 

Regulatory capital**.......................................................................................... 8.6 6.7 

International capital adequacy ratio.................................................................. 11.9% 12.3% 

Tier one ratio..................................................................................................... 8.3% 8.3% 

** on an extended Cooke basis 

Net banking income by core business 

in millions of euros* 2005 2004 

Corporate and Institutional Banking and Markets........................................... 1,259 1,159 

Private Equity and Wealth Management .......................................................... 264 188 

Services .............................................................................................................. 724 611 

Receivables Management................................................................................... 781 683 

Net banking income of core businesses ............................................................... 3,029 2,641 

Other net banking income ................................................................................. 62 67 

Average loan outstandings* 2005 2004 

in billions of euros 79.4 70.6 

Assets under management at December 31* 2005 2004 

in billions of euros 106.4 87.3 

*2005 figures: EU IFRS; 2004 figures: IFRS excluding IAS 32, 39 and IFRS 4 

The Banque Populaire Group 

The Banque Populaire Group provides banking, financial and insurance services to a broad 

client base of individuals, tradespeople, farmers, businesses, and banking and financial services groups. 

It defines itself as a major multi-banner universal bank. The local retail banking business is 

conducted under the flagship Banque Populaire banner, backed up by complementary banners. 

CASDEN Banque Populaire serves employees of the French education, research and culture systems, 

Crédit Coopératif operates in the social and subsidized economy, ACEF caters to civil servants, while 

SOCAMA mutual guarantee companies cater to the needs of tradespeople and Crédit Maritime 

Mutuel serves the fishing, marine and coastline industries. 

The financing, investment banking and services for corporate and institutional clients are 

provided by Natexis Banques Populaires and its subsidiaries, which include Coface. 

The Banque Populaire Group stands out from other banking groups on account of its unique 

structure, its origins in the cooperative movement and corporate governance commensurate with its 

values. 

These three features have helped drive strong business development based on brisk organic 

growth, selective acquisitions and long-term partnerships. 

155

A three-dimensional organization 

– The 19 Banque Populaire regional banks, CASDEN Banque Populaire and Crédit Coopératif 

The Banque Populaire banks are cooperative organizations, with strong roots in their local areas 

and their sectors of activity. They are the Group’s parent companies and shareholders of Banque 

Fédérale des Banques Populaires. They represent the Group’s centre of gravity in retail banking, 

which contributes over two-thirds of the Group’s earnings. They are autonomous banks, providing 

their clients with a local service and the full range of banking and insurance products and services. 

Cooperative dimension 

– Banque Fédérale des Banques Populaires 

It houses the central corporate functions of the Banque Populaire Group and acts as the 

holding company for Natexis Banques Populaires. Its role is to supervise, coordinate and oversee 

strategic planning for the entire Group. 

Federal dimension 

– Natexis Banques Populaires 

Listed on Eurolist Paris, it is active in financing, investment banking and services and 

contributes close to one-third of the Group’s earnings either directly or through its subsidiaries. 

Its range of corporate banking services and international presence was enriched by the 

acquisition of Coface in 2002 (credit insurance and credit management services). 

Listed-company dimension 

Natexis Banques Populaires Businesses 

Natexis Banques Populaires is organised around four core businesses. These core businesses are 

supported by three Corporate departments, Information Systems & Logistics, General Secretariat and 

Finance. The Internal Audit Department completes the structure. 

Corporate and Institutional Banking and Markets 

Serving both corporate and institutional clients, the Corporate and Institutional Banking and 

Markets core business proposes solutions for customer needs, be they in loans and cash management, 

capital markets, employee savings or asset management, by drawing on all the business lines of 

Natexis Banques Populaires. Two business development departments one dedicated to corporate 

clients, the other to institutions, ensure strategic and marketing oversight for these customers and 

coordinate the sales forces of the specialized business lines. 

Key figures: 

A1,259 million in net banking income (up 9% from 2004) 

A76.9 billion in outstanding loans 

No. 3 lead manager for French corporate bond issues, by volume (source: Bloomberg) 

Private Equity and Wealth Management 

The Private Equity and Wealth Management core business includes Natexis Private Equity, 

Banque Privée Saint Dominique and Natexis Private Banking Luxembourg S.A. 

Natexis Private Equity and its subsidiaries, specialized in private equity business lines, play a 

role in every stage of a company’s development, from founding to pre-flotation financing. Natexis 

Private Equity builds relationships with investors and entrepreneurs based on its values of 

commitment and entrepreneurship. Banque Privée Saint Dominique, dedicated to private asset 

management, personalizes its approach to managing wealth by combining management of a diversified 

investment portfolio with legal and tax advisory services. Natexis Private Banking Luxembourg S.A. 

is specialized in international estate planning. 

156

Indicators: 

Natexis Private Equity: A2,345 million in managed assets 

A371 million in new investments 

Banque Privée Saint Dominique: 1,600 client families 

Natexis Private Banking Luxembourg SA: 4,657 clients 

Services 

Composed of more than 2,500 people, the Services core business now includes six business lines. 

It has two objectives. 

The first is to support the Banque Populaire regional banks and help them achieve their growth 

and new business development goals through the design of products and systems. 

The second is to adapt its services to the other client groups of Natexis Banques Populaires: 

large companies, institutions, retail banks, specialized banks with or without a branch network and 

other financial institutions. 

Key figures: 

No. 1 administrative and financial manager of employee savings in France (source: AFG) 

No. 2 asset management investor in France (source: Europerformance) 

No. 1 issuer of payment cards for small business customers in France (source: SAS Carte Bleue) 

11.7% market share in interbank teleclearing (SIT) transactions (source: 2005 SIT data) 

Receivables Management 

Receivables Management brings together the resources and expertise of Coface and Natexis 

Factorem. It enables companies to optimize, in whole or in part, the financial management of their 

customer and supplier relationships. This core business comprises four business lines: company 

information, receivables management, credit insurance and factoring, enabling companies to manage, 

protect and finance their accounts receivable. Natexis Banques Populaires is at the forefront of these 

four businesses in France and across the globe. 

Coface offers companies a broad spectrum of receivables management solutions through its own 

network spanning 58 countries and through those of its partners in the CreditAlliance network 

(insurance companies and services companies). 

Natexis Factorem provides its services primarily through the Banque Populaire network. 

This multi-network strategy is one of the strengths of the Receivables Management core 

business, enabling it to maximize the volume of customer sales it handles. 

Key figures: 

Coface 

A238 billion in guaranteed receivables 

A674 million in net banking income 

A111 million in net income 

Natexis Factorem 

A12 billion in factored receivables 

A107 million in net banking income 

A32 million in net income 

157

Contribution to revenues (consolidated Net Banking Income or ‘‘NBI’’) in 2005 

in millions of euros 2005 % 

Change 

2005/2004 

in % 

Corporate and Institutional Banking and Markets..................... 1,259 41% + 9 

Private Equity and Wealth Management .................................... 264 9% + 41 

Services ........................................................................................ 724 24% + 19 

Receivables Management ............................................................ 781 26% + 14 

Net banking income of core businesses ......................................... 3,029 100% + 15 

Other net banking income ........................................................... 62 

Total............................................................................................. 3,091 

Corporate Governance 

Board of Directors 

The Chairman of Natexis Banques Populaires is Philippe Dupont and the Chief Executive 

Officer is Francois Ladam. 

Directors 

Philippe Dupont, Chairman of the Board of Directors of Natexis Banques Populaires 

Banque Fédérale des Banques Populaires, represented by Pierre Desvergnes, Chairman of 

Casden Banque Populaire 

Vincent Bolloré, Chairman and Chief Executive Officer of Groupe Bolloré 

Christian Brevard, Deputy Vice-Chairman of Banque Populaire Alsace 

Jean-François Comas, Chief Executive Officer of Banque Populaire Côte d’Azur 

Claude Cordel, Chairman of Banque Populaire du Sud 

Daniel Duquesne, Chief Executive Officer of Banque Populaire Loire et Lyonnais 

Stève Gentili, Chairman of BRED Banque Populaire 

Jean de La Chauvinière 

Yvan de La Porte du Theil, Chief Executive Officer of Banque Populaire Val de France 

Richard Nalpas, Chief Executive Officer of Banque Populaire Toulouse-Pyrénées 

Francis Thibaud, Chief Executive Officer of Banque Populaire du Sud-Ouest 

Jean-Louis Tourret, Chairman of Banque Populaire Provençale et Corse 

Robert Zolade, Chairman of HBI (Holding Bercy Investissement) 

Jean-Pierre Chavaillard, director representing employee-shareholders 

Non-Voting Director 

Michel Goudard, Deputy Chief Executive Officer of Banque Fédérale des Banques Populaires 

Board Secretary 

Jean-René Burel 

Acting Auditors 

Deloitte & Associés, 

Salustro Reydel 

Barbier Frinault et Autres 

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Substitute Auditors 

Beas 

François Chevreux 

Pascal Macioce 

Committees of the Board 

The Board of Directors of Natexis Banques Populaires has had three special committees for the 

past several years. Their job is to assist the Board in the performance of its functions. 

– an Audit Committee, (set up in 1996), 

– a Risk Management Committee (set up in 2000), 

– a Remuneration Committee (set up in 1996), 

Operating rules have been prepared for the Risk Management Committee and the Audit 

Committee. 

Whenever necessary, the Committees of the Board make inquiries of the head of Internal Audit, 

the Corporate Secretary, the Senior Executive Vice President, Finance, the Senior Executive Vice 

President, Risk Management, the Compliance Officer, the Senior Executive Vice President, Internal 

Control, the Financial Crime Prevention Officer, or any other persons in a position to provide the 

technical information required. The Auditors are invited to take part in the Audit Committee’s 

meetings. Neither the Chairman nor the Chief Executive Officer attends meetings of the Committees. 

Formal minutes are produced after each meeting and the Committee chairmen report periodically to 

the Board on their activities and recommendations. 

The Audit Committee has four members: Richard Nalpas, Chairman, Pierre Desvergnes, Jean de La 

Chauvinière (independent director) and Francis Thibaud. Its overall responsibilities, pursuant to its 

operating rules, are to assist the Board of Directors in controlling risk at Natexis Banques Populaires, to 

review draft financial statements and related financial disclosures. Where necessary, the Committee obtains 

explanations about material items before the financial statements are presented to the Board. During its 

review, the Committee examines the accounting treatment of non-recurring transactions and obtains 

assurance concerning the appropriateness and consistent application of accounting principles and methods. 

As well as meeting before the publication of the interim and annual financial statements, the 

Committee may also hold other meetings during the year to review any issues that fall within its 

purview. In 2005, the Committee met twice, with a 75% attendance rate, to review the 2004 annual 

financial statements and the 2005 interim financial statements, prior to their presentation to the 

Board. The Auditors attended both meetings. 

The Auditors submit a summary of the nature and objectives of their work to the Committee. 

This summary includes their observations on the accounting choices made and on the technical 

aspects of the closing, their opinion on the level of provisions and on the various risks to which the 

bank is subject. The Auditors also draw the Committee’s attention to the consequences of regulatory 

and accounting changes affecting the presentation of the parent-only and consolidated financial 

statements. They make suggestions intended to improve the quality of the financial information that 

the bank produces. 

The Risk Management Committee has four members: Daniel Duquesne, Chairman, Jean-François Comas, 

Claude Cordel and Jean-Louis Tourret. 

In accordance with its operating rules, the Risk Management Committee assists the Board of 

Directors in managing the risks incurred by Natexis Banques Populaires. To this end, the Committee 

analyses the bank’s main areas of risk, other than those concerning the accuracy of the financial 

statements and financial disclosures, and assesses the effectiveness of the internal control systems. In 

the same way as the Audit Committee, the Risk Management Committee may review any issues that 

fall within its purview. 

In 2005, the Risk Management Committee met four times, with a 100% attendance rate, and 

examined, in accordance with CRBF rule no. 97-02, the Chairman’s report on how the Board of 

159

Directors’ work is prepared and organized and on the bank’s internal control procedures, as 

stipulated in the Financial Security Act. The Committee was informed of the results of internal audit 

assignments carried out in 2004 and of the auditing schedule for 2005; finally, it was consulted on the 

proposed responses to the Banking Commission’s various audit reports. 

To make more detailed information about the evaluation of market risks available to the 

members of the Board, the Risk Management Committee organized a meeting in 2005 attended by 

several heads of risk management and market units, who each presented the concepts and tools used 

to manage risk and furnished explanatory documentation on these complex topics. 

Finally, given the importance of the topic, affecting both the quality and the reliability of 

financial reporting, a report was presented to the Committee on the bank’s enterprise systems 

development plan. 

The Remuneration Committee has four members. Its chairman is Jean de La Chauvinière (independent 

director) and the other members are Stève Gentili, Vincent Bolloré (independent director) and Yvan de La 

Porte du Theil. 

It considered various mechanisms for maintaining a steady flow of employee-owned shares, 

including stock options and bonus shares, so as to make proposals to the Board. In this context, the 

‘‘Alizé’’ plan, instituted in 2001, will expire in 2006. 

It also examined the methods for determining the variable portion of executive compensation, 

detailed in the section below entitled ‘‘Compensation paid to the Chairman, Chief Executive Officer 

and directors’’. 

Subsequent events 

* In January 2006, credit rating agency Standard & Poor’s published new long and shortterm 

credit ratings for Natexis Banques Populaires and Banque Fédérale des Banques 

Populaires, with a long-term rating of AA- (with a stable outlook) and a short-term rating 

of A1+. 

This constitutes an upgrade in Natexis Banques Populaires’ long and short-term ratings, an 

upgrade in Banque Fédérale des Banques Populaires’ short-term rating and the first long-term rating 

for Banque Fédérale des Banques Populaires. 

* Natexis Banques Populaires’ medium-term business plan has been revised to take into 

account new economic conditions and the change in accounting standards. 

Despite these changes, the major axes of the three-year plan have been confirmed: 

– Growth in net banking income of 9-10% a year; 

– Maintaining provisions at around 35bp of risk-weighted assets; 

– Reduction in the cost/income ratio; 

– ROE of around 15%. 

The plan has also been defined in line with the aims of the Group’s strategic development plan, 

of which it forms an integral part. 

Recent Developments relating to Natexis Banques Populaires 

* On March 12, 2006, the Banque Populaire Group issued a press release: the Banque 

Populaire Group approved the start of exclusive negotiations concerning the creation of 

NATIXIS. 

The full version of the press release can be downloaded on the www.nxbp.banquepopulaire.fr 

website. 

* On March 12, 2006, the Banque Populaire Group issued a joint press release with Groupe 

Caisse d’Epargne: ‘‘Banque Populaire Group and Groupe Caisse d’Epargne have entered 

into exclusive negotiations for the creation of NATIXIS’’. 

160

The full version of the press release, setting out the procedures and schedule for the project, can 

be downloaded on the www.nxbp.banquepopulaire.fr website. 

* On April 13, 2006, the Banque Populaire Group issued another joint press release with 

Groupe Caisse d’Epargne. 


website. 

* On May 4, 2006, the Banque Populaire Group issued another joint press release with 

Groupe Caisse d’Epargne: ‘‘Charles Milhaud and Philippe Dupont have appointed 

Dominique Ferrero to perform a review of the NatIxis project and make 

recommendations’’ 


website. 

* On May 17, 2006, The Banque Populaire Groupe issued a press release: ‘‘Natixis project: 

Groupe Banque Populaire reaffirms the importance of keeping to the timetable’’ 


website. 

NATEXIS ASSET MANAGEMENT 

Corporate Profile 

Natexis Asset Management is the investment management arm of the Banque Populaire Group 

and a 100% subsidiary of Natexis Banques Populaires, the Group’s financing, investment and services 

bank. Formed in 1998, Natexis Asset Management has, as of 30 April 2004, A107.1 billion under 

management and ranks fifth in the French market in terms of OPCVM distributed (source: 

‘‘Europerformance’’). Natexis Asset Management’s headquarters is based in Paris. As of 30 April 

2004, Natexis Asset Management had 220 employees, including 83 portfolio management specialists. 

NATEXIS LEVERAGED FINANCE 

Natexis’ Leveraged Finance Group has been investing in the European market since 1997, and is 

one of the leading European leveraged loan players with an experienced team of 50 professionals (34 

in Europe, 15 in the US). 

Natexis’ Leveraged Finance Group’s origination network in France, Northern Europe, Southern 

Europe and the USA provides relationships with local and pan-European arrangers, private equity 

houses, mezzanine funds, as well as large and medium-size companies where local teams give sourcing 

advantage. 

As of December 2005, Natexis had arranged and invested in more than 200 separate senior and 

mezzanine transactions in Europe (totalling approximately EUR 6 billion of commitments). In 2005, 

Natexis was the number five mandated lead arranger of LBO loans in France, and number four 

bookrunner of LBO loans in France, by number of transactions (source: Dealogic Loanware). 

In the U.S., Natexis Banques Populaires (and its predecessor BFCE) has been active in the 

leveraged finance market since the early nineties. On a global basis, the group manages a Leveraged 

Finance Portfolio of EUR 2 billion in Europe including positions in mezzanine loans for A49 million 

and over A1 billion in US senior secured loans. 

KEY PERSONNEL 

Philippe Lefelle – Head of Leveraged Finance 

Head of Leveraged Finance: Philippe Lefelle took the responsibility of Natexis LFG in early 

2000. Under his leadership, the Group gained strong momentum to become a leading player in its 

field. His previous background includes a track record in mezzanine (Founder and General Manager 

of Euromezzanine for 6 years, a mezzanine fund jointly managed with BNP-Paribas) as well as a 

longstanding career in corporate banking/finance in a variety of capacities within Natexis. 

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Jean-Luc Simon – CDO Director 

Jean-Luc Simon was appointed Head of the CLO in early 2004 after having handled the 

Leveraged Finance Group’s US activities since 2001. Previously, he was Head of Credit for corporate 

lending and asset backed securities (including CDOs) and co-Head of the Department for 10 years. 

He joined the Bank in 1985 from Chase Manhattan Paris General Audit team. Jean-Luc received a 

Masters degree in Business and Management from the HEC business school. 

Jacques Sudre – CDO Manager 

Jacques Sudre joined Natexis’s Leveraged Finance origination team in London in 2002 to work 

on Northern European transactions. He was fully dedicated to Vallauris CLO in 2005. Jacques holds 

a Masters degree in Business Law from the Paris II University and a Masters degree in Business and 

Management from the Paris business school, ESCP. 

Graham Olive – Origination – Northern Europe 

Graham Olive joined Natexis LFG in mid 2001 to establish the Northern European franchise in 

Leveraged Finance. He began his career with Hambros prior to spending six years with Flemings 

where he specialized in Leveraged Finance. 

Godric Rosset – Origination – France 

Goodric Rosset joined the Paris Leveraged Finance team in early 2000. He joined Natexis in 

1990 as a Corporate Banking Officer after an audit background with Ernst & Young. For 10 years 

he gained an extensive knowledge of some industrial sectors, specializing in retail, transport, and 

logistics. 

Hervé Seguin – Origination – France 

Hervé Seguin has been with the Natexis Group for nine years. Previously, he worked in the 

corporate finance area with Crédit Agricole Indosuez and Société Générale. A seasoned LBO 

professional, Hervé joined the Paris team at its inception in 1997. 

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DESCRIPTION OF THE PORTFOLIO 

Capitalised terms which are used in this section and not defined in this section shall have the 

meanings given to them in Condition 1 (Definitions) under ‘‘Conditions of the Notes’’. 

1. Introduction 

Under the Collateral Management Agreement, Natexis Banques Populaires (together with any of 

its successors in interest) in relation to all investment and management functions with respect to the 

Collateral except in respect of Financial Instruments and Natexis Asset Management in relation to all 

investment and management functions with respect to Financial Instruments (as defined below) only 

(in each case, the ‘‘Collateral Manager’’ and together, the ‘‘Collateral Managers’’) have each agreed to 

act as the Issuer’s collateral manager and to act in specific circumstances on behalf of the Issuer and 

to carry out the functions described below. In managing the categories of Collateral Debt Obligations 

for which they are responsible each Collateral Manager shall act in compliance with the Collateral 

Management Agreement and the Conditions. Natexis Banques Populaires shall procure that Natexis 

Asset Management complies with its obligations under the Collateral Management Agreement 

(including its obligation to manage the categories of Collateral Debt Obligations to be managed by it 

in compliance with the terms of the Collateral Management Agreement and the Conditions of the 

Notes). The Collateral Managers shall prior to making investment or disposal decisions consult with 

each other with a view to ensuring that the Portfolio complies with the terms of the Collateral 

Management Agreement and the Conditions of the Notes (and, in particular, to ensure compliance 

with the obligations of the Collateral Managers thereunder in respect of the Investment Objectives (as 

defined below) and the Collateral Quality Tests to the extent required under the terms of the 

Collateral Management Agreement). 

‘‘Financial Instruments’’ means any financial instrument (instrument financier) within the meaning 

of article L.211-1 of the French Code Monétaire et Financier including Mezzanine Obligations held in 

the form of debt securities, Structured Finance Securities, Synthetic Securities (subject as provided in 

Section 7.16 (Synthetic Securities) below), Collateral Enhancement Obligations, Currency Swap 

Transactions and any Interest Rate Hedge Transactions. 

Pursuant to the Collateral Management Agreement, the Collateral Administrator is required to 

perform certain calculations in relation to the Portfolio on behalf of the Issuer. 

A portfolio of Senior Secured Loans, Second Lien Loans and Mezzanine Obligations will be 

purchased by, or on behalf of, the Issuer either (i) on or about the Closing Date or (ii) during the 

Investment Period from the Closing Date to but excluding the Final Effective Date out of the net 

proceeds of the issue of the Notes deposited in the Additional Collateral Account on the Closing 

Date and sums standing to the credit of the Principal Account as described herein (together, the 

‘‘Final Portfolio’’). Under the terms of the Collateral Management Agreement, in making investment 

decisions and entering into arrangements on behalf of the Issuer to buy and sell Collateral Debt 

Obligations and Collateral Enhancement Obligations, the Collateral Managers shall use all their 

respective reasonable endeavours to ensure that there shall be sufficient funds available on each 

Payment Date in accordance with the Priorities of Payment: 

(a) 

(b) 

(c) 

to satisfy the payment obligations of the Issuer in respect of the CDO Liabilities in a 

timely manner; 

to ensure the maintenance of the Initial Ratings on each Class of Rated Notes; and 

subject to (a) and (b) above and to the protection of the interests of the Noteholders, to 

maximise the return to the holders of the Subordinated Notes. 

The above are referred to in the Collateral Management Agreement as the ‘‘Investment 

Objectives’’. 

The Collateral Debt Obligations will be constituted and/or evidenced by the various trust deeds, 

indentures, loan agreements, participation agreements and other similar instruments applicable thereto. 

All references herein to the acquisition or purchase of Collateral Debt Obligations, Additional 

Collateral Debt Obligations and Substitute Collateral Debt Obligations shall include provision by, or 

163

on behalf of, the Issuer of Synthetic Collateral in respect of Synthetic Securities so purchased or 

acquired. 

2. Investment Period 

It is anticipated that the Issuer will have purchased, or entered into agreements to purchase, 

Collateral Debt Obligations with an aggregate principal amount of approximately A200,000,000 on or 

about the Closing Date. The Collateral Managers will use their respective reasonable endeavours to 

purchase Additional Collateral Debt Obligations out of the Balance standing to the credit of the 

Additional Collateral Account after the Closing Date in order to procure that: 

(a) the Interim Targets (determined by reference to Collateral Debt Obligations both 

purchased and committed to be purchased) are satisfied with effect from the Initial 

Effective Date; 

(b) 

(c) 

(d) 

the aggregate principal amount of Collateral Debt Obligations purchased or committed to 

be purchased is equal to at least A250,000,000 as at the Initial Effective Date and equal to 

or greater than the Target Par Amount as at the Final Effective Date; 

the Collateral Quality Tests and the Coverage Tests (determined by reference to Collateral 

Debt Obligations both purchased and committed to be purchased) are satisfied with effect 

from the Final Effective Date and at all times thereafter; and 

the Portfolio Profile Tests (determined by reference to Collateral Debt Obligations both 

purchased and committed to be purchased) are satisfied with effect from the Final Effective 

Date and at all times thereafter, to the extent required to do so under the Reinvestment 

Criteria. 

The Additional Collateral Debt Obligations purchased by, or on behalf of, the Issuer during the 

Investment Period will, at the time a binding commitment for their acquisition is entered into, be 

required to satisfy the Eligibility Criteria and each Additional Collateral Debt Obligation shall also be 

selected by the Collateral Managers in a manner consistent with the terms of the Collateral 

Management Agreement as described in this Prospectus. 

3. Initial Effective Date 

The Business Day after the six month period from the Closing Date shall be the ‘‘Initial 

Effective Date’’, unless the Collateral Manager, acting on behalf of the Issuer, is able to purchase 

Collateral Debt Obligations the aggregate principal amount of which is equal to or greater than 

A250,000,000 prior to the expiration of such period, in which case, the Collateral Manager, acting on 

behalf of the Issuer, shall declare the Initial Effective Date as set forth in the Collateral Management 

Agreement. Within 20 days of the Initial Effective Date the independent accountants appointed by 

the Issuer in accordance with the Collateral Management Agreement shall issue a report (an 

‘‘Independent Accountants’ Report’’) confirming details of the aggregate principal amount of the 

Collateral Debt Obligations purchased or committed to be purchased as at such date and the 

computations demonstrating compliance with the Interim Targets by reference to such Collateral Debt 

Obligations, (or absent such compliance with the Interim Targets the report shall be submitted 

together with a plan prepared by the Collateral Manager acting on behalf of the Issuer that is, in the 

Manager’s commercially reasonable judgment, sufficient to attain compliance on the Final Effective 

Date with each of the Collateral Quality Tests, the Coverage Tests and the Portfolio Profile Test) 

copies of which shall be forwarded to the Issuer, the Trustee, the Collateral Manager, the Collateral 

Administrator and the Rating Agencies. The Collateral Manager, acting on behalf of the Issuer, shall 

request that the Rating Agencies confirm the Initial Ratings assigned to each Class of Rated Notes 

within 30 days after the Initial Effective Date. In the event that the Rating Agencies confirm the 

ratings assigned to any of the Class I Senior Notes, the Class II Senior Notes, the Class III 

Mezzanine Notes and/or the Class IV Mezzanine Notes as at the Closing Date are reduced or 

withdrawn, the Collateral Manager, acting on behalf of Issuer, may continue to purchase Additional 

Collateral Debt Obligations out of the Balance standing to the credit of the Additional Collateral 

Account up to the Business Day prior to the Payment Date falling immediately after the Initial 

Effective Date on which date, in the event that such ratings have not been reinstated, all amounts 

164

standing to the credit of the Additional Collateral Account shall be transferred to the Payment 

Account and shall be applied as Principal Proceeds in redemption of the Class I Senior Notes, the 

Class II Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes in 

accordance with the Priorities of Payment to the extent required to cause such ratings to be 

reinstated. 

4. Final Effective Date 

The ‘‘Final Effective Date’’ shall be the earlier of (a) the date designated for such purpose by 

the Collateral Manager, acting on behalf of the Issuer, by written notice to the Trustee, the Issuer 

and the Collateral Administrator pursuant to the Collateral Management Agreement, subject to each 

of the Portfolio Profile Tests, the Collateral Quality Tests and the Coverage Tests being satisfied as at 

such date and the Issuer having entered into binding commitments to acquire Collateral Debt 

Obligations the CDO Principal Balance of which equals or exceeds the Target Par Amount by such 

date and (b) the date which falls twelve months after the Closing Date, or if such day is not a 

Business Day, the immediately following Business Day. 

Within 20 days of the Final Effective Date the Issuer shall procure that the independent 

accountants appointed by the Issuer in accordance with the Collateral Management Agreement shall 

issue an Independent Accountants’ Report confirming details of the aggregate principal amount 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 forwarded to the 

Issuer, the Trustee, the Collateral Manager, the Collateral Administrator and the Rating Agencies. 

The Collateral Manager, acting on behalf of the Issuer, shall request that the Rating Agencies 

confirm the Initial Ratings assigned to each Class of Rated Notes within 30 days of the Final 

Effective Date. The Collateral Manager, acting on behalf of the Issuer, shall promptly following 

receipt of such report request that each of the Rating Agencies confirm the Initial Ratings of the 

Rated Notes of each Class. In the event that (i) the Initial Ratings of the Rated Notes of any Class 

are reduced or withdrawn by either Rating Agency or (ii) either or both of the Rating Agencies 

notifies the Issuer or the Collateral Manager on behalf of the Issuer that such Rating Agency intends 

to reduce or withdraw its Initial Rating of the Rated Notes of any Class then, in each case, all 

further purchases of Collateral Debt Obligations shall cease unless the Collateral Manager, acting on 

behalf of the Issuer, 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 cause confirmation or reinstatement of the Initial Rating of the Rated notes of each Class. 

However, where either or both of the Rating Agencies notifies the Issuer or the Collateral Manager 

on behalf of the Issuer that such Rating Agency intends to reduce or withdraw its Initial Ratings of 

the Rated Notes of any Class, the Collateral Manager, acting on behalf of the Issuer, is under no 

obligation to present a Rating Confirmation Plan to the Rating Agencies and may, in its discretion, 

acting on behalf of the Issuer, determine not to present such plan in favour of redemption of Rated 

Notes as described in the paragraph below and as provided pursuant to Condition 7(d)(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 

first Business Day prior to the Payment Date next following the Final Effective Date and any other 

Payment Date thereafter, the Balance standing to the credit of the Additional Collateral Account (if 

any) will be transferred to the Payment Account and shall be applied as Principal Proceeds, together 

with Interest Proceeds and other Principal Proceeds, in redemption of the Rated Notes in accordance 

with the Priorities of Payment to the extent required to cause the Initial Ratings assigned to the 

Rated Notes of each Class to be confirmed (following the application of Interest Proceeds pursuant 

to the Priorities of Payment). Upon confirmation by each of the Rating Agencies of the Initial 

Ratings assigned to the Rated Notes of each Class after the Final Effective Date, the transaction will 

be ‘‘effective’’ and the Balance standing to the credit of the Additional Collateral Account (if any) 

shall, upon the direction of the Collateral Manager, acting on behalf of the Issuer, be transferred to 

165

the Interest Account and/or to the Principal Account, for reinvestment in Substitute Collateral Debt 

Obligations, as applicable. 

5. Eligibility Criteria 

Each Collateral Debt Obligation shall, at the date a binding commitment to acquire such 

obligation by, or on behalf of, the Issuer is entered into, be required to satisfy each of the Eligibility 

Criteria set out below (collectively, the ‘‘Eligibility Criteria’’): 

(1) it is a Senior Secured Loan, a Second Lien Loan, a Mezzanine Obligation, or a Structured 

Finance Security that has been issued in connection with the securitisation of operating 

cash flows of a corporate obligor (and in the case of the latter, rated at least ‘‘BBB-’’ by 

S&P and ‘‘Baa3’’ by Moody’s and in respect of which a Rating Agency Confirmation 

(from S&P only) has been obtained); 

(2) it is either (i) denominated in Euro and is not convertible into or payable in any other 

currency or (ii) is denominated in United States dollars, Canadian dollars, Australian 

dollars, pounds sterling or any lawful currency (other than the Euro) of a Qualifying 

Country and is not convertible into or payable in any other currency and the Issuer, with 

effect from the date of acquisition thereof, enters into a Currency 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 Collateral Management Agreement; 

(3) it is an obligation to which a Moody’s Recovery Rate may be assigned pursuant to the 

‘‘Moody’s Minimum Weighted Average Recovery Rate Test’’ as described below (or any 

successor test which may replace it, subject to Rating Agency Confirmation); 

(4) it is not a lease; 

(5) it is not Margin Stock as defined under Regulation U issued by the Board of Governors 

of the Federal Reserve System; 

(6) it is not, at the time it is purchased, actually known to the Collateral Manager (after 

making reasonable enquiry) to be a Defaulted Obligation or a Credit Risk Obligation; 

(7) it has a Stated Maturity (providing for fixed payment of principal at or before its 

maturity) which falls prior to the Maturity Date of each Class of Notes; 

(8) it is capable of being sold, assigned or participated to the Issuer without any breach of 

applicable selling restrictions or of any contractual provision; 

(9) 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 by the Issuer; (iii) which may arise as a result of an 

undertaking to participate in a financial restructuring of a Senior Secured Loan, Second 

Lien Loan or Mezzanine Obligation where such undertaking is contingent upon the 

redemption in full of such Senior Secured Loan, Second Lien Loan or Mezzanine 

Obligation on or before the time by which the Issuer is obliged to enter into the 

restructured Senior Secured Loan, Second Lien Loan or Mezzanine Obligation and where 

the restructured Senior Secured Loan, Second Lien Loan or Mezzanine Obligation satisfies 

the Eligibility Criteria; (iv) in respect of Synthetic Securities and Participations only, which 

are subject to limited recourse provisions (for an amount not greater than par) similar to 

those set out in the Trust Deed; or (iv) which are owed to the agent bank in relation to 

the performance of its duties under a syndication obligation; 

(10) it is not, at the time of purchase, the subject of an offer of exchange, conversion, or tender 

by its obligor, or by any other person, for cash, securities or any other type of 

consideration (an ‘‘Offer’’) (other than for an obligation which is an eligible Collateral 

Debt Obligation meeting the Reinvestment Criteria described below), or to an optional 

redemption in whole by its obligor, and at the time of purchase is not convertible into 

equity at the option of the obligor; 

166

(11) in the case of any Collateral Debt Obligation under which the primary obligor is 

incorporated in the United States, its acquisition by the Issuer would not cause the Issuer 

to be deemed to have participated in a primary loan origination; 

(12) it is not, at the time it is purchased by the Issuer, actually known to the Issuer or the 

Collateral Manager (after making reasonable enquiry) that payments under it will, if made 

to the Issuer, be subject to any withholding tax in any jurisdiction unless either such 

withholding tax can be sheltered by application being made under the applicable double 

tax treaty or the obligor thereunder is required to make ‘‘gross-up’’ payments in respect of 

the full amount of any such tax withheld; 

(13) 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 interest 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 Collateral Manager 

on behalf of the Issuer) has notified the Trustee in the event that any Collateral Debt 

Obligation is a security not held through Euroclear, that the Issuer has taken such action 

as the Trustee may require to effect such security interest and has obtained the consent of 

the Trustee to hold such security otherwise than through Euroclear; 

(14) a Moody’s Rating and/or a Moody’s Rating Factor and an S&P Rating can be determined 

for such Collateral Debt Obligation based on the methodology set forth in the definitions 

of ‘‘Moody’s Rating’’ and ‘‘S&P Rating’’ and (i) the Moody’s Rating Factor for such 

Collateral Debt Obligation is not greater than 3490 and/or the Moody’s Rating for such 

Collateral Debt Obligation is at least ‘‘B3’’ and (ii) the S&P Rating for such Collateral 

Debt Obligation is at least ‘‘B-’’; 

(15) in the case of a Senior Secured Loan, a Second Lien Loan or a Mezzanine Obligation, it 

is not purchased at a price higher than (i) 102 per cent. of its par amount (such par 

amount including, for the avoidance of doubt, in the case of a Mezzanine Obligation, any 

accretion of the principal amount outstanding thereof) if the Coverage Tests are met or (ii) 

100.5 per cent. of its par amount (such par amount including, for the avoidance of doubt, 

in the case of a Mezzanine Obligation, any accretion of the principal amount outstanding 

thereof) if the Coverage Tests are not met; 

(16) in the case of a Collateral Debt Obligation with a purchase price which is less than 90 per 

cent. of its outstanding principal amount at the time of purchase by or on behalf of the 

Issuer, (i) the purchase price of such Collateral Debt Obligation is not less than 70 per 

cent. of its outstanding principal amount, (ii) the purchase funds to be applied to acquire 

such Collateral Debt Obligation represent the Sale Proceeds from a Collateral Debt 

Obligation sold at a price which is less than 90 per cent. of the outstanding principal 

amount thereof, and (iii) the difference between the price (expressed as a percentage of the 

outstanding principal amount) of the sold Collateral Debt Obligation and the price 

(expressed as a percentage of the outstanding principal amount) of the Collateral Debt 

Obligation to be acquired, if a positive number, does not exceed 10 per cent.; 

(17) it is not an interest only obligation; 

(18) it is not an obligation (except for a Mezzanine Obligation) that by its terms permits the 

Obligor thereunder to defer interest for credit-related reasons that would otherwise be paid 

on a current basis; 

(19) it is not a zero coupon obligation; 

(20) it is not a Current Pay Obligation; 

(21) it is an obligation that pays interest no less frequently than annually (unless it is a 

Deferring Mezzanine Obligation in respect of the portion thereof for which interest may be 

deferred thereunder); 

(22) it is not an obligation in respect of which interest payments are scheduled to decrease 

(although interest payments may decrease due to (i) unscheduled events such as a decrease 

of an index relating to a floating rate of interest, the change from a default rate of interest 

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to a non-default rate or an improvement in the obligor’s financial condition or (ii) a 

scheduled declining principal balance or as a result of satisfaction of contractual conditions 

set out in the relevant documentation for such obligation); 

(23) it must require the majority of the lenders to the obligor thereunder for any change in the 

principal repayment profile or interest applicable on such obligation, for the avoidance of 

doubt, excluding any changes originally envisaged in the loan documentation; 

(24) it has not been called for, and is not subject to a pending redemption; 

(25) it is not an obligation or security whose repayment is subject to substantial non-credit 

related risk (for example an obligation the payment of which is expressly contingent upon 

the non occurrence of a catastrophe, a hurricane bond, or a market value collateralised 

bond or debt obligation) as determined in the reasonable business judgment of the 

Collateral Manager unless Rating Agency Confirmation to its purchase is received; 

(26) it is an obligation of an obligor having (i) a principal place of business or significant 

operations, and (ii) its jurisdiction of incorporation, in a Qualifying Country (as 

determined by the Collateral Manager); 

(27) it is not an obligation pursuant to which future advances of principal may be required to 

be made by the Issuer; 

(28) the acquisition by the Issuer will not result in the imposition of stamp duty or stamp duty 

reserve tax payable by the Issuer, unless Rating Agency Confirmation is received in respect 

of such acquisition; and 

(29) it is a ‘‘financial asset’’ for the purposes of section 110 of the Irish Taxes Consolidation 

Act 1997, as amended. 

The subsequent failure of any Collateral Debt Obligation to satisfy any of the Eligibility Criteria 

shall not cause any such obligation to cease being a Collateral Debt Obligation so long as such 

obligation satisfied the Eligibility Criteria when the Issuer, or the Collateral Manager on behalf of the 

Issuer, entered into a binding agreement to purchase such obligation. 

6. Portfolio Profile Tests 

The Collateral Debt Obligations in aggregate shall be required to satisfy each of the Portfolio 

Profile Tests on the Final Effective Date and thereafter, to the extent required to do so under the 

Reinvestment Criteria. The Portfolio Profile Tests are as follows: 

(1) Collateral Debt Obligations with an aggregate Principal Amount of at least A276,000,000 

consist of Collateral Debt Obligations which constitute Senior Secured Loans; 

(2) Collateral Debt Obligations with an aggregate Principal Amount of not more than 

A24,000,000 consist of Second Lien Loans and Mezzanine Obligations; 

(3) Collateral Debt Obligations with an aggregate Principal Amount of not more than 

A60,000,000 are Non-Euro Obligations; 

(4) the aggregate Principal Amount of the Collateral Debt Obligations of any single obligor 

may not be more than A7,500,000; 

(5) the aggregate Principal Amount of the Collateral Debt Obligations that consist of 

Structured Finance Securities may not be more than A15,000,000; 

(6) the aggregate Principal Amount of the Collateral Debt Obligations that consist of 

Mezzanine Obligations of any single obligor may not be more than A4,500,000, save that 

in the case of up to three obligors of Mezzanine Obligations the aggregate Principal 

Amount of the Collateral Debt Obligations of each such obligor may equal up to 

A6,000,000 each; 

(7) Collateral Debt Obligations with an aggregate Principal Amount of not more than 10 per 

cent. of the CDO Principal Balance provide for payments of interest in cash less frequently 

than semi-annually but at least as frequently as annually; 

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cent. of the CDO Principal Balance bear interest at other than a floating rate of interest; 

(9) subject to the limits of the Bivariate Risk Table set out below, Collateral Debt Obligations 

with the aggregate Principal Amount of not more than 20 per cent. of the CDO Principal 

Balance may consist of Synthetic Securities and not more than 30 per cent. of the CDO 

Principal Balance may consist of Participations together with Synthetic Securities; 

Long-Term Senior 

Unsecured Debt 

Rating of Selling 

Institution/Synthetic 

Counterparty* 

Moody’s 

Bivariate Risk Table 

Long-Term Senior 

Unsecured Debt 

Rating of Selling 

Institution/Synthetic 

Counterparty* 

S&P 

Individual Third Party Aggregate Third Party 

Credit Exposure Credit Exposure 

Limit**% 

Limit**% 

Aaa AAA 20 30 

Aa1 AA+ 10 20 

Aa2 AA 10 20 

Aa3 AA- 10 20 

A1 A+ 5 10 

A2 A 5 5 

A3 A- 0 0 

* Synthetic Counterparties of Uncollateralised CLNs only 

** As a percentage of the Aggregate Collateral Balance (excluding Defaulted Obligations) the aggregate third party 

credit exposure limit shall be determined by reference to the aggregate of the third party credit exposure of all such 

Counterparties which share the same rating level or have a lower rating level, as indicated in the Bivariate Risk Table 

(10) Collateral Debt Obligations with an aggregate Principal Amount of not more than A45 

million of the CDO Principal Balance consist of Collateral Debt Obligations the obligors 

of which have a principal place of business outside the European Union; and 


cent. of the CDO Principal Balance consist of obligations with a Moody’s Rating of 

‘‘Caa1’’ or less or an S&P Rating of ‘‘CCC+’’ or less. 

For the purposes of the Portfolio Profile Tests, ‘‘Principal Amount’’ means: (i) in the case of any 

Collateral Debt Obligation denominated in a currency other than Euro, the Euro Equivalent of the 

principal amount of each such Collateral Debt Obligation; and (ii) in any other case, the principal 

amount of such Collateral Debt Obligation, provided always that the ‘‘Principal Amount’’ of any 

Defaulted Obligation shall be zero. 

If the rating assigned to any Selling Institution or Synthetic Counterparty is downgraded to 

below ‘‘A2’’, by Moody’s or ‘‘A’’ by S&P, the Collateral Manager shall notify the Rating Agencies 

and the Trustee of such downgrade. 

7. Management of the Portfolio 

7.1 Overview 

Subject to the terms of the Collateral Management Agreement, the Collateral Manager, acting 

on behalf of the Issuer, will purchase the Collateral Debt Obligations (including all Substitute 

Collateral Debt Obligations) and will monitor the performance and credit quality of the Collateral 

Debt Obligations on an ongoing basis. 

The Collateral Manager, acting on behalf of the Issuer, is permitted in certain circumstances and 

subject to certain requirements set forth in the Collateral Management Agreement (including 

confirmations from the Collateral Administrator), all as further described below, to sell Collateral 

Debt Obligations and Defaulted Equity Securities and to reinvest the Sale Proceeds thereof in 

Substitute Collateral Debt Obligations. The Collateral Administrator shall determine and shall provide 

confirmation of whether certain of the relevant criteria which are required to be satisfied in 

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connection with any such sale or reinvestment are satisfied or, if any such criteria are not satisfied, 

shall notify the Collateral Manager of the reasons and the extent to which such criteria are not so 

satisfied, following written request by the Collateral Manager, which request shall specify all necessary 

details of the Collateral Debt Obligation or Defaulted Equity Security to be sold and the proposed 

Substitute Collateral Debt Obligations to be purchased. 

Sale of Collateral Debt Obligations: Subject to the terms of the Collateral Management 

Agreement, each Collateral Manager, acting on behalf of the Issuer, may sell the category of 

Collateral Debt Obligations or Defaulted Equity Securities held by or on behalf of the Issuer for 

which it has management responsibility, in the following circumstances (and as further described 

below): 

(a) at any time: 

(i) any Defaulted Obligation; 

(ii) any Defaulted Equity Security; 

(iii) any Credit Risk Obligation; and 

(iv) any Credit Improved Obligation; 

(b) at any time during the Reinvestment Period: any Collateral Debt Obligation which is not a 

Credit Improved Obligation, a Credit Risk Obligation or a Defaulted Obligation provided 

that all such sales (measured by reference to the aggregate Principal Balance of the 

Collateral Debt Obligations (excluding any Credit Improved Obligations, Credit Risk 

Obligations or Defaulted Obligations) sold in that year (each such year being a year from, 

but excluding, the Closing Date or, as the case may be an anniversary thereof, to, but 

excluding, the next succeeding anniversary thereof)(and excluding any sales pursuant to 

paragraph (a) above)) do not exceed 20 per cent. of the CDO Principal Balance as at the 

most recent to have occurred of the Closing Date and each anniversary thereof. 

In addition, in the event that a Currency Swap Agreement is terminated in respect of an 

outstanding Non-Euro Obligation and no Replacement Currency Swap Agreement is entered into by 

the Issuer within 10 Business Days in accordance with the Collateral Management Agreement, then 

such Non-Euro Obligation shall be sold. 

Tax Subsidiary: In the event that the ownership of a Collateral Debt Obligation would result in 

the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject 

to the U.S. branch profits tax (in either case, such Collateral Debt Obligation becoming a ‘‘Taxed 

Collateral Debt Obligation’’), the Collateral Manager on behalf of and at the expense of the Issuer 

shall, within ten (10) Business Days of the date on which the Collateral Manager becomes aware or 

acquires knowledge that such Collateral Debt Obligation is a Taxed Collateral Debt Obligation, either 

(i) sell or otherwise dispose of all or a portion of such Taxed Collateral Debt Obligation in 

accordance with the provisions of the Trust Deed, or (ii) (subject to Rating Agency Confirmation) set 

up a special purpose subsidiary (a ‘‘Tax Subsidiary’’) to receive and hold any such Taxed Collateral 

Debt Obligation, unless the Issuer has received an opinion of nationally recognized counsel that the 

Issuer can hold such Taxed Collateral Debt Obligation directly without causing the Issuer to be 

treated as engaged in a trade or business in the United States for U.S. federal income tax purposes. 

The Issuer shall cause the purposes and permitted activities of any such subsidiary to be restricted 

solely to the acquisition, holding and disposition of such Taxed Collateral Debt Obligation and shall 

require such subsidiary to distribute 100% of the proceeds of any sale of such Taxed Collateral Debt 

Obligation, net of any tax liabilities, to the Issuer. 

Treatment of Sale Proceeds and Principal Proceeds: The proceeds of sale of Collateral Debt 

Obligations in the circumstances provided above, together with any other Principal Proceeds received, 

will be applied by the Collateral Administrator, acting on behalf of the Issuer, subject to and in 

accordance with the Priorities of Payment: 

(a) 

during the Non-Call Period: in the acquisition of Substitute Collateral Debt Obligations, 

subject to satisfaction of the Reinvestment Criteria and other conditions (as described 

further below) or in payment into the Principal Account pending such reinvestment, (save 

in the case of the proceeds of sale of any Collateral Debt Obligations above which 

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(b) 

represent accrued interest which the Collateral Manager, acting on behalf of the Issuer, 

designates as Interest Proceeds (in accordance with the Collateral Management Agreement 

and the Conditions) to be paid into the Interest Account); 

following expiry of the Non-Call Period but during the remainder of the Reinvestment Period: 

either, at the discretion of the Collateral Manager acting on behalf of the Issuer: 

(i) in the acquisition of Substitute Collateral Debt Obligations, subject to satisfaction of 

the Reinvestment Criteria and other conditions (as described further below), or in 

payment into the Principal Account pending such reinvestment (or, in the case of 

proceeds of sale representing accrued interest as referred to in paragraph (a) above, 

into the Interest Account in accordance with the Collateral Management Agreement 

and the Conditions); or 

(ii) in payment into the Principal Account, for disbursement on the next following 

Payment Date in redemption of each Classes of Notes in accordance with the 

Priorities of Payment; 

(c) following the expiry of the Reinvestment Period: 

(i) in the case of Unscheduled Principal Proceeds and Sale Proceeds designated for 

reinvestment by the Collateral Manager acting on behalf of the Issuer, either, at the 

discretion of the Collateral Manager (but subject to paragraphs 7.3 and 7.4 below), in 

the acquisition of Substitute Collateral Debt Obligations, subject to satisfaction of the 

Reinvestment Criteria and other conditions (as described further below) or payment 

into the Principal Account pending such reinvestment, or in payment into the 

Principal Account for disbursement on the next following Payment Date in 

redemption of each Class of Notes in accordance with the Priorities of Payment; and 

(ii) in the case of Principal Proceeds other than Unscheduled Principal Proceeds and Sale 

Proceeds (other than Sale Proceeds of Defaulted Obligations) designated for 

reinvestment by the Collateral Manager, in payment into the Principal Account, for 

disbursement on the next following Payment Date in redemption of each Class of 

Notes in accordance with the Priorities of Payment. 

Time scales for reinvestment of Principal Proceeds: On the final Payment Date of the 

Reinvestment Period, any Principal Proceeds (other than Unscheduled Principal Proceeds, Sale 

Proceeds of Credit Risk Obligations and Sale Proceeds of Credit Improved Obligations) shall be paid 

into the Principal Account for disbursement and redemption of the Notes in accordance with the 

Priorities of Payment, except if such proceeds were received less than 25 Business Days before such 

date, in which case they shall be paid into the Principal Account for such purpose on the second next 

Payment Date unless reinvested within 25 Business Days of receipt thereof. At any time (during or 

following the Reinvestment Period) Unscheduled Principal Proceeds and any Sale Proceeds (other 

than those relating to Defaulted Obligations) that have not been reinvested in Collateral Debt 

Obligations shall be applied to the Principal Account for disbursement in redemption of each Class of 

Notes in accordance with the Priorities of Payment on the second Payment Date following receipt of 

such proceeds. 

Treatment of Interest Proceeds: In the event that the Interest Reinvestment Test is not satisfied 

on the related Determination Date, Interest Proceeds will be applied, subject to and in accordance 

with the Priorities of Payment and the Conditions, in acquisition of Substitute Collateral Debt 

Obligations, subject to the satisfaction of the Reinvestment Criteria, or in payment into the Principal 

Account pending such reinvestment to the extent necessary to cause the Interest Reinvestment Test to 

be met if recalculated following such purchase or deposit, up to an amount not exceeding 25 per 

cent. of the Interest Proceeds that would otherwise be payable to the holders of the Subordinated 

Notes. 

7.2 Sales during the Reinvestment Period 

The Collateral Manager, acting on behalf of the Issuer, may dispose of any Collateral Debt 

Obligation during the Reinvestment Period which is not a Credit Improved Obligation, a Credit Risk 

Obligation or a Defaulted Obligation (which are permitted to be sold in the circumstances described 

171

in Sections 7.3 (Sale of Credit Improved Obligations), 7.4 (Sale of Credit Risk Obligations) and 7.5 

(Sale of Defaulted Obligations and Defaulted Equity Securities) below) and reinvest the Sale Proceeds 

thereof in Substitute Collateral Debt Obligations, such sale and reinvestment being subject to: 

(a) 

(b) 

(c) 

(d) 

no Event of Default having occurred which is continuing; 

the ratings assigned to the Class I Senior Notes and the ratings assigned to the Class II 

Senior Notes not having been reduced by one or more rating sub-categories and the 

ratings assigned to the Class III Mezzanine Notes and the ratings assigned to the Class IV 

Mezzanine Notes not having been reduced by two or more rating subcategories, in each 

case from the Initial Ratings thereof, or in any such case, not having been withdrawn by 

the Rating Agencies; 

the Collateral Manager using all reasonable efforts to reinvest the Sale Proceeds of the 

Collateral Debt Obligations in Substitute Collateral Debt Obligations within 15 Business 

Days of the sale thereof; 

the Collateral Administrator certifying that: 

(i) 

(ii) 

the sum of the aggregate of the Principal Balance of the Collateral Debt Obligations 

(excluding any Credit Improved Obligations, Credit Risk Obligations or Defaulted 

Obligations) sold in that year (each such year being a year from, but excluding, the 

Closing Date or, as the case may be an anniversary thereof, to, but excluding, the 

next succeeding anniversary thereof) when aggregated with the Principal Balances of 

the Collateral Debt Obligations (excluding any Credit Improved Obligations, Credit 

Risk Obligations or Defaulted Obligations) to be sold does not exceed 20 per cent. of 

the CDO Principal Balance as at the beginning of such year; and 

the Reinvestment Criteria will be satisfied upon such sale and reinvestment; and 

(e) 

the Collateral Manager certifying that, where applicable, it believes that the Sale Proceeds 

of the Collateral Debt Obligation sold can be reinvested in Collateral Debt Obligations 

with an aggregate Principal Balance equal to or greater than the Principal Balance of the 

Collateral Debt Obligation sold. 

7.3 Sale of Credit Improved Obligations 

Credit Improved Obligations may be sold by the Collateral Manager, acting on behalf of the 

Issuer, at any time subject to no Event of Default having occurred which is continuing. 

During the Non-Call Period, the Collateral Manager, acting on behalf of the Issuer, may apply 

the Sale Proceeds thereof to reinvestment in Substitute Collateral Debt Obligations or in payment 

into the Principal Account pending such reinvestment, such sale and reinvestment being subject to: 

(a) 

(b) 

(c) 

the Collateral Manager, acting on behalf of the Issuer, using all reasonable efforts to 

reinvest the Sale Proceeds of such Credit Improved Obligations in one or more Substitute 

Collateral Debt Obligations within 15 Business Days of the sale thereof; and 

the Collateral Manager certifying that it believes that the Sale Proceeds of the Credit 

Improved Obligation sold can be reinvested in Substitute Collateral Debt Obligations with 

an aggregate Principal Balance equal to or greater than the Principal Balance of the Credit 

Improved Obligation sold; and 

the Collateral Administrator certifying that the Reinvestment Criteria will be satisfied upon 

such sale and reinvestment. 

Following the expiry of the Non-Call Period, the Sale Proceeds of Credit Improved Obligations 

may, at the discretion of the Collateral Manager, acting on behalf of the Issuer, either be designated 

for reinvestment in Substitute Collateral Debt Obligations or deposited in the Principal Account and 

disbursed in redemption of the appropriate Classes of Notes in accordance with the Priorities of 

Payment on the first Payment Date following such sale (subject always to the conditions referred to 

above, except (b) in the case where such Sale Proceeds are designated for deposit in the Principal 

Account). Following the end of the Reinvestment Period, Credit Improved Obligations can be sold 

above par only. 

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7.4 Sale of Credit Risk Obligations 

Credit Risk Obligations may be sold at any time by the Collateral Manager, acting on behalf of 

the Issuer, subject to no Event of Default having occurred which is continuing. 

During the Non-Call Period, the Collateral Manager, acting on behalf of the Issuer, may apply 

the Sale Proceeds thereof to reinvestment in Substitute Collateral Debt Obligations or in payment 

into the Principal Account pending such reinvestment subject to: 

(a) 

(b) 

(c) 

the Collateral Manager, acting on behalf of the Issuer, using all reasonable efforts to 

reinvest the Sale Proceeds of such Credit Risk Obligations in one or more Substitute 

Collateral Debt Obligations not later than 45 Business Days following the sale of such 

Credit Risk Obligation; and 

the Collateral Manager certifying that it believes that the Sale Proceeds of the Credit Risk 

Obligation sold can be reinvested in Substitute Collateral Debt Obligations with an 

aggregate Principal Balance equal to or greater than the Sale Proceeds of the Credit Risk 

Obligation sold; and 



Following the expiry of the Non-Call Period, the Sale Proceeds of any Credit Risk Obligations 

may (subject always to the conditions referred to above and the proviso below), at the discretion of 

the Collateral Manager, acting on behalf of the Issuer, either (i) be designated for reinvestment in 

Substitute Collateral Debt Obligations or (ii) deposited in the Principal Account and disbursed in 

redemption of the appropriate Classes of Notes in accordance with the Priorities of Payment on the 

first Payment Date following such sale. 

7.5 Sale of Defaulted Obligations and Defaulted Equity Securities 

Defaulted Obligations or Defaulted Equity Securities may be sold by the Collateral Manager, 

acting on behalf of the Issuer, at any time following a Collateral Debt Obligation becoming a 

Defaulted Obligation or following receipt of a Defaulted Equity Security, as the case may be, subject 

to no Event of Default having occurred that is continuing and subject, further, to: 

(a) 

(b) 

(c) 

the Collateral Manager certifying that it believes that the Sale Proceeds of Defaulted 

Obligations and Defaulted Equity Security (as the case may be) shall be reinvested in 

Substitute Collateral Debt Obligations with an aggregate Principal Balance equal to or 

greater than such Sale Proceeds (provided that Sale Proceeds of a Defaulted Obligation 

may not be reinvested in Substitute Collateral Debt Obligations after the Reinvestment 

Period); 

the Collateral Manager using reasonable efforts to reinvest the Sale Proceeds of such 

Defaulted Obligation in one or more Substitute Collateral Debt Obligations not later than 

45 Business Days following the sale of such Defaulted Obligation (provided that Sale 

Proceeds of a Defaulted Obligation may not be reinvested in Substitute Collateral Debt 

Obligations after the Reinvestment Period); and 



During the Non-Call Period, the Collateral Manager, acting on behalf of the Issuer, shall use all 

reasonable efforts to apply the Sale Proceeds of any Defaulted Obligation or Defaulted Equity 

Security in the acquisition of Substitute Collateral Debt Obligations not later than 45 Business Days 

following the date on which such Sale Proceeds were received or in payment into the Principal 

Account pending such reinvestment. Following expiry of the Non-Call Period, such Sale Proceeds 

may, at the discretion of the Collateral Manager, acting on behalf of the Issuer, either be (i) (subject 

always to the conditions referred to above) designated for reinvestment in Substitute Collateral Debt 

Obligations (save in respect of the Sale Proceeds of a Defaulted Obligation after the Reinvestment 

Period), or (ii) deposited in the Principal Account and disbursed in redemption of the appropriate 

Classes of Notes in accordance with the Priorities of Payment on the first Payment Date following 

such sale. 

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7.6 Unscheduled Principal Proceeds 

The Collateral Manager, acting on behalf of the Issuer, shall during the Non-Call Period use all 

reasonable efforts to apply Unscheduled Principal Proceeds in the acquisition of Substitute Collateral 

Debt Obligations satisfying the Reinvestment Criteria (or in payment into the Principal Account 

pending such reinvestment) prior to the end of the Due Period in which such Unscheduled Principal 

Proceeds were received subject to no Event of Default having occurred which is continuing. Following 

expiry of the Non-Call Period, Unscheduled Principal Proceeds shall either be designated for 

reinvestment by the Collateral Manager, acting on behalf of the Issuer, at its discretion, acting on 

behalf of the Issuer, and applied either in the acquisition of Substitute Collateral Debt Obligations, 

subject to satisfaction of the Reinvestment Criteria, or payment into the Principal Account pending 

such reinvestment or, if not so designated, shall be disbursed as Principal Proceeds in accordance with 

the Priorities of Payment on the next following Payment Date. 

7.7 Scheduled Principal Proceeds 

During the Reinvestment Period but prior to the expiry of the Non-Call Period, the Collateral 

Manager, acting on behalf of the Issuer, shall use all reasonable efforts to apply Scheduled Principal 

Proceeds in the acquisition of Substitute Collateral Debt Obligations satisfying the Reinvestment 

Criteria (or in payment into the Principal Account pending such reinvestment) prior to the end of the 

Due Period in which such Scheduled Principal Proceeds were received subject to no Event of Default 

having occurred which is continuing. After the expiry of the Non-Call Period but prior to the end of 

the Reinvestment Period, any Scheduled Principal Proceeds shall be, subject to and in accordance 

with the Priorities of Payment, at the discretion of the Collateral Manager, acting on behalf of the 

Issuer, either designated for reinvestment in Substitute Collateral Debt Obligations and applied either 

in the acquisition of Substitute Collateral Debt Obligations, subject to satisfaction of the 

Reinvestment Criteria, or payment into the Principal Account pending such reinvestment or, if not so 

designated, shall be applied to redeem the Class I Senior Notes in whole or in part and, following the 

redemption in full thereof, to redeem the Class II Senior Notes in whole or in part on a pro rata 

basis and, following the redemption in full thereof, to redeem the Class III Mezzanine Notes in whole 

or in part on a pro rata basis and, following the redemption in full thereof, to redeem the Class IV 

Mezzanine Notes in whole or in part on a pro rata basis until the redemption in full thereof. 

After the expiry of the Reinvestment Period, any Scheduled Principal Proceeds shall be paid into 

the Principal Account and disbursed in redemption of each Class of Notes in accordance with the 

Priorities of Payment on the second next following Payment Date. 

7.8 Reinvestment Criteria 

Pursuant to the Collateral Management Agreement and subject to and in accordance with the 

Priorities of Payment, (i) during the Reinvestment Period but prior to the expiry of the Non-Call 

Period, any Principal Proceeds shall be applied in the acquisition of Substitute Collateral Debt 

Securities, and (ii) after the expiry of the Non-Call Period but prior to the end of the Reinvestment 

Period, any Principal Proceeds may, at the discretion of the Collateral Manager, be reinvested in 

Substitute Collateral Debt Obligations. 

At any time after the end of the Reinvestment Period, Unscheduled Principal Proceeds and Sale 

Proceeds (other than Sale Proceeds of Defaulted Obligations) may, at the discretion of the Collateral 

Manager, acting on behalf of the Issuer, be reinvested in Substitute Collateral Debt Obligations if, in 

each case, after such reinvestment, the criteria set out below (the ‘‘Reinvestment Criteria’’) are 

satisfied. The Reinvestment Criteria are as follows: 

(a) 

(b) 

no Event of Default has occurred that is continuing at the time of such purchase; 

each of the Coverage Tests, the Collateral Quality Tests and the Portfolio Profile Tests are 

satisfied following such reinvestment; or (unless otherwise stated below), if any of such 

tests were not satisfied immediately prior to such reinvestment, each such test is maintained 

or improved following such reinvestment. Each such test shall be calculated by reference to 

their respective levels immediately prior to the applicable sale or repayment or prepayment 

of the relevant Collateral Debt Obligations and following reinvestment, as set out below: 

174

(i) if each Coverage Test is not satisfied, the related Coverage Ratio will be maintained 

or increased after giving effect to such reinvestment; 

(ii) if the Maximum Weighted Average Life Test is not satisfied, then the Portfolio 

Weighted Average Life will be the same or less, after giving effect to such 

reinvestment; 

(iii) if the Maximum Portfolio Rating Test is not satisfied, then the Average Portfolio 

Rating will be maintained or improved after giving effect to such reinvestment; 

(iv) if the Moody’s Minimum Weighted Average Recovery Rate Test is not satisfied, then 

the Moody’s Recovery Rate will be maintained or improved after giving effect to 

such reinvestment or acquisition; 

(v) if the S&P Minimum Weighted Average Recovery Rate Test is not satisfied, then the 

S&P Minimum Weighted Average Recovery Rate will be maintained or improved 

after giving effect to such reinvestment; 

(vi) if, during the Reinvestment Period, the S&P CDO Monitor Test was not satisfied 

immediately prior to such reinvestment, then such test result must be maintained or 

improved (and in the case of reinvestment of Sale Proceeds from Credit Improved 

Obligations, such test must be satisfied) after giving effect to such reinvestment; 

(vii) if, following reinvestment of Sale Proceeds of a Credit Improved Obligation, the 

Portfolio Profile Test is satisfied; and 

(viii) if the Minimum Diversity Test is not satisfied, immediately prior to receipt of such 

Principal Proceeds, then the Diversity Score as calculated immediately prior to receipt 

of such Principal Proceeds will be maintained or improved after giving effect to such 

reinvestment; 

(c) all Sale Proceeds of Credit Risk Obligations, Defaulted Obligations and Defaulted Equity 

Security (as the case may be) shall be reinvested in Substitute Collateral Debt Obligations 

with an aggregate Principal Balance equal to or greater than such Sale Proceeds (provided 

that Sale Proceeds of a Defaulted Obligation may not be reinvested in Substitute Collateral 

Debt Obligations after the Reinvestment Period); 

(d) the aggregate Principal Balance of all Collateral Debt Obligations acquired with the Sale 

Proceeds, repayments or prepayments from any Collateral Debt Obligations (other than a 

Credit Risk Obligation, Defaulted Obligation or Defaulted Equity Security) is equal to or 

greater than the aggregate Principal Balance of those Collateral Debt Obligations sold, 

repaid or prepaid, as the case may be; 

(e) the Collateral Debt Obligation to be purchased satisfies the Eligibility Criteria; 

(f) 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 interest 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 Collateral Manager 

on behalf of the Issuer) has notified the Trustee in the event that any Collateral Debt 

Obligation is a security not held through Euroclear, that the Issuer has taken such action 

as the Trustee may require to effect such security interest and has obtained the consent of 

the Trustee to hold such security otherwise than through Euroclear; 

(g) the purchase price of the relevant Substitute Collateral Debt Obligation to be acquired 

with the Sale Proceeds of any Collateral Debt Obligation, is equal to or less than such 

Sale Proceeds reduced by any related hedging termination payment; and 

(h) the Sale Proceeds of a Collateral Debt Obligation will be equal to or greater than the 

purchase price of the Substitute Collateral Debt Obligation together with any related 

upfront hedging payment; 

provided that, after the end of the Reinvestment Period, the following additional criteria must also be 

satisfied: 

(a) the Class IV Par Value Test is equal to or greater than 107.4 per cent. 

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(b) in the case of proceeds resulting from the sale of Credit Risk Obligations, all such 

proceeds must be reinvested in Collateral Debt Obligations with the same or a higher 

credit rating and with the same or earlier Stated Maturity; 

(c) the Coverage Tests are satisfied (both immediately before and immediately after such 

reinvestment); 

(d) the Maximum Portfolio Rating Test is satisfied (both immediately before and immediately 

after such reinvestment); 

(e) the Maximum Weighted Average Life Test is satisfied (both immediately before and 

immediately after such reinvestment); 

(f) Collateral Debt Obligations with an aggregate Principal Amount of not more than 

A15,000,000 are obligations with a Moody’s Rating of ‘‘Caa1’’ or less, or an S&P Rating 

of ‘‘CCC+’’ or less; 

(g) in respect of any Sale Proceeds from Credit Improved Obligations or Unscheduled 

Principal Proceeds must be reinvested in Substitute Collateral Debt Obligations with an 

aggregate Principal Balance equal to or greater than such proceeds; 

(h) immediately prior to such reinvestment, both (i) the Initial Ratings by Moody’s on the 

Class I Senior Notes and Class II Senior Notes have been maintained and have not been 

withdrawn and (ii) the ratings by Moody’s on the Class III Mezzanine Notes and Class IV 

Mezzanine Notes have not been downgraded by more than one sub-category below the 

Initial Ratings thereof and have not been withdrawn; and 

(i) if, after the Reinvestment Period, in relation to Unscheduled Principal Proceeds and Sale 

Proceeds from Credit Improved Obligations, the S&P CDO Evaluator Test was not 

satisfied immediately prior to such reinvestment such test result must be maintained or 

improved after giving effect to such reinvestment; 

7.9 Designation for Reinvestment 

The Collateral Manager will notify the Issuer and the Collateral Administrator of the details of 

all Unscheduled Principal Proceeds and Sale Proceeds (other than Sale Proceeds of Defaulted 

Obligations) which it has designated for reinvestment upon receipt thereof and will confirm the extent 

to which such amounts remain designated for reinvestment two Business Days prior to each 


7.10 Collateral Enhancement Obligations 

The Collateral Manager, acting on behalf of the Issuer, may from time to time purchase 

Collateral Enhancement Obligations independently or as part of a unit with Collateral Debt 

Obligations being so purchased, provided that such Collateral Enhancement Obligations may not 

constitute Margin Stock. The amounts which may be applied in the acquisition of Collateral 

Enhancement Obligations shall be limited to the Balance standing to the credit of the Collateral 

Enhancement Account from time to time. To the extent that the Balance standing to the credit of the 

Collateral Enhancement Account from time to time is insufficient to exercise rights under Collateral 

Enhancement Obligations, the Collateral Manager, acting on behalf of the Issuer, may, at its 

discretion, pay amounts required in order to fund such purchase or exercise (each such amount a 

‘‘Collateral Manager Advance’’) pursuant to the terms of the Collateral Management Agreement. 

Collateral Manager Advances may also be made to the Issuer for general purposes. Each Collateral 

Manager Advance may bear interest provided that such rate of interest shall not exceed a rate of 

EURIBOR plus one per cent. per annum. All such Collateral Manager Advances shall be repaid out 

of the Balance standing to the credit of the Collateral Enhancement Account from time to time and 

to the extent not repaid therefrom, out of Interest Proceeds and Principal Proceeds on each Payment 

Date pursuant to paragraph (X) of Condition 3(c)(i) (Application of Interest Proceeds) and paragraph 

(P) of Condition 3(c)(ii) (Application of Principal Proceeds). The Collateral Manager, acting on behalf 

of the Issuer, may sell Collateral Enhancement Obligations at any time and shall procure that the 

proceeds of sale thereof together with all other Distributions received in respect of Collateral 

Enhancement Obligations are paid into the Collateral Enhancement Account. 

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7.11 Exercise of Warrants and Options 

The Collateral Manager, acting on behalf of the Issuer, may exercise a warrant or option 

attached to a Collateral Debt Obligation or comprised in a Collateral Enhancement Obligation and 

shall request the Trustee to instruct the Account Bank to make any necessary payment pursuant to a 

duly completed Acquisition/Disposal Order (as defined in the Collateral Management Agreement). 

7.12 Margin Stock 

The Collateral Management Agreement requires that the Issuer or the Collateral Manager, 

acting on behalf of the Issuer, will sell any Collateral Debt Obligation, Defaulted Equity Security or 

Collateral Enhancement Obligation which is, or at any time becomes, Margin Stock as soon as 

practicable following such event. 

7.13 Redemption or Purchase of the Notes 

In the event of an optional redemption of the Notes in whole or upon receipt of notification 

from the Trustee of the enforcement of the security over the Collateral or the purchase of the Notes 

of any Class by the Issuer, the Issuer, or the Collateral Manager acting on behalf of the Issuer, 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 foregoing 

limitations, subject always to any limitations or restrictions set out in the Conditions of the Notes 

and the Trust Deed. 

7.14 Block Trades 

The requirements set out in this Section 7 (Management of the Portfolio) shall be deemed to be 

satisfied upon any sale and/or purchase of Collateral Debt Obligations on any day in the event that 

such Collateral Debt Obligations satisfy such requirements in aggregate rather than on an individual 

basis. 

7.15 Eligible Investments 

The Collateral Manager, acting on behalf of the Issuer, may from time to time purchase Eligible 

Investments out of the Balances standing to the credit of the Accounts, provided that no such Eligible 

Investment may be purchased at a price above par and provided further that, such Eligible 

Investment shall not have a maturity beyond the next Payment Date if the Collateral Manager, acting 

on behalf of the Issuer, determines that such Eligible Investment shall be used to make payments 

pursuant to the Priorities of Payment on such Payment Date. 

7.16 Synthetic Securities 

Synthetic Securities may not be acquired by the Issuer and comprise a part of the Portfolio 

unless and until the programme of activities of Natexis Asset Management is extended by the 

Autorité des Marches Financier (or any relevant successor authority) to cover the management of 

these assets, in accordance with applicable French law and regulations (or any other Collateral 

Manager of the Issuer has such regulatory authority in respect of such assets at the relevant time). 

Subject as provided in the preceding paragraph, the Collateral Manager, acting on behalf of the 

Issuer, may from time to time acquire Collateral Debt Obligations which are Synthetic Securities. A 

Synthetic Security is a security denominated in Euro which may be a swap transaction including, 

without limitation, a credit default swap, total return swap, debt security, security issued by a trust or 

similar vehicle or other investment (excluding any equity investment) purchased from or entered into 

by the Issuer with a Synthetic Counterparty, the returns on which (as determined by the Collateral 

Manager) are linked to the credit of one or more Reference Obligations but which may provide for a 

different maturity, payment dates, interest rate, credit exposure or other credit or non-credit related 

characteristics than such Reference Obligation(s). 

The entry into, or acquisition of, any Synthetic Security will be subject to Rating Agency 

Confirmation from S&P, which confirmation shall specify whether any Synthetic Security entered into 

or acquired shall be treated as a Senior Secured Loan, a Second Lien Loan or a Mezzanine 

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Obligation. For the avoidance of doubt, a Currency Swap Obligation shall not constitute a Synthetic 

Security if such synthetic security provides for payments to the Issuer denominated in Euro. 

As part of the acquisition or entry into of a Synthetic Security which is an unfunded credit 

swap transaction, the Issuer or the Collateral Manager, acting on behalf of the Issuer, shall be 

required to provide Synthetic Collateral the principal amount of which is not less than 100 per cent. 

of the notional amount of 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 the Synthetic Security. Subject as provided below, the Issuer or the 

Collateral Manager, acting on behalf of the Issuer, may purchase such Synthetic Collateral 

notwithstanding that it may not satisfy the Eligibility Criteria (provided that such Synthetic Collateral 

may not include Margin Stock or any Security the acquisition of which would cause the breach of 

applicable selling or transfer restrictions or of applicable Irish laws relating to the offering of 

securities or of collective investment schemes). For the purposes of the Collateral 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 posted. The Issuer shall grant 

a first priority security interest in such Synthetic Collateral to the related Synthetic Counterparty and 

a second priority security interest to the Trustee for the benefit of the Secured Parties and shall cause 

the Synthetic Counterparty holding such Synthetic Collateral to be notified of and acknowledge such 

second priority security interest. 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: 

(i) Sale Proceeds in the event that the Synthetic Security was sold, assigned or terminated at 

the option of the Issuer; or 

(ii) Unscheduled Principal Proceeds in the event that the Synthetic Security was subject to an 

early termination other than by or on behalf of the Issuer; or 

(iii) Scheduled Principal Proceeds in the event that the Synthetic Security expires at its 

scheduled maturity. 

Interest (or amounts equivalent thereto) 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) to 

the extent that it satisfies the Eligibility Criteria, at the discretion of the Collateral Manager, be 

retained and shall constitute a Collateral Debt Obligation or (b) in all other circumstances be sold as 

soon as reasonably practicable. 

For purposes of the Coverage Tests, the Collateral Quality Tests (other than the Diversity Test, 

the Moody’s Minimum Weighted Average Recovery Rate Test and the S&P Minimum Weighted 

Average Recovery Rate Test but, for the avoidance of doubt, including the Maximum Portfolio 

Rating 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 Collateral Manager determines otherwise and receives Rating Agency 

Confirmation in respect of such determination. 

For purposes of the Diversity Test, the Portfolio Profile Test (except in respect of criterion 9 

concerning the maximum percentage of Synthetic Securities) the Moody’s Recovery Rate and the 

Moody’s 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) and not of the Synthetic Security, unless the Collateral Manager determines otherwise and 

receives Rating Agency Confirmation in respect of such determination. 

The interest rate or coupon of a fixed rate Synthetic Security shall be a fraction, expressed as a 

percentage and annualised, the numerator of which is the current stated periodic payments of interest 

scheduled to be received by the Issuer from the related Synthetic Counterparty and the denominator 

of which is the notional balance of such Synthetic Security. The interest rate or spread of a floating 

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ate Synthetic Security shall be a fraction, expressed as a percentage and annualised, the numerator of 

which is the current stated periodic spread over EURIBOR scheduled to be received by the Issuer 

from the related Synthetic Counterparty and the denominator of which is the notional balance of 

such Synthetic Security. 

In the event that any Deliverable Obligations are received by the Issuer, the Collateral Manager, 

acting on behalf of the Issuer: 

(a) may, to the extent that such obligations satisfy the Eligibility Criteria, designate such 

Deliverable Obligation as a Collateral Debt Obligation; or 

(b) shall, in all other circumstances, sell or procure the sale thereof as soon as reasonably 

practicable. 

For the purposes of the above, ‘‘Deliverable Obligations’’ shall mean an obligation referred to in 

a Synthetic Security as the ‘‘Deliverable Obligation’’ which is deliverable upon termination prior to 

the scheduled maturity thereof. 

7.17 Sale/Purchase Contracts 

The Issuer or the Collateral Manager, acting on behalf of the Issuer, may only enter into 

contracts for sale and/or purchase of Collateral Debt Obligations with counterparties who are rated 

by Moody’s lower than ‘‘A2’’ and by S&P lower than ‘‘A’’ in respect of their long-term senior 

unsecured debt and ‘‘P-1’’ by Moody’s and ‘‘A-1’’ by S&P in respect of their short-term senior 

unsecured debt if any 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. The Issuer or the 

Collateral Manager, acting on behalf of the Issuer, may, however, enter into contracts for sale and/or 

purchase of Collateral Debt Obligations which have a settlement date at such time which is further 

from the date of entry into such contract than the customary market settlement period with 

counterparties who are rated by Moody’s equal to or above ‘‘A2’’ and by S&P equal to or above 

‘‘A’’ in respect of their long-term senior unsecured debt and ‘‘P-1’’ by Moody’s and ‘‘A-1’’ by S&P in 

respect of their short-term senior unsecured debt provided that the settlement date of any such 

contract must be within 30 days of entry into such contract. 

7.18 Participations 

Pursuant to the Collateral Management Agreement, the Collateral Manager, acting on behalf of 

the Issuer, may from time to time acquire Collateral Debt Obligations from Selling Institutions by 

way of Participations. The Collateral Manager will use its reasonable endeavors to procure that the 

Participations entered into by the Issuer after the Closing Date will be in a form substantially similar 

to that recommended by the Loan Market Association or the Loan Syndication and Trading 

Association, Inc. and will contain limited recourse and non petition provisions similar to those 

contained in the Trust Deed. Rating Agency Confirmation must first be obtained in the case of 

Participations, where the Selling Institution (the ‘‘first Selling Institution’’) derives its interest in such 

Participation from another Selling Institution (the ‘‘second Selling Institution’’). At the time such 

Participation is acquired, the percentage of the CDO Principal Balance that represents Participations 

entered into by the Issuer with a single Selling Institution, shall not, when combined with the 

percentage of the aggregate Principal Amount of Collateral Debt Obligations that represent Synthetic 

Securities entered into with such institution exceed the applicable Individual Third Party Credit 

Exposure Limit set out in the Individual Bivariate Risk Table determined by reference to the credit 

rating of such Selling Institution (or any guarantor thereof). At the time such Participation is 

acquired, the aggregate percentage of the CDO Principal Balance that represents all Participations 

and Synthetic Securities entered into by the Collateral Manager acting on behalf of the Issuer, with 

counterparties having the same credit rating will not exceed the applicable Aggregate Third Party 

Credit Exposure Limit set out in Aggregate Bivariate Risk Table for such credit rating. If the Selling 

Institution selling the Participation continues, after such sale, to derive its interest through a 

participation or series of participations then each entity (excluding the relevant borrower) through 

which the first Selling Institution, directly or indirectly, derives its interest in the relevant Collateral 

Debt Obligation shall be treated as a Selling Institution and the relevant Collateral Debt Obligation 

shall be treated as a single participation (with a Principal Balance equal to that of the relevant 

Participation) entered into by the Collateral Manager, acting on behalf of the Issuer, with a Selling 

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Institution, having a credit rating prescribed by the relevant Rating Agency as the combined rating 

with respect to the combination of the ratings of the entities (excluding the relevant borrower) from 

whom the Issuer, directly or indirectly, derives its interest in the relevant Collateral Debt Obligation. 

7.19 Purchase of Collateral Debt Obligations 

The Collateral Debt Obligations will be purchased by the Issuer or by the Collateral Manager 

acting on its behalf. It is anticipated that the Collateral Manager will purchase Collateral Debt 

Obligations in the secondary market on behalf of the Issuer from dealers unaffiliated with the 

Collateral Manager or from Affiliates of the Collateral Manager, or will sell Collateral Debt 

Obligations to the Issuer from its inventory or the inventories of its Affiliates. See ‘‘Risk Factors – 

Certain Conflicts of Interest’’. 

The Issuer or the Collateral Manager acting on its behalf, may acquire interests in Collateral 

Debt Obligations which are loans either directly (by way of novation or assignment) (each an 

‘‘Assignment’’) or indirectly (by way of participation or sub-participation) (each a ‘‘Participation’’). 

For a discussion of certain considerations relating to Assignments and Participations see ‘‘Risk 

Factors – Participations and Assignments’’. 

8. Currency Swap Obligations 

8.1 Payment Obligations 

The Issuer or the Collateral Manager, acting on behalf of the Issuer, may, purchase any Non- 

Euro Obligations, provided that on the date of acquisition of each Non-Euro Obligation the Issuer 

enters into a Currency Swap Transaction under the Currency Swap Agreement pursuant to which 

(save as provided in the last paragraph of this section 8.1 (Payment Obligations)): 

(a) on the effective date of such transaction (envisaged, pursuant to the Collateral 

Management Agreement, to take place within three Business Days of the date of 

acquisition of the Non-Euro Obligation, but in any case before the next Payment Date), 

the Issuer pays to the Currency Swap Counterparty an initial exchange amount in Euros 

calculated at the Currency Swap Transaction Exchange Rate in exchange for payment by 

the Currency Swap Counterparty of an initial exchange amount in the relevant currency 

equal to the purchase price of such Non- Euro Obligation (the ‘‘Non-Euro Notional 

Amount’’). 

(b) (subject as provided in paragraph (e) below) on the scheduled date of termination of such 

transaction, which shall be the date falling two Business Days after the date on which the 

Non- Euro Obligation is scheduled to mature, the Issuer pays to the Currency Swap 

Counterparty a final exchange amount equal to the amount payable upon maturity of the 

Non-Euro Obligation (as may have been reduced in accordance with any amortisation or 

increased in an amount corresponding to the amount by which the aggregate outstanding 

principal amount of the relevant Non-Euro Obligation may be increased in accordance 

with the terms and conditions of such Non-Euro Obligation) in the relevant currency in 

exchange for payment by the Currency Swap Counterparty of a final exchange amount (as 

may have been reduced in accordance with any amortisation or increased in an amount 

corresponding to the amount by which the aggregate outstanding principal amount of the 

relevant Non-Euro Obligation may be increased in accordance with the terms and 

conditions of such Non-Euro Obligation) denominated in Euro, such final exchange 

amount to be converted into Euro at the Currency Swap Transaction Exchange Rate; 

(c) two Business Days following the actual day of receipt of each scheduled payment of 

interest on the related Non-Euro Obligation, the Issuer pays in the applicable currency of 

the Non- Euro Obligation a coupon on the Non-Euro Notional Amount (as may be 

increased or decreased from time to time in accordance with the terms of the relevant 

Currency Swap Agreements) of the Currency Swap Agreement, calculated by reference to 

the applicable floating rate plus a margin in respect of interest on the underlying Non- 

Euro Obligation and the Currency Swap Counterparty pays to the Issuer in Euro a 

coupon calculated by reference to six-month EURIBOR plus a margin based on the Euro 

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(d) 

(e) 

notional equivalent of the Non-Euro Notional Amount (as may be increased or decreased 

from time to time in accordance with the terms of the relevant Currency Swap 

Agreements); 

in the case of a sale in whole of a Non-Euro Obligation (other than in the circumstances 

described in paragraph (e) below), two Business Days following such sale, the Currency 

Swap Transaction or corresponding part shall be terminated and the Issuer shall pay to 

the Currency Swap Counterparty the Sale Proceeds arising from such sale up to an 

amount not exceeding the Non-Euro Notional Amount (as may have been reduced in 

accordance with any amortisation or increased in an amount corresponding to the amount 

by which the aggregate outstanding principal amount of the relevant Non-Euro Obligation 

may be increased in accordance with the terms and conditions of such Non-Euro 

Obligation) of the related Currency Swap Transaction and the Currency Swap 

Counterparty shall pay to the Issuer a Euro amount equal to the Non-Euro Sale Proceeds 

so paid to the Currency Swap Counterparty converted into Euro at the Currency Swap 

Transaction Exchange Rate minus any termination payment payable to the Currency Swap 

Counterparty as a result of the termination (whether in whole or in part) of such Currency 

Swap Transaction. For all amounts exceeding the Non-Euro Notional Amount (as may 

have been reduced in accordance with any amortisation or increased in an amount 



conditions of such Non-Euro Obligation) of the related Currency Swap Transaction, the 

Sale Proceeds thereof shall be converted into Euro, at the prevailing spot rate of exchange 

determined by the Collateral Manager, acting on behalf of the Issuer, and paid into the 

Principal Account. No termination payment shall be payable by the Currency Swap 

Counterparty to the Issuer in such circumstances; 

promptly after the Collateral Manager, acting on behalf of the Issuer, or the Currency 

Swap Counterparty becomes aware that a Non-Euro Obligation has become a Defaulted 

Obligation, it shall notify the other of the same and immediately upon receipt of such 

notice a period of one year or such other period as may be designated by the Issuer (after 

considering the recommendation of the Collateral Manager and the approval of the 

Currency Swap Counterparty) for recovery of amounts due in respect of such Non-Euro 

Obligation the subject thereof (the ‘‘Recovery Period’’), shall begin. During the Recovery 

Period, the Issuer shall pay to the Currency Swap Counterparty any amounts received by 

the Issuer in the relevant currency in respect of the Defaulted Obligation (up to an amount 

not exceeding, in aggregate, the Non-Euro Notional Amount of the related Currency Swap 

Transactions, save for any Currency Swap Transaction for mezzanine assets where the 

Non-Euro Notional Amount may be adjusted in accordance with the increase or decrease 

in the outstanding principal amount of such assets) and the Currency Swap Counterparty 

shall in return pay to the Issuer a Euro amount equal to such recoveries converted into 

Euro at the Currency Swap Transaction Exchange Rate. Any payments received by the 

Issuer in respect of the Defaulted Obligation in excess of the Non-Euro Notional Amount 

shall be paid to the Currency Swap Counterparty who shall in return pay to the Issuer a 

Euro amount equal to such excess recoveries converted into Euro at the then prevailing 

spot rate of exchange, determined in accordance with the terms of the relevant Currency 

Swap Agreement. The Collateral Manager, acting on behalf of the Issuer, may sell a 

Defaulted Obligation at any time during the Recovery Period, provided that if all or part 

of such Defaulted Obligation is still outstanding on the date which falls one month prior 

to the end of the Recovery Period, the Collateral Manager, acting on behalf of the Issuer, 

shall (subject to and in accordance with the Collateral Management Agreement) use 

reasonable efforts to sell such Defaulted Obligation and to accept and settle (on behalf of 

the Issuer) any firm offer (including any firm offer from the Currency Swap Counterparty 

as described below) to buy such Defaulted Obligation by no later than the expiry of the 

Recovery Period. If the Collateral Manager, acting on behalf of the Issuer, is unable to sell 

the Defaulted Obligation by the date which falls one month prior to the end of the 

Recovery Period, the Currency Swap Counterparty will have the option to make a bid on 

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the Defaulted Obligation at the fair market value thereof. If no higher bids are received by 

the Collateral Manager by the end of the Recovery Period, acting on behalf of the Issuer, 

the Defaulted Obligation will be sold to the Currency Swap Counterparty at a price equal 

to such fair market value. Following any sale of the Defaulted Obligation, the Currency 

Swap Transaction shall be terminated and no termination payments or unwind costs shall 

be payable by either party and the Issuer shall pay the Sale Proceeds thereof to the 

Currency Swap Counterparty and the Currency Swap Counterparty will pay to the Issuer 

an amount equal to such Sale Proceeds converted into Euro at the Currency Swap 

Transaction Exchange Rate. If the Collateral Manager, acting on behalf of the Issuer is 

unable to sell the Defaulted Obligation prior to the end of the Recovery Period, the 

Currency Swap Transaction shall be cancelled two Business Days after the expiry of the 

Recovery Period with no termination payments being payable by either party and, to the 

extent that after expiry of the Recovery Period the Collateral Manager, acting on behalf of 

the Issuer, is able to sell the Defaulted Obligation, the Sale Proceeds thereof shall be 

converted into Euro, at the prevailing spot rate of exchange determined by the Collateral 

Manager, acting on behalf of the Issuer, and paid into the Principal Account. 

Any amounts in the nature of interest or principal which would constitute Principal 

Proceeds if converted into Euro in excess of the relevant Non-Euro Notional Amount (as 

may have been reduced in accordance with any amortisation or increased in an amount 



conditions of such Non-Euro Obligation) shall be (i) converted into Euro by the Issuer at 

the then prevailing spot rate of exchange determined by the Collateral Manager, acting on 

behalf of the Issuer, and paid to the Currency Swap Counterparty in an amount equal to 

such amount of interest and principal denominated in Euro following conversion into Euro 

at the Currency Swap Transaction Exchange Rate to the extent that any payment has been 

made by the Currency Swap Counterparty prior to such Non-Euro Obligation becoming a 

Defaulted Obligation and in respect of which a corresponding payment had not been made 

by the Issuer and (ii) converted into Euro, at the then prevailing spot rate of exchange 

determined by the Collateral Manager, acting on behalf of the Issuer, in all other cases. 

(f) in the case of any other prepayment in respect of the Currency Swap Transaction 

(including such prepayment as may have been made in accordance with any amortisation), 

the Issuer shall pay to the Currency Swap Counterparty all amounts so received in respect 

of such prepayment (the ‘‘Prepayment Receipts’’) and the Currency Swap Counterparty 

shall pay to the Issuer a Euro amount equal to such Prepayment Receipts converted at the 

Currency Swap Transaction Exchange Rate and the Currency Swap Transaction shall 

terminate (in the case of a prepayment in whole, in whole or, in the case of a prepayment 

in part, including without limitation pursuant to any amortisation, in part). No 

termination payment shall be payable by either party in such circumstances. 

The Issuer shall only be obliged to pay to any Currency Swap Counterparty such amounts as it 

actually receives in respect of any Non-Euro Obligation and shall not under any circumstances be 

obliged to pay any additional amounts to the Currency Swap Counterparty in respect thereof. 

All amounts received by the Issuer in respect of Non-Euro Obligations shall be paid into the 

appropriate Currency Account. Amounts payable by the Issuer to the Currency Swap Counterparty 

upon termination of any Currency Swap Transaction in the circumstances where such termination 

payment is due will be paid out of (i) first, the amounts standing to the credit of the applicable 

Currency Account and (ii) secondly, out of Interest Proceeds or Principal Proceeds available for such 

purposes in accordance with the Priorities of Payment, and will not exceed such amounts. 

All amounts received by the Issuer from the Currency Swap Counterparty in respect of any 

Currency Swap Transaction shall be paid into the Interest Account and/or the Principal Account 

subject to and in accordance with Condition 3(i) (Accounts). 

The Collateral Manager, acting on behalf of the Issuer, shall convert all amounts received by it 

in respect of any Non-Euro Obligation which is no longer the subject of a related Currency Swap 

Transaction into Euro promptly upon receipt thereof at the then prevailing spot rate of exchange and 

182

shall procure that such amounts are paid into the Principal Account or the Interest Account, as 

applicable. 

For the purposes of the Coverage Tests, the Portfolio Profile Tests and the Collateral Quality 

Tests (other than the Minimum Diversity Test and the Moody’s Minimum Weighted Average 

Recovery Rate Test), a Currency Swap Obligation shall be included as a Collateral Debt Obligation 

having the relevant characteristics of the Currency Swap Transaction and not of the related Non- 

Euro Obligation, unless the Collateral Manager, acting on behalf of the Issuer, determines otherwise 

and receives Rating Agency Confirmation. In addition, prior to the sale of any Currency Swap 

Obligation, the Issuer and the Collateral Manager shall request the Collateral Administrator to 

determine whether the Coverage Tests are being satisfied. In the event that the Coverage Tests are 

being satisfied, the Collateral Administrator shall determine whether the Coverage Tests would be 

satisfied were such Currency Swap Obligation (or part thereof, as the case may be) to be sold and 

such Currency Swap Obligation (or part thereof, as the case may be) may only be sold where the 

Coverage Tests would continue to be satisfied following such sale. In the event that the Coverage 

Tests are not being satisfied, the Collateral Administrator will determine whether the Coverage Tests 

would be maintained or improved were such Collateral Debt Obligation (or part thereof, as the case 

may be) to be sold and the proceeds of such sale reinvested according to the Reinvestment Criteria 

and such Currency Swap Obligation (or part thereof, as the case may be) may only be sold where the 

Coverage Tests would be maintained or improved following such sale. 

For purposes of the Minimum Diversity Test and the Moody’s Minimum Weighted Average 

Recovery Rate Test, a Currency Swap Obligation shall be included as a Collateral Debt Obligation 

having the relevant characteristics of the related Non-Euro Obligation and not of the Currency Swap 

Obligation, unless the Collateral Manager, acting on behalf of the Issuer, determines otherwise and 

receives Rating Agency Confirmation. 

The interest rate or coupon of a Currency Swap Obligation shall be the Euro interest rate or 

coupon payable under the related Currency Swap Transaction. 

Running costs of the Currency Swap Transaction will affect the calculation of the margin 

payable by the Currency Swap Counterparty and upfront costs, if any, will be allocable to the 

purchase price of the Currency Swap Obligation. 

If the Issuer and the relevant Currency Swap Counterparty so agree (subject to the prior 

approval of the Trustee and receipt of Rating Agency Confirmation) a Currency Swap Transaction 

may contain terms which are different from those described above. 

8.2 Replacement Currency Swap Agreements 

In the event that any Currency Swap Agreement terminates in whole at any time in 

circumstances in which the applicable Currency Swap Counterparty is the sole ‘‘Defaulting Party’’ or 

‘‘Affected Party’’ (as defined in the applicable Currency Swap Agreement) the Collateral Manager, 

acting on behalf of the Issuer, shall use commercially reasonable efforts to enter into a Replacement 

Currency Swap Agreement on substantially the same terms as such Currency Swap Agreement within 

10 days of the termination thereof with a counterparty which (or whose guarantor) satisfies applicable 

Required Ratings and, furthermore, subject to the prior consent of the Trustee and receipt of Rating 

Agency Confirmation as to the entry into of such Replacement Currency Swap Agreement with the 

proposed counterparty and the Collateral Manager, acting on behalf of the Issuer, shall take all such 

steps as are necessary to approve or ratify such recommendation. 

In the event of termination of the Currency Swap Agreement in whole in the circumstances 

referred to above, any Currency Swap Termination Receipts payable by the Currency Swap 

Counterparty to the Issuer will be paid into the appropriate Currency Account or, in the case of 

Euro-denominated Currency Swap Termination Receipts, the Principal Account and shall be applied 

towards the costs of entry into a Replacement Currency Swap 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: 

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(a) where the Issuer, following consultation with the Collateral Manager, determines not to 

replace such Currency Swap Agreement and Rating Agency Confirmation is received in 

respect of such determination; or 

(b) where termination of the Currency Swap Agreement occurs on a Redemption Date 

pursuant to Conditions 7(a)(Final Redemption), 7(b)(Optional Redemption), 7(g)(Redemption 

upon Failure to Appoint a Replacement Collateral Manager) or10(Events of Default); or 

(c) to the extent that such Currency Swap Termination Receipts are not required for 

application towards the costs of entry of such Replacement Currency Swap Agreement, 

in which event such Currency Swap Termination Receipts shall be paid into the appropriate 

Currency Account (in the case of Currency Swap Termination Receipts denominated in a currency 

other than Euro) or the Principal Account (in the case of Currency Swap Termination Receipts 

denominated in Euro), shall constitute Unscheduled Principal Proceeds and shall be applied in 

accordance with the Priorities of Payment on the next following Payment Date. 

In the event that the Issuer receives any Currency Swap Replacement Receipt upon entry into a 

Replacement Currency Swap Agreement, such amount shall be paid into the relevant Currency 

Account and applied directly by the Issuer or the Collateral Manager, acting on behalf of the Issuer, 

in payment of any Currency Swap Termination Payment payable upon termination of the Currency 

Swap Agreement being so replaced. To the extent not fully paid out of Currency Swap Replacement 

Receipts, any Currency Swap Termination Payment payable by the Issuer shall be paid to the 

Currency Swap Counterparty on the next Payment Date in accordance with the Priorities of Payment. 

To the extent not required for making any such Currency Swap Termination Payment, any Currency 

Swap Replacement Receipt shall be converted into Euro by the Collateral Manager, acting on behalf 

of the Issuer, and paid into the Principal Account, shall constitute Principal Proceeds and shall be 

distributed in accordance with the Priorities of Payment on the next following Payment Date. 

9. Interest Rate Hedging 

9.1 General 

The Collateral Manager acting on behalf of the Issuer will (in particular, in the event that more 

than 5% of the CDO Principal Balance comprises aggregate Principal Amount of Collateral Debt 

Obligations bearing interest at a rate other than a floating rate of interest, and otherwise in 

accordance with the terms of the Collateral Management Agreement) from time to time enter into 

interest rate hedge transactions (each an ‘‘Interest Rate Hedge Transaction’’) in order to comply with 

the terms of the Collateral Management Agreement, as described in this Section 9 (Interest Rate 

Hedging). Notwithstanding anything else herein, if the Issuer and the relevant Interest Rate Hedge 

Counterparty so agree (subject to the prior approval of the Trustee and receipt of Rating Agency 

Confirmation), an Interest Rate Hedge Transaction may contain terms which are different from those 

described below. 

The costs (if any) of entry into or unwinding of (as applicable) each Interest Rate Hedge 

Transaction in connection with: 

(a) the acquisition of any Collateral Debt Obligation (which is not a Substitute Collateral 

Debt Obligation) during the Investment Period shall be paid out of the amounts standing 

to the credit of the Additional Collateral Account after the Closing Date; and 

(b) the acquisition of any Substitute Collateral Debt Obligation shall be paid out of the Sale 

Proceeds or Principal Proceeds received upon any sale or redemption of the Collateral 

Debt Obligation it is replacing and any Interest Rate Hedge Termination Receipts or 

Interest Rate Hedge Replacement Receipts received in connection therewith, 

and entry into any Interest Rate Hedge Transaction shall not be permitted to the extent that such 

proceeds are insufficient. The running costs of the Interest Hedge Transaction will be reflected in the 

applicable spread and upfront costs, if any, allocated to the purchase price of the relevant Collateral 

Debt Obligation(s). 

All Scheduled Interest Rate Hedge Counterparty Payments received by the Issuer from the 

Interest Rate Hedge Counterparty in respect of any Interest Rate Hedge Transaction shall be paid 

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into the Interest Account and distributed as Interest Proceeds, save for such Scheduled Interest Rate 

Hedge Counterparty Payments due and payable to the Issuer each Payment Date which shall, to the 

extent received by the Issuer, be paid into the Payment Account, each as subject to and in 

accordance with Condition 3(i)(Accounts). 

9.2 Reduction or Sale of Interest Rate Hedge Transactions 

The Collateral Manager may, acting on behalf of the Issuer, enter into Interest Rate Hedge 

Transactions provided that any such Interest Rate Hedge Transaction contains the standard 

provisions referred to in paragraph 10 below and is in the Pre-Approved Form, save to the extent of 

any material change thereto as agreed by the Issuer, the applicable Interest Rate Hedge Counterparty 

and Collateral Manager and subject to receipt of Rating Agency Confirmation in respect thereof. 

Subject to the receipt of Rating Agency Confirmation in relation thereto, the Issuer, or the 

Collateral Manager acting on its behalf, may sell, terminate and/or reduce the notional amount of 

any Interest Rate Hedge Transaction, in whole or in part, at any time at the discretion of the Issuer 

or the Collateral Manager acting on its behalf. 

Any Interest Rate Hedge Termination Receipt shall be paid into the Interest Account and any 

Interest Rate Hedge Termination Payment payable by the Issuer to an Interest Rate Hedge 

Counterparty in such circumstances shall be payable on the next following Payment Date in 

accordance with the Priorities of Payment. Any Interest Rate Hedge Termination Receipts not 

required for application towards the payment of Interest Rate Hedge Termination Payments (save for 

interest accrued thereon which shall constitute Interest Proceeds and shall be retained in the Interest 

Account) shall constitute Principal Proceeds and shall be transferred to the Principal Account and 

applied in accordance with the Priorities of Payment on the next following Payment Date. 

9.3 Replacement Interest Rate Hedge Agreements 

In the event that any Interest Rate Hedge Agreement terminates in whole at any time as a 

result of an ‘‘Event of Default’’ or ‘‘Termination Event’’ thereunder under which the applicable 

Interest Rate Hedge Counterparty is the sole ‘‘Defaulting Party’’ or ‘‘Affected Party’’ (each such term 

as defined therein), the Collateral Manager, acting on behalf of the Issuer shall, subject to and in 

accordance with the terms of the Collateral Management Agreement, enter into a Replacement 

Interest Rate Hedge Agreement on behalf of the Issuer on substantially the same terms as the 

terminated Interest Rate Hedge Agreement within 30 days of the termination thereof with a 

counterparty satisfying the Required Ratings applicable thereto, and subject to receipt of a Rating 

Agency Confirmation in respect thereof (including the cost of entry thereof). 

In the event of termination of any Interest Rate Hedge Agreement in whole in the circumstances 

referred to above, any Interest Rate Hedge Termination Receipts will be paid into the Interest 

Account and shall be applied by the Issuer or the Collateral Manager, acting on behalf of the Issuer, 

towards the costs of entry into a Replacement Interest Rate Hedge Agreement, save where: 

(a) 

(b) 

(c) 

the Collateral Manager, acting on behalf of the Issuer, determines not to replace such 

Interest Rate Hedge Agreement, and notifies the Rating Agencies of such determination 

and Rating Agency Confirmation from Moody’s and S&P is received in respect of such 

determination; or 

termination of the applicable Interest Rate Hedge Agreement occurs on a Redemption 

Date pursuant to Conditions 7(a) (Final Redemption), 7(b) (Optional Redemption) or 10 

(Events of Default); or 

to the extent that such Interest Rate Hedge Termination Receipts or a part thereof are not 

required for application towards the costs of entry of any such Replacement Interest Rate 

Hedge Agreement, 

in which event such Interest Rate Hedge Termination Receipts (save for interest accrued thereon 

which shall constitute Interest Proceeds and shall be retained in the Interest Account) shall constitute 

Principal Proceeds and shall be transferred to the Principal Account and applied in accordance with 

the Priorities of Payment on the next following Payment Date. 

185

In the event that the Issuer receives any Interest Rate Hedge Replacement Receipts upon entry 

into a Replacement Interest Rate Hedge Agreement, such amount shall be paid into the Interest 

Account and applied by the Collateral Manager, acting on behalf of the Issuer, in payment of any 

Interest Rate Hedge Termination Payment payable upon termination of the Interest Rate Hedge 

Agreement being so replaced on the next Payment Date in accordance with the Priorities of Payment. 

To the extent not fully paid out of Interest Rate Replacement Receipts, any Interest Rate 

Termination Payment payable by the Issuer shall be paid to the Interest Rate Counterparty on the 

next Payment Date in accordance with the Priorities of Payment. To the extent not required for 

making any such Interest Rate Hedge Termination Payment, any Interest Rate Hedge Replacement 

Receipts standing to the credit of the Interest Account (save for interest accrued thereon which shall 

constitute Interest Proceeds and shall be retained in the Interest Account) shall constitute Principal 

Proceeds and shall be transferred to the Principal Account and applied in accordance with the 

Priorities of Payment on the next following Payment Date. 

10. Standard Terms of Hedge Agreements 

Each Interest Rate Hedge Agreement and Currency Swap Agreement (each, a ‘‘Hedge 

Agreement’’) entered into by or on behalf of the Issuer shall contain the following standard provisions 

and shall be in the Pre-Approved Form, save to the extent that any material change thereto is agreed 

by the Issuer, the applicable Interest Rate Hedge Counterparty, the applicable Currency Swap 

Counterparty (each, a ‘‘Hedge Counterparty’’) and the Collateral Manager and subject to receipt of 

Rating Agency Confirmation in respect thereof. 

10.1 Hedge Counterparty 

At the time of entry into any Currency Swap Transaction or Interest Rate Hedge Transaction 

(as applicable), each Hedge Counterparty (or its Credit Support Provider) shall satisfy the applicable 

Required Ratings or, failing that, shall have satisfied the provisions of any of paragraphs (e)(A), 

(e)(B), (e)(C) or (e)(D) under ‘‘Termination Provisions’’ below. Failure to satisfy the foregoing shall 

(unless Rating Agency Confirmation has been obtained notwithstanding such failure) result in an 

Early Termination Event under the applicable Currency Swap Agreement or Interest Rate Hedge 

Agreement. 

10.2 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’’ which is a ‘‘Termination Event’’ for 

the purposes of each Hedge Agreement (see ‘‘Termination Provisions’’ below). In the event of the 

occurrence of a Tax Event (as defined in such Hedge Agreement), the Hedge Agreement includes 

provision for the relevant Affected Party (as defined therein) to transfer its obligations under such 

Hedge Agreement to an Affiliate (in the case of the 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 (including receipt of Rating Agency Confirmation with respect of such transfer to an 

Affiliate). A failure by the relevant Affected Party to comply with such provisions in the event of a 

Tax Event will constitute a Termination Event under the terms of the Hedge Agreement. 

10.3 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) (Priorities of Payment). 

10.4 Termination Provisions 

Under each Hedge Agreement, the Issuer 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 if there is an Event of Default or a Termination 

Event with respect to the Issuer. Each Hedge Agreement contains termination events commonly found 

in the 1992 ISDA Master Agreement (Multi-currency Cross Border) or the 2002 ISDA Master 

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Agreement (or such ISDA pro forma Master Agreement as may be published by ISDA from time to 

time) save for (i) the disapplication as regards the Issuer of the Events of Default relating to ‘‘Breach 

of Agreement’’, ‘‘Misrepresentation’’, and ‘‘Credit Support Default’’ and (ii) the disapplication as 

regards both the Issuer and the applicable Hedge Counterparty of the Event of Default relating to 

‘‘Default under Specified Transaction’’, ‘‘Cross Default’’, ‘‘Merger without Assumption’’ and 

Termination Events relating to ‘‘Tax Event’’ and a ‘‘Tax Event upon Merger’’ and a ‘‘Credit Event 

upon Merger. In addition, each Hedge Agreement shall contain the following Additional Termination 

Events: 

(a) 

(b) 

(c) 

(d) 

(e) 

an Event of Default has occurred in respect of the Notes pursuant to Condition 10 of the 

Notes and the Trustee has taken action to enforce the security over the Collateral, for the 

purposes of which all Transactions shall be ‘‘Affected Transactions’’ (as defined in such 

Hedge Agreement), the Issuer shall be the sole Affected Party, save that either the 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 all Transactions shall be 

Affected Transactions and the Issuer shall be the sole ‘‘Affected Party’’ (as defined in such 

Hedge Agreement), save that all of the Affected Transactions shall be deemed to have 

terminated automatically in full without the need for notice from either Party and the 

applicable Early Termination Date shall be the Redemption Date of the Notes; 

in the case of a Hedge Transaction which is an Interest Rate Hedge Transaction which is 

an interest rate swap (but not an interest rate cap or floor) only, Rated Notes have been 

redeemed in full, for the purposes of which each Interest Rate Hedge Transaction which is 

such an interest rate swap shall be an Affected Transaction and the Issuer shall be the sole 

Affected Party save that each such Affected Transaction shall be deemed to have 

terminated automatically in full without the need for notice from either party thereto, and 

the applicable Early Termination Date shall be the Redemption Date on which the Rated 

Notes are redeemed in full; 

the Priorities of Payment have been amended in a manner materially prejudicial to the 

Hedge Counterparty (such manner, as determined by the Trustee) with respect to the 

position of the Hedge Counterparty in the Priorities of Payment and the payment 

obligations in priority thereto or pari passu therewith without the Hedge Counterparty’s 

prior written consent, for the purposes of which all Transactions shall be Affected 

Transactions and the Issuer shall be the sole Affected Party; 

the failure by the Hedge Counterparty to take, in the event that the Hedge Counterparty 

or its Credit Support Provider is downgraded to below the Required Ratings, any action 

required under paragraphs (A) to (D) set forth below, unless Rating Agency Confirmation 

has been received notwithstanding such failure, for the purposes of which all Transactions 

shall be Affected Transactions and the Hedge Counterparty shall be the sole Affected 

Party: 

(A) 

(B) 

at its own cost, transfer, within 30 calendar days of such downgrade below the 

Required Ratings, all of its rights and obligations under the Hedge Agreement at fair 

market value to another entity which has (or whose obligations hereunder are 

unconditionally and irrevocably guaranteed by an entity which has) the applicable 

Required Ratings; or 

at its own cost, cause, within 30 calendar days of such downgrade below the 

Required Ratings, an entity with the applicable Required Ratings (or whose 

guarantor or provider of credit support has the applicable Required Ratings) to 

guarantee or provide an indemnity in respect of the Hedge Counterparty’s (or its 

Credit Support Provider’s) obligations under the Hedge Agreement in form and 

substance reasonably satisfactory to the Issuer, the Trustee and in respect of which 

Rating Agency Confirmation is obtained; or 

187

(C) 

at its own cost, (i) in the case where the Hedge Counterparty is an Interest Rate 

Hedge Counterparty, and: 

(1) if the long-term and short-term senior unsecured debt ratings of such Interest 

Rate Hedge Counterparty or its Credit Support Provider are below ‘‘A1’’ (but 

not below ‘‘A3’’) or below ‘‘P-1’’ from Moody’s, post, within 30 calendar days 

of such downgrade below the Required Ratings, collateral with the Issuer 

pursuant to an appropriate mark-to-market collateral agreement in an amount 

equal to 102 per cent. of the weekly mark-to-market value (subject to a 

minimum of zero) of any such Interest Rate Hedge Transaction that is the 

subject of such Interest Rate Hedge Agreement, as determined by the Collateral 

Manager, acting on behalf of the Issuer, and the Interest Rate Hedge 

Counterparty and in accordance with the then current market practice; 

(2) if any of the long-term or short-term senior unsecured debt ratings of such 

Interest Rate Hedge Counterparty or its Credit Support provider are below 

‘‘A3’’ or ‘‘P-1’’ from Moody’s, immediately post collateral with the Issuer 

pursuant to an appropriate mark-to-market collateral agreement in an amount 

equal to 102 per cent. of the weekly mark-to-market value (subject to a 

minimum of zero) of any such Interest Rate Hedge Transaction that is the 

subject of such Interest Rate Hedge Agreement, as determined by the Collateral 

Manager, acting on behalf of the Issuer, and the Interest Rate Hedge 

Counterparty and in accordance with the then current market practice, plus the 

product of 0.40 per cent. multiplied by the remaining average life (as determined 

by the Collateral Administrator in accordance with the terms of the Collateral 

Management Agreement) of such Interest Rate Hedge Transaction multiplied by 

the notional amount of such Interest Rate Hedge Transaction provided that for 

such time as the applicable Interest Rate Hedge Counterparty posts collateral in 

the circumstances of this paragraph (2), it shall use its reasonable efforts to 

transfer, within 30 calendar days of such downgrade below the Required 

Ratings, all of its rights and obligations under the Interest Rate Hedge 

Agreement pursuant to paragraph (A) above and/or procure a guarantor or 

indemnitor of its obligations under the Interest Rate Hedge Agreement pursuant 

to paragraph (B) above; and 

(3) if the short-term senior unsecured debt ratings of such Interest Rate Hedge 

Counterparty or its Credit Support Provider are below ‘‘A-1’’ but not below 

‘‘A-3’’ from S&P, post, within 30 calendar days of such downgrade below the 

Required Ratings, collateral with the Issuer pursuant to an appropriate mark-tomarket 

collateral agreement in an amount equal to 100 per cent. of the weekly 

mark-to-market value (subject to a minimum of zero) of any such Interest Rate 

Hedge Transaction that is the subject of such Interest Rate Hedge Agreement, 

as determined by the Collateral Manager, acting on behalf of the Issuer, and 

the Interest Rate Hedge Counterparty and in accordance with the then current 

market practice, plus the product of (x) the relevant Volatility Buffer (as defined 

in the Collateral Management Agreement), multiplied by (y) the notional 

amount of the Interest Rate Hedge Transaction, as determined by the Collateral 

Manager, acting on behalf of the Issuer and calculated weekly; 

(ii) 

in the case where the Hedge Counterparty is a Currency Swap Counterparty, 

and: 

(1) if the long term and short term senior unsecured debt ratings of the Currency 

Swap Counterparty or its Credit Support Provider are below ‘‘A1’’ (but not 

below ‘‘A3’’) or below ‘‘P-1’’ from Moody’s, post, within 30 calendar days of 

such downgrade below the Required Ratings, collateral with the Issuer pursuant 

to an appropriate mark-to-market collateral agreement in an amount equal to 

102 per cent. of the weekly mark-to-market value (subject to a minimum of 

188

(D) 

zero) of any Currency Hedge Transaction, as determined by the Collateral 

Manager, acting on behalf of the Issuer and the Currency Swap Counterparty 

and in accordance with the then current market practice; 

(2) if any of the long term and short term senior unsecured debt ratings of the 

Currency Swap Counterparty or its Credit Support Provider are below ‘‘A3’’ or 

‘‘P-1’’ from Moody’s, immediately post collateral with the Issuer pursuant to an 

appropriate mark-to-market collateral agreement in an amount equal to 102 per 

cent. of the weekly mark-to-market value (subject to a minimum of zero) of any 

Currency Hedge Transaction, as determined by the Collateral Manager, acting 

on behalf of the Issuer, and the Currency Swap Counterparty and in accordance 

with the then current market practice, plus the product of two per cent. of the 

notional amount of the Currency Swap Transaction, as determined by the 

Collateral Manager, acting on behalf of the Issuer and calculated weekly 

provided that for such time as the applicable Currency Swap Counterparty posts 

collateral in the circumstances of this paragraph (2), it shall use its reasonable 

efforts to transfer, within 30 calendar days of such downgrade below the 

Required Ratings, all of its rights and obligations under the Currency Swap 

Agreement pursuant to paragraph (A) above and/or procure a guarantor or 

indemnitor of its obligations under the Currency Swap Agreement pursuant to 

paragraph (B) above; and 

(3) if the short term senior unsecured debt ratings of the Currency Swap 

Counterparty or its Credit Support Provider are below ‘‘A-1+’’ but not below 

‘‘A-3’’ from S&P, post, within 30 calendar days of such downgrade below the 

Required Ratings, collateral with the Issuer pursuant to an appropriate mark-tomarket 

collateral agreement in an amount equal to 100 per cent. of the weekly 

mark-to-market value (subject to a minimum of zero) of any Currency Hedge 

Transaction, as determined by the Collateral Manager, acting on behalf of the 

Issuer and the Currency Swap Counterparty and in accordance with the then 

current market practice, plus the product of (x) the relevant Volatility Buffer (as 

defined in the Collateral Management Agreement), multiplied by (y) the notional 

amount of the Currency Swap Transaction, as determined by the Collateral 

Manager, acting on behalf of the Issuer and calculated weekly; 

provided that (x) if in S&P’s judgment the collateralisation level specified in subparagraph 

(i)(3) or (ii)(3) is below the level required by S&P’s collateralisation 

criteria, the Interest Rate Hedge Counterparty or the Currency Swap 

Counterparty, as the case may be, shall post collateral with the Issuer in an 

amount in respect of which Rating Agency Confirmation from S&P is obtained; 

(y) for the avoidance of doubt, the measures specified in this paragraph (C) 

shall not be available in the event that the Interest Rate Hedge Counterparty or 

the Currency Swap Counterparty or their Credit Support Providers, as 

applicable, do not satisfy the minimum rating specified in this paragraph (C); 

and (z) in the event that the Interest Rate Hedge Counterparty or the Currency 

Swap Counterparty, as applicable, is required to post collateral under more than 

one of the subparagraphs above, the Interest Rate Hedge Counterparty or the 

Currency Swap Counterparty shall only be required to post the maximum of the 

collateral required (and not the sum of the collateral required) under the various 

subparagraphs in this paragraph (C); or 

at its own cost, within 30 calendar days of such downgrade below the Required 

Ratings employ any other strategy as is acceptable to the Collateral Manager, acting 

on behalf of the Issuer, and in respect of which Rating Agency Confirmation is 

received in respect thereof from the affected Rating Agency from time to time or, in 

each case, if any of the requirements above are not satisfied by a Hedge 

Counterparty (or guarantor or indemnitor, as applicable), Rating Agency 

Confirmation is received in respect thereof. 

189

Upon the occurrence of any Event of Default or Termination Event, a Hedge Agreement may 

be terminated in accordance with the detailed provisions thereof and a lump sum determined by 

reference to market quotations obtained for the entry into of a replacement swap on the same terms 

as that terminated or as otherwise described in the applicable Hedge Agreement (the ‘‘Termination 

Payment’’) may become payable by the Issuer to the applicable Hedge Counterparty or vice versa. 

11. The Collateral Quality Tests 

The Collateral Quality Tests will be used primarily as the criteria for purchasing Collateral Debt 

Obligations. The Collateral Quality Tests will consist of the Minimum Diversity Test, the Maximum 

Weighted Average Life Test, the Maximum Portfolio Rating Test, the Minimum Weighted Average 

Spread Test, the Moody’s Minimum Weighted Average Recovery Rate Test, the S&P Minimum 

Weighted Average Recovery Rate Test, the S&P CDO Monitor Test, and the S&P CDO Evaluator 

Test. The Collateral Administrator will (subject to the proviso below) carry out the Collateral Quality 

Tests (i) as at the Initial Effective Date, (ii) as at the Final Effective Date, (iii) after the Initial 

Effective Date, upon a substitution (including both the date of sale and reinvestment if not the same 

date) of, or a default under, a Collateral Debt Obligation or acquisition of any Additional Collateral 

Debt Obligation, (iv) the last Business Day of each Month and (v) with reasonable notice (not being 

less than two Business Days’ notice), on any Business Day requested by the Rating Agencies (any 

such date, a ‘‘Measurement Date’’), provided that the S&P CDO Monitor Test will only be carried out 

on a Measurement Date falling on or after the Final Effective Date until the end of the Reinvestment 

Period and provided further that the S&P CDO Evaluator Test will only be carried out on a 

Measurement Date falling on or after the end of the Reinvestment Period. 

The Collateral Administrator will carry out the Collateral Quality Tests on each Measurement 

Date. For the purpose of the Minimum Diversity Test, the Maximum Portfolio Rating Test and the 

Minimum Weighted Average Spread Test, the Issuer shall, not later than five Business Days prior to 

the Final Effective Date and may at any time thereafter, upon five Business Days’ notice, notify the 

Collateral Manager, the Trustee, the Collateral Administrator and the Rating Agencies of the quality 

case which is to apply in respect of such tests, as referred to in the Moody’s Test Matrix and 

provided that the quality case applicable to the Maximum Portfolio Rating Test shall be determined 

by reference to the quality cases which are to apply by reference to the quality cases which are to 

apply (each of the quality cases being a ‘‘Quality Case’’) set out below for any given case: 

(a) the applicable Moody’s Test Matrix for performing the Moody’s Minimum Diversity Test will 

be the Moody’s Test Matrix in which the elected case is set out; 

(b) the applicable column for performing the Moody’s Maximum Rating Factor Test will be the 

column in the applicable Moody’s Test Matrix in which the elected case is set out. 

(c) the applicable row for determining the Minimum Weighted Average Spread will be the row in 

the applicable Moody’s Test Matrix in which the elected case is set out; and 

(d) the applicable row and column for performing the Moody’s Minimum Weighted Average 

Recovery Rate Test will be the row and column in the applicable Moody’s Test Matrix in which 

the elected case is set out. 

In no circumstances shall the Issuer be under any obligation to elect that a different Quality Case 

shall apply. 

Diversity Score: 30 

Moody’s Maximum Portfolio Rating 2250 2400 2550 

Moody’s Minimum Weighted Average 

Minimum Weighted Average Spread 

Recovery Rate 

2.35% ........................................................................................... 53.3% 56.3% 59.1% 

2.55% ........................................................................................... 50.8% 54.0% 56.9% 

2.75% ........................................................................................... 48.3% 51.6% 54.7% 

2.95% ........................................................................................... 46.0% 49.6% 52.7% 

190





Recovery Rate 

2.35% ........................................................................................... 51.6% 54.8% 57.6% 

2.55% ........................................................................................... 48.9% 52.0% 55.3% 

2.75% ........................................................................................... 46.4% 49.9% 53.0% 

2.95% 44.0% 47.7% 50.9% 





Recovery Rate 

2.35% ........................................................................................... 50.0% 53.5% 56.4% 

2.55% ........................................................................................... 47.5% 51.0% 54.0% 

2.75% ........................................................................................... 45.0% 48.4% 51.7% 

2.95% ........................................................................................... 42.4% 46.2% 49.5% 

11.1 The Minimum Diversity Test 

The ‘‘Minimum Diversity Test’’ will be satisfied as at any Measurement Date if the Diversity 

Score equals or exceeds 33 on each Measurement Date from and including the Business Day 

following the period from the Initial Effective Date to but excluding the Final Effective Date and 

equals or exceeds the level specified in the Moody’s Test Matrix (set out above) which is applicable 

under the Quality Case selected by the Issuer on each Measurement Date from and including the 

Final Effective Date to but excluding the last day of the Reinvestment Period. 

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) an ‘‘Average Principal Balance’’ is calculated by summing the Obligor Principal Balances 

and dividing by the sum of the aggregate number of obligors represented; 

(b) 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; 

(c) 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; 

(d) 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; and 

(e) an ‘‘Industry Diversity Score’’ is then established by reference to the Diversity Score Table 

shown below for the related Aggregate Industry Equivalent Unit Score. If the Aggregate 

Industry Equivalent Unit Score falls between any two such scores shown in the table 

below, then the Industry Diversity Score is the lower of the two Diversity Scores in the 

table. 

191

For purposes of calculating the Diversity Score: 

(i) any obligors affiliated with one another will be considered to be one obligor; and 

(ii) a Synthetic Security shall be included as a Collateral Debt Obligation having the relevant 

characteristics of the related Reference Obligation (and the obligor under such Synthetic 

Security shall be deemed to be the obligor under the related Reference Obligation) and not 

of the Synthetic Security, unless the Collateral Manager determines otherwise and receives 

Rating Agency Confirmation in respect of such determination. 

192

Aggregate 

Industry 

Equivalent 

Unit Score 

Industry 

Diversity 

Score 

Aggregate 

Industry 

Equivalent 

Unit Score 

Diversity Score Table 

Aggregate 

Industry 

Equivalent 

Unit Score 

Industry 

Diversity 

Score 

Aggregate 

Industry 

Equivalent 

Unit 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 

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 

4.7500 2.6000 9.8500 3.9750 14.9500 4.5000 

193

Aggregate 

Industry 

Equivalent 

Unit Score 

Industry 

Diversity 

Score 

Aggregate 

Industry 

Equivalent 

Unit Score 

Aggregate 

Industry 

Equivalent 

Unit Score 

Industry 

Diversity 

Score 

Aggregate 

Industry 

Equivalent 

Unit Score 

4.8500 2.6333 9.9500 4.0000 15.0500 4.5100 

4.9500 2.6667 10.0500 4.0100 15.1500 4.5200 

Aggregate 

Industry 

Equivalent 

Unit Score 

Industry 

Diversity 

Score 

11.2 The Maximum Weighted Average Life Test 

The ‘‘Weighted Average Life Test’’ means a test which will be satisfied as at any Measurement 

Date from (and including) the Effective Date, if the Portfolio Weighted Average Life is on or before 

26 July 2017. 

‘‘Portfolio Weighted Average Life’’ is, as of any date of determination the date calculated by 

adding to the Closing Date the Weighted Average Life of the Collateral Debt Obligations (expressed 

as a number of months from the Closing 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 on such date of determination is less than the initial 

aggregate Principal Balance of the Collateral Debt Obligations (excluding Defaulted Obligations) at 

the Final Effective Date, the difference between such initial aggregate Principal Balance and such 

outstanding aggregate Principal Balance by (b) the number of months from the Closing Date to the 

date of such maturity or amortisation (in the case of paragraph (i)(a)(1)) or to such date of 

determination (in the case of paragraph (i)(a)(2)) and (ii) dividing such sum by the aggregate Principal 

Balance (excluding Defaulted Obligations) used in paragraph (a)(1) above. 

11.3 The Maximum Portfolio Rating Test 

The ‘‘Maximum Portfolio Rating Test’’ will be satisfied as of any Measurement Date if the 

Average Portfolio Rating on each Measurement Date (i) from and including the Initial Effective Date 

to but excluding the Final Effective Date is 2,410 or less which corresponds to a rating of between 

‘‘B1’’ and ‘‘B2’’ and (ii) from and including the Final Effective Date is equal to or less than the level 

specified in the Moody’s Test Matrix (set out above) which is applicable under the Quality Case 

selected by the Collateral Manager, acting on behalf of the Issuer. 

The ‘‘Average Portfolio Rating’’ is determined by summing the products obtained by multiplying 

the Principal Balance of each Collateral Debt Obligation, excluding Defaulted Obligations, by its 

corresponding Moody’s Rating Factor or Implied Moody’s Rating Factor (as applicable), dividing 

such sum by the aggregate Principal Balances of all Collateral Debt Obligations, excluding Defaulted 

Obligations, and rounding the result up to the nearest whole number. 

The ‘‘Moody’s Rating’’ of any Collateral Debt Obligation, as at any date of determination, shall 

mean the following: 

(i) with respect to Collateral Debt Obligations that are Senior Secured Loans, 

(a) if the obligor of such Collateral Debt Obligation has a corporate family rating by 

Moody’s, such rating, 

(b) if the obligor of such Collateral Debt Obligation has no corporate family rating by 

Moody’s and the Collateral Debt Obligation itself is not rated, but the obligor of 

such Collateral Debt Obligation has a senior unsecured obligation publicly rated by 

Moody’s, such rating, 

(c) if the obligor of such Collateral Debt Obligation has no corporate family rating by 

Moody’s, but the Collateral Debt Obligation itself is rated, one subcategory below 

such rating, and 

(d) if the obligor of such Collateral Debt Obligation has no corporate family rating by 

Moody’s and neither such Collateral Debt Obligation nor any senior unsecured 

obligation of the obligor has been publicly rated by Moody’s, but another obligation 

of the obligor has been rated by Moody’s (including, but not limited to, public 

194

(ii) 

(iii) 

(iv) 

ratings or private ratings), such rating as determined in accordance with clause (iv), 

below, as if such Collateral Debt Obligation were a senior unsecured Collateral Debt 

Obligation; 

with respect to Collateral Debt Obligations other than Senior Secured Loans, if such 

Collateral Debt Obligation is rated by Moody’s, such rating; 

with respect to Collateral Debt Obligations that are not rated by Moody’s, then the 

Moody’s Rating of such Collateral Debt Obligation shall be deemed to be the rating 

thereof as may be assigned by Moody’s upon the request of the Issuer or the Collateral 

Manager; provided that pending receipt from Moody’s of such rating, such Collateral Debt 

Obligation shall have a Moody’s Rating of ‘‘B3’’ if: 

(a) the Issuer or the Collateral Manager on behalf of the Issuer expects to present such 

Collateral Debt Obligation to Moody’s for obtaining a rating of such Collateral Debt 

Obligation no later than two Business Days after the Issuer purchases such Collateral 

Debt Obligation, 

(b) the Collateral Manager certifies to the Trustee that the Collateral Manager believes 

that such rating will be at least ‘‘B3’’, and 

(c) the aggregate principal balance of Collateral Debt Obligations having such Moody’s 

Rating by reason of this proviso does not exceed 5% of the aggregate Principal 

Balance of all Collateral Debt Obligations; 

with respect to Collateral Debt Obligations other than Senior Secured Loans, if such 

Collateral Debt Obligation is not rated by Moody’s and neither the Issuer nor the 

Collateral Manager obtains a rating for such Collateral Debt Obligation pursuant to 

subclause (iii) above, then the Moody’s Rating of such Collateral Debt Obligation shall be 

determined as follows: 

(a) if there is a rating on a senior secured obligation of the obligor, then the Moody’s 

Rating of such Collateral Debt Obligation: 

(1) shall equal such rating, if such Collateral Debt Obligation is also a senior 

secured obligation, 

(2) shall be one subcategory below such rating if such Collateral Debt Obligation is 

a senior unsecured obligation of the obligor, and 

(3) shall be three subcategories below such rating if such rating is ‘‘Ba3’’ or higher 

or two subcategories below such rating if such rating is ‘‘B1’’ or lower and if 

such Collateral Debt Obligation is a subordinated obligation of the obligor; 

(b) if there is a rating on a senior unsecured obligation of the obligor, then the Moody’s 


(1) shall equal such rating if such Collateral Debt Obligation is also a senior 

unsecured obligation of the obligor, 

(2) shall be equal to such rating if such rating is ‘‘Baa3’’ or higher or one 

subcategory above such rating if such rating is ‘‘Ba1’’ or below and such 

Collateral Debt Obligation is a senior secured obligation of the obligor, and 

(3) shall be two subcategories below such rating if such rating is ‘‘B1’’ or higher or 

one subcategory below such rating if such rating is ‘‘B2’’ or below and such 

Collateral Debt Obligation is a subordinated obligation of the obligor; and 

(c) if there is a rating on a subordinated obligation of the obligor, then the Moody’s 


(1) shall equal such rating if such Collateral Debt Obligation is also a subordinated 

obligation of the obligor, 

(2) shall be one subcategory above such rating if such rating is ‘‘Baa3’’ or higher 

and such Collateral Debt Obligation is a senior secured obligation of the obligor 

or a senior unsecured obligation of the obligor, 

195

(3) shall be two subcategories above such rating if such rating is below ‘‘Baa3’’ and 

if such Collateral Debt Obligation is a senior secured obligation of the obligor 

(except that if such rating is ‘‘B3,’’ the Moody’s Rating of such Collateral Debt 

Obligation shall be ‘‘B2’’), and 

(4) shall be one subcategory above such rating if such rating is below ‘‘Baa3’’, and 

if such Collateral Debt Obligation is a senior unsecured obligation of the 

obligor; and 

(v) 

if such Collateral Debt Obligation is not rated by Moody’s, and no other security or 

obligation of the obligor is rated by Moody’s and neither the Issuer nor the Collateral 

Manager obtains a Moody’s Rating for such Collateral Debt Obligation pursuant to 

subclause (iii) above, then the Moody’s Rating of such Collateral Debt Obligation may be 

determined using method (a) provided below, or if the Moody’s Rating of such Collateral 

Debt Obligation cannot be determined using method (a), then the Moody’s Rating may be 

determined using methods (b), (c), (d) or (e) below: 

(a) (1) if such Collateral Debt Obligation is rated by S&P, then the Moody’s Rating of 

such Collateral Debt Obligation will be (x) one subcategory below the Moody’s 

equivalent of the rating assigned by S&P if such Collateral Debt Obligation is 

rated ‘‘BBB-’’ or higher by S&P and such obligation is not a loan or a 

participation interest in a loan and (y) three subcategories below the Moody’s 

equivalent of the rating assigned by S&P if such Collateral Debt Obligation is 

rated ‘‘BB+’’ or lower by S&P and such obligation is not a loan or a 

participation interest in a loan and (z) two subcategories below the Moody’s 

equivalent of the rating assigned by S&P if such Collateral Debt Obligation is a 

loan or a participation interest in a loan; or 

(2) if such Collateral Debt Obligation is not rated by S&P but another security or 

obligation of the obligor is rated by S&P (a ‘‘parallel security’’) then the rating 

of such parallel security will at the election of the Collateral Manager be 

determined in accordance with the methodology set forth in subclause (a)(1) 

above, and the Moody’s Rating of such Collateral Debt Obligation will be 

determined in accordance with the methodology set forth in clause (iv) above 

(for such purposes treating the parallel security as if it were rated by Moody’s 

at the rating determined pursuant to this subclause (a)(2)); or 

(3) if such Collateral Debt Obligation is a Structured Finance Security, no Moody’s 

Rating may be determined based on an S&P Rating; 

provided, however, that ratings assigned by local offices of S&P in countries that do 

not qualify as Qualifying Countries under clauses (i) or (ii) of the definition of 

Qualifying Countries shall not be used to determine a Moody’s Rating pursuant to 

this subclause (v)(a); 

(b) 

if such Collateral Debt Obligation is a senior secured obligation of the obligor and 

(1) neither the obligor nor any of its related persons is subject to reorganization or 

bankruptcy proceedings, (2) no debt securities or obligations of the obligor are in 

default, (3) neither the obligor nor any of its affiliates have defaulted on any debt 

during the past two years, (4) the obligor (including its predecessors) has been in 

existence for the past five years, (5) the obligor is current on any cumulative 

dividends, (6) the fixed-charge ratio for the obligor exceeds 125% for each of the past 

two fiscal years and for the most recent quarter, (7) the obligor had a net profit 

before tax in the past fiscal year and the most recent quarter and (8) the annual 

financial statements of the obligor are unqualified and certified by a firm of 

independent accountants of national reputation, and quarterly statements are 

unaudited but signed by a corporate officer, the Moody’s Rating of such Collateral 

Debt Obligation will be ‘‘B3"; 

196

(c) 

if such Collateral Debt Obligation is a senior secured obligation of the obligor and 

(1) neither the obligor nor any related persons is subject to reorganization or 

bankruptcy proceedings and (2) no obligation of the obligor has been in default 

during the past two years, the Moody’s Rating of such Collateral Debt Obligation 

will be ‘‘Caa2"; 

(d) if the obligor of such Collateral Debt Obligation is a U.S. obligor and such 

Collateral Obligation is a senior unsecured obligation of the obligor and (1) neither 

the obligor nor any of its affiliates is subject to reorganization or bankruptcy 

proceedings and (2) no debt security or obligation of the obligor has been in default 

during the past two years, the Moody’s Rating of such Collateral Debt Obligation 

will be ‘‘Caa3"; or 

(e) 

if a debt security or obligation of the obligor has been in default during the past two 

years, the Moody’s Rating of such Collateral Debt Obligation will be ‘‘Ca.’’ 

The ‘‘Moody’s Rating Factor’’ of any Collateral Debt Obligation will mean the number assigned 

under the Moody’s Rating Factor Table below to the Moody’s Rating of such Collateral Debt 

Obligation (including, for the avoidance of doubt, any Implied Moody’s Rating Factor determined in 

accordance with the definition of ‘‘Moody’s Rating’’ as set out above) or any other number 

communicated by Moody’s. 

Moody’s Rating Factor Table 

Rating 

Rating 

Factor Rating 

Rating 

Factor 

Aaa ........................................................... 1 Bal ............................................... 940 

Aal............................................................ 10 Ba2 .............................................. 1,350 

Aa2 ........................................................... 20 Ba3 .............................................. 1,766 

Aaa ........................................................... 40 B1 ................................................ 2,220 

Al.............................................................. 70 B2 ................................................ 2,720 

A2............................................................. 120 B3 ................................................ 3,490 

A3............................................................. 180 Caal ............................................. 4,770 

Baal .......................................................... 260 Caa2 ............................................ 6,500 

Baal .......................................................... 360 Caa3 ............................................ 8,070 

Baa3.......................................................... 610 Ca ................................................ 10,000 

provided, however, that the Moody’s Rating Factor of any Synthetic Security where the Synthetic 

Counterparty thereto has been downgraded to long-term senior unsecured credit rating lower than 

‘‘A3’’ by Moody’s or such rating has been withdrawn, will be the sum of (i) the Moody’s Rating 

Factor applicable to the Moody’s Rating of the Reference Obligation thereof and (ii)(A)(if a 

Synthetic Security which has not been collateralised) the Moody’s Rating Factor applicable to the 

Moody’s Rating of the Obligor thereof or (B)(if a Synthetic Security which has been collateralised) 

the Synthetic Collateral thereof. 

The ‘‘S&P Rating’’ of any Collateral Debt Obligation, as at any date of determination, shall 

mean the following: 

(a) 

(b) 

if there is an issuer credit rating by S&P of the issuer of or obligor of such Collateral 

Debt Obligation, or the guarantor who unconditionally and irrevocably guarantees such 

Collateral Debt Obligation (and such guarantee is unconditional at the time it is purchased 

and cannot be unilaterally revoked by the obligor or any of its Affiliates) is rated by S&P, 

the issuer credit rating from S&P of such issuer or obligor or guarantor, as the case may 

be; 

if paragraph (a) does not apply to such Collateral Debt Obligation, then the S&P Rating 

of such Collateral Debt Obligation may be determined by using any one of the methods 

provided below: 

197

(i) 

(ii) 

(iii) 

if such Collateral Debt Obligation is publicly rated by Moody’s, then the S&P Rating 

of such Collateral Debt Obligation shall be (A) one subcategory below the S&P 

equivalent of the rating assigned by Moody’s if such Collateral Debt Obligation is 

rated ‘‘Baa3’’ or higher by Moody’s and (B) two sub-categories below the S&P 

equivalent of the rating assigned by Moody’s if such Collateral Debt Obligation is 

rated ‘‘Bal’’ or lower by Moody’s; provided that the Euro Equivalent of the aggregate 

principal amount of Collateral Debt Obligations that may be given an S&P Rating 

based on a rating given by Moody’s as provided in this sub-clause (b)(i) shall not 

exceed 10 per cent. of the CDO Principal Balance; 

if such Collateral Debt Obligation is not rated by Moody’s but a parallel security is 

rated by Moody’s, then the rating of such parallel security shall be determined in 

accordance with the methodology set forth in sub-clause (b)(i) above; 

if no other security or obligation of the issuer or obligor is rated by S&P or 

Moody’s, then the Issuer or the Collateral Manager on behalf of the Issuer may 

apply to S&P for an S&P credit estimate, which shall then be its S&P Rating; 

provided that during the period measured from the date of acquisition of such 

Collateral Debt Obligation through to the date on which such credit estimate is 

assigned, such Collateral Debt Obligation shall be attributed an S&P Rating of ‘‘B-’’ 

(for 21 days), and to the extent no credit estimate is received within 21 days, as 

agreed with S&P thereafter; and 

(c) 

with respect to any Synthetic Security or Participation, if the related Synthetic Security 

Counterparty or Selling Institution (as applicable) has been downgraded to an issuer credit 

rating lower than ‘‘A’’ by S&P, the S&P Rating shall be the lower of such rating or the 

rating of the related Reference Obligation or borrower (as applicable) as determined 

according to clauses (a) through (c) herein. 

All Collateral Debt Obligations which are project finance loans or which are Structured Finance 

Securities must be given a public or shadow rating by S&P and must be assigned an S&P Recovery 

Rate by S&P. 

For the purposes of the Maximum Portfolio Rating Test, 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 Principal Balance of such Collateral Debt Obligation shall be calculated 

as if such Collateral Debt Obligation had not been sold or was not subject to such an optional 

redemption or Offer and such Collateral Debt Obligation shall be included in such test as if it had 

not been sold by the Issuer or was subject to an optional redemption or Offer. 

11.4 The Minimum Weighted Average Spread Test 

The ‘‘Minimum Weighted Average Spread Test’’ will be satisfied if the Weighted Average Spread 

is greater than or equal to, as at any Measurement Date, from and including the Initial Effective 

Date to and excluding the Final Effective Date, 2.55 per cent. and, as at any Measurement Date 

from and including the Final Effective Date is greater than or equal to the level specified in the 

Moody’s Test Matrix (set out above) which is applicable under the Quality Case selected by the 

Collateral Manager, acting on behalf of the Issuer. 

The ‘‘Weighted Average Spread’’ is determined by summing the following: 

(a) 

the products obtained by multiplying the Principal Balance of each floating rate Collateral 

Debt Obligation, save for Non-Euro Obligations and excluding Defaulted Obligations, by 

the margin (expressed in basis points) over EURIBOR payable in respect of such 

Collateral Debt Obligation (net of any withholding taxes not subject to an applicable gross 

up obligation) due on the date of determination; 

198

(b) the products obtained by multiplying the Principal Balance of each floating rate Non-Euro 

Obligation, excluding Defaulted Obligations, by the margin (expressed in basis points) over 

EURIBOR payable by the applicable Currency Swap Counterparty to the Issuer under the 

Currency Swap Transaction relating thereto; 

(c) the aggregate of the products obtained by multiplying the Principal Balance of each fixed 

rate Euro denominated Collateral Debt Obligation the subject of an Interest Rate Hedge 

Transaction (excluding any Defaulted Obligations), by the difference between the amount 

payable by the applicable Interest Rate Hedge Counterparty to the Issuer under the 

Interest Rate Hedge Transaction relating thereto and the Note EURIBOR (as expressed in 

basis points); 

(d) the aggregate of the products obtained by multiplying the Principal Balance of each fixed 

rate Non-Euro Obligation, excluding Defaulted Obligations, by the difference between the 

amount payable by the applicable Currency Swap Counterparty to the Issuer under the 

Currency Swap Transaction relating thereto and the Note EURIBOR (as expressed in basis 

points) thereof; and 

(e) in respect of any fixed Collateral Debt Obligations not the subject of an Interest Rate 

Hedge Transaction, the difference between the fixed rate coupon of such Collateral Debt 

Obligation and Note EURIBOR as at the date of calculation; 

dividing such sum by the aggregate Principal Balances of all such fixed and floating rate Collateral 

Debt Obligations, including Non-Euro Obligations but excluding Defaulted Obligations, and rounding 

the result up to the nearest basis point. 

‘‘Note EURIBOR’’ means the six-month EURIBOR as at any Measurement Date (or in respect 

of any Measurement Date during the first Interest Accrual Period, the EURIBOR rate determined by 

linear interpolation in respect of 6 month EURO deposits and 9 month EURO deposits). 

11.5 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 if the Moody’s Weighted Average Recovery Rate is greater than or equal to the 

level specified in the Moody’s Test Matrix (set out above) which is applicable under the Quality Case 

selected by the Collateral Manager, acting on behalf of the Issuer. 

‘‘Moody’s Recovery Rate’’ means, in relation to each Collateral Debt Obligation, either (a) the 

Moody’s Recovery Rate allotted to such Collateral Debt Obligation in the Moody’s Recovery Rate 

Table below, by reference to whether it is a Senior Secured Loan, Second Lien Loan or Mezzanine 

Obligation and the Associated Country of such Collateral Debt Obligation; or (b) the Moody’s 

Recovery Rate assigned thereto by Moody’s on request by the Collateral Manager, provided that for 

the purposes of calculating the Moody’s 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 obligor under the related Reference Obligation) and not 

of the Synthetic Security, unless the Collateral Manager determines otherwise and receives Rating 

Agency Confirmation in respect of such determination, such Moody’s Recovery Rate to be rounded 

to the nearest decimal place and expressed as a percentage. 

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Moody’s Recovery Rate Table 

Obligor 

Bonds 

All loans except Senior 

Loans 

(including any Second 

Lien Loans and 

Mezzanine Loans) 

Senior Loans 

Senior Loans 

Tier A for Collateral Debt 

Obligations with a Moody’s 

Rating of ‘‘Baa2’’ and above.. 20% 45% 65% 

Tier A for Collateral Debt 

Obligations with a Moody’s 

Rating ‘‘Baa3’’ and below ...... 10% 25% 75% 

Tier B...................................... 20% 45% 65% 

Tier C ..................................... 15% 35% 50% 

Tier D ..................................... 10% 25% 35% 

USA/Canada........................... 22.5% 50% 70% 

The ‘‘Moody’s Weighted Average Recovery Rate’’ on any Measurement Date shall be determined 

by summing the products of the Principal Balance of each Collateral Debt Obligation (excluding 

Defaulted Obligations) and its Moody’s Recovery Rate and dividing such amount by the sum of the 

Principal Balances of all the Collateral Debt Obligations (excluding Defaulted Obligations), such 

figure to be expressed as a percentage. 

Notwithstanding the foregoing, Moody’s may communicate to the Collateral Manager and the 

Collateral Administrator methods for determination of Recovery Rates and related calculations other 

than that described above to be used for purposes of the Collateral Quality Tests, subject to Rating 

Agency Confirmation. 

Determination of Associated Country 

The ‘‘Associated Country’’ of a Collateral Debt Obligation shall be determined by the Collateral 

Manager, acting in good faith, determining the principal place of business of the borrower and its 

Group by reference to the Location Criterion which it believes is most appropriate for the Collateral 

Debt Obligation in question and the Associated Country of such Collateral Debt Obligation shall be 

the country with (i) the lower of (A) the Moody’s Recovery Rate of the country of incorporation of 

the borrower thereunder and (B) the lowest of all of the Moody’s Recovery Rates of the various 

countries utilised in reaching the 60 per cent. threshold required for the purposes of the Location 

Criterion so selected by the Collateral Manager in determining the principal place of business of the 

borrower and its Group or (ii) such Moody’s Recovery Rate as may be assigned by Moody’s at the 

request of the Collateral Manager. 

Where: 

The ‘‘Associated Country’’ is any one of the countries listed in the Moody’s Recovery Rate 

Table or such additional countries as the Collateral Manager may determine, subject to receipt of 

approval in writing from Moody’s in respect of such determination and receipt by the Collateral 

Manager of the Moody’s Recovery Rates applicable to any such country. 

Determination of Country Tier 

‘‘Group’’ means the relevant obligor and each of its subsidiaries and Affiliates whose financial 

statements are included in such obligor’s most recent annual audited consolidated financial statements. 

‘‘Location Criteria’’ means, in respect of each issuer or borrower of a Collateral Debt 

Obligation, one of the following, as selected and determined by the Collateral Manager, acting in 

good faith: 

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(a) at least 60 per cent. of the consolidated revenues of such obligor’s Group, as set out in the 

most recent annual audited consolidated financial statements of such Group, are earned by 

one or more companies in such Group which are incorporated in the applicable country; 

(b) at least 60 per cent. of the consolidated earnings of such obligor’s Group before interest 

and taxes as set out in the most recent annual audited consolidated financial statements of 

such Group are earned by one or more companies in such Group which are incorporated 

in the applicable country; 

(c) at least 60 per cent. of the consolidated earnings of such obligor’s Group before interest, 

taxes, depreciation and amortisation as set out in the most recent annual audited 

consolidated financial statements of such Group are earned by one or more companies in 

such Group which are incorporated in the applicable country; 

(d) at least 60 per cent. of the consolidated total assets of such obligor’s Group, as set out in 

the most recent annual audited consolidated financial statements of such Group, are 

located in the applicable country; and 

(e) at least 60 per cent. of the total employees of the obligor’s Group, as set out in its most 

recent annual audited consolidated financial statements, are employed in the applicable 

country. 

For purposes of calculating the Moody’s 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 obligor under such Synthetic Security shall be deemed to 

be the obligor under the related Reference Obligation) and not of the Synthetic Security, unless the 

Collateral Manager determines otherwise and receives Rating Agency Confirmation in respect of such 

determination. 

For the purposes of the Moody’s Minimum Weighted Average Recovery Rate Test, 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 Principal Balance of such Collateral Debt 

Obligation shall be calculated as if such Collateral Debt Obligation had not been sold or was not 

subject to such an optional redemption or Offer and such Collateral Debt Obligation shall be 

included in such test as if it had not been sold by the Issuer or was subject to an optional 

redemption or Offer. 

11.6 S&P Minimum Weighted Average Recovery Rate Test 

The ‘‘S&P Minimum Weighted Average Recovery Rate Test’’ will be satisfied if, as of the Initial 

Effective Date and any subsequent Measurement Date, the number (expressed as a percentage to one 

decimal place) obtained by: 

(a) adding, with respect to each Collateral Debt Obligation (excluding Defaulted Obligations), 

the product obtained by multiplying the Principal Balance of such Collateral Debt 

Obligation by its S&P Recovery Rate (as defined below); and 

(b) dividing such sum by the aggregate principal amount of all such Collateral Debt 

Obligations, 

is greater than or equal to the S&P Minimum Weighted Average Recovery Rate specified in the 

S&P Tests Matrix below (each scenario in this matrix being a ‘‘Break-even Rate Case’’), which is 

applicable under the Break-even Rate Case selected by the Collateral Manager, acting on behalf of 

the Issuer. 

Subject to the provisions provided below, on and after the Effective Date, the Collateral 

Manager, acting on behalf of the Issuer, will have the option to elect which of the cases (the ‘‘Breakeven 

Rate Cases’’) set forth in the matrix below (the ‘‘S&P Tests Matrix’’) shall be applicable for 

purposes of the S&P Minimum Weighted Average Recovery Rate Test and based on the selection of 

the Collateral Manager (on behalf of the Issuer), S&P will provide the Collateral Manager (on behalf 

of the Issuer) on the Effective Date, and from time to time thereafter until the end of the 

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Reinvestment Period, with the applicable CDO Monitor in connection with the CDO Monitor Test. 

For any given case, the applicable row and column for performing the S&P Minimum Weighted 

Average Recovery Rate Test will be the row and column in which the elected case is set out. 

On the Effective Date, the Collateral Manager, acting on behalf of the Issuer, will be required 

to elect which 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 Collateral Manager (on behalf of 

the Issuer) may elect to have a different Break-even Rate Case apply, provided that the S&P 

Minimum Weighted Average Recovery Rate Test applicable to the Breakeven Rate Case to which the 

Collateral Manager (on behalf of the Issuer) desires to change are satisfied. In no event will the 

Issuer or the Collateral Manager (on behalf of the Issuer) be obliged to elect to have a different 

Break-even Rate Case apply. 

S&P Tests Matrix 

S&P Minimum Weighted Average Recovery 

47% 51% 55% 59% 

Weighted Average 

Break-even Rate Case 

Spread 

2.35% ............................. Breakeven Rate Case 

1 

Breakeven Rate Case 

2 


3 


4 


5 


6 


7 


8 


8 


9 


10 


11 


12 


13 


14 


15 

The ‘‘S&P Recovery Rate’’ means the recovery rate assigned by S&P to each Collateral Debt 

Obligation as set out in the Collateral Management Agreement. For the purposes of the S&P 

Minimum Weighted Average Recovery Rate Test, unless otherwise specified by S&P, Synthetic 

Securities shall be assigned to a priority category based on the underlying Reference Obligation. 

11.7 S&P CDO Monitor Test 

The ‘‘S&P CDO Monitor Test’’ means a test which will be satisfied (a) on any date prior to the 

receipt by the Collateral Manager of the S&P CDO Monitor from S&P and (b) thereafter, as of any 

Measurement Date on or after the Final Effective Date until the end of the Reinvestment Period 

after giving effect to the purchase of a Substitute Collateral Debt Obligation, if each of the Class I 

Loss Differential, the Class II Loss Differential and the Class III Loss Differential of the Proposed 

Portfolio (as defined below) is (i) positive or (ii) greater than or equal to the Class I Loss 

Differential, the Class II Loss Differential or the Class III Loss Differential of the Current Portfolio, 

all in accordance with the provisions set forth in the Collateral Management Agreement. 

The ‘‘Class I Loss Differential’’ is, at any time, the rate calculated by subtracting the Class I 

Scenario Loss Rate (as defined below) from the Class I Break-even Loss Rate (as defined below) at 

such time. 

The ‘‘Class I Scenario Loss Rate’’ is, as of any date of determination, an estimate of the 

cumulative default rate for the Current Portfolio or the Proposed Portfolio, as applicable, consistent 

with a rating of ‘‘AAA’’ assigned to the Class I Senior Notes by S&P, determined by application of 

the relevant S&P CDO Monitor on such date. 

The ‘‘Class I Break-even Loss Rate’’ for each S&P Break-even Rate Case, is, as of any date of 

determination, the maximum percentage of defaults on the Current Portfolio or the Proposed 

Portfolio, as applicable, the transaction can sustain, as determined by S&P, through application of the 

corresponding S&P CDO Monitor, which after giving effect to S&P’s assumptions on recoveries and 

timing and to the Priority of Payments, will result in sufficient funds remaining for the payment of 

the Class I Senior Notes in full by their stated maturity and the timely payment of interest on the 

Class I Senior Notes. 

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The ‘‘Class II Loss Differential’’ is, at any time, the rate calculated by subtracting the Class II 

Scenario Loss Rate (as defined below) from the Class II Break-even Loss Rate (as defined below) at 

such time. 

The ‘‘Class II Scenario Loss Rate’’ is, as of any date of determination, an estimate of the 


with a rating of ‘‘AA’’ assigned to the Class II Senior Notes by S&P, determined by application of 

the relevant S&P CDO Monitor on such date. 

The ‘‘Class II Break-even Loss Rate’’ for each S&P Break-even Rate Case, is, as of any date of 





the Class II Senior Notes in full by their stated maturity and the timely payment of interest on the 

Class II Senior Notes. 

The ‘‘Class III Loss Differential’’ is, at any time, the rate calculated by subtracting the Class III 

Scenario Loss Rate (as defined below) from the Class III Break-even Loss Rate (as defined below) at 

such time. 

The ‘‘Class III Scenario Loss Rate’’ is, as of any date of determination, an estimate of the 


with a rating of ‘‘BBB’’ assigned to the Class III Mezzanine Notes by S&P, determined by 

application of the relevant S&P CDO Monitor on such date. 

The ‘‘Class III Break-even Loss Rate’’ for each S&P Break-even Rate Case, is, as of any date of 





the Class III Mezzanine Notes in full by their stated maturity and the ultimate payment of interest 

on the Class III Mezzanine Notes. 

The ‘‘Class IV Loss Differential’’ is, at any time, the rate calculated by subtracting the Class IV 

Scenario Loss Rate (as defined below) from the Class IV Break-even Loss Rate (as defined below) at 

such time. 

The ‘‘Class IV Scenario Loss Rate’’ is, as of any date of determination, an estimate of the 


with a rating of ‘‘BB’’ assigned to the Class IV Mezzanine Notes by S&P, determined by application 

of the relevant S&P CDO Monitor on such date. 

The ‘‘Class IV Break-even Loss Rate’’ for each S&P Break-even Rate Case, is, as of any date of 





the Class IV Mezzanine Notes in full by their stated maturity and the ultimate payment of interest on 

the Class IV Mezzanine Notes. 

The ‘‘Current Portfolio’’ means the portfolio (measured by aggregate principal balance) of 

Collateral Debt Obligations (excluding Defaulted Obligations) and Eligible Investments existing prior 

to the sale, maturity or other disposition of a Collateral Debt Obligation or prior to the purchase of 

a Collateral Debt Obligation, as the case may be. 

The ‘‘Proposed Portfolio’’ means the portfolio (measured by aggregate principal balance) of 

Collateral Debt Obligations (excluding Defaulted Obligations), Substitute Collateral Debt Obligations 

and Eligible Investments resulting from the sale or other disposition of a Collateral Debt Obligation 

or a proposed acquisition of a Substitute Collateral Debt Obligation from Principal Proceeds, as the 

case may be. 

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11.10 S&P CDO Evaluator Test 

The ‘‘S&P CDO Evaluator Test’’ will be satisfied on any Measurement Date after the 

Reinvestment Period if, after giving effect to the purchase or sale of a Collateral Debt Obligation (or 

both), as the case may be, the S&P Class I Scenario Default Rate, the S&P Class II Scenario Default 

Rate, the S&P Class III Scenario Default Rate and the S&P Class IV Scenario Default Rate, 

respectively, of the Proposed Portfolio (as defined above) is less than (in which case, the S&P CDO 

Evaluator Test would be improved) or equal to (in which case the S&P CDO Evaluator Test would 

be maintained) the S&P Class I Scenario Default Rate, the S&P Class II Scenario Default Rate, the 

S&P Class III Scenario Default Rate and the S&P Class IV Scenario Default Rate, respectively, 

determined in respect of the Current Portfolio (as defined above) existing prior to the purchase or 

sale of such Collateral Debt Obligation. 

‘‘S&P Class I Scenario Default Rate’’, at any time, means an estimate of the cumulative default 

rate for the Current Portfolio or the Proposed Portfolio, as applicable, consistent with an ‘‘AAA’’ 

rating by S&P with respect to the Class I Senior Notes, determined by application of the relevant 

S&P CDO Evaluator at such time. 

‘‘S&P Class II Scenario Default Rate’’, at any time, means an estimate of the cumulative default 

rate for the Current Portfolio or the Proposed Portfolio, as applicable, consistent with an ‘‘AA’’ 

rating by S&P with respect to the Class II Senior Notes, determined by application of the relevant 

S&P CDO Evaluator at such time. 

‘‘S&P Class III Scenario Default Rate’’, at any time, means an estimate of the cumulative 

default rate for the Current Portfolio or the Proposed Portfolio, as applicable, consistent with a 

‘‘BBB’’ rating by S&P with respect to the Class III Mezzanine Notes, determined by application of 

the relevant S&P CDO Evaluator at such time. 

‘‘S&P Class IV Scenario Default Rate’’, at any time, means an estimate of the cumulative 

default rate for the Current Portfolio or the Proposed Portfolio, as applicable, consistent with a ‘‘BB’’ 

rating by S&P with respect to the Class IV Mezzanine Notes, determined by application of the 

relevant S&P CDO Evaluator at such time. 

12. The Coverage Tests 

The Coverage Tests consist of the Senior Par Value Test, the Senior Interest Coverage Test, the 

Mezzanine Par Value Tests, the Mezzanine Interest Coverage Tests and the Interest Reinvestment 

Test. 

The Coverage Tests will be used primarily to determine whether interest may be paid on the 

Mezzanine Notes and the Subordinated Notes. The Coverage Tests (with the exception of the Interest 

Reinvestment Test) will be used to determine whether Principal Proceeds and, to the extent needed, 

funds which would otherwise be used to pay interest on the Mezzanine Notes and the Subordinated 

Notes must instead be used to pay principal of Class I Senior Notes and, to the extent applicable, the 

Class II Senior Notes, the Class III Mezzanine Notes and the Class IV Mezzanine Notes, in each 

case, to the extent necessary to cause the Coverage Tests relating to the relevant Class or Classes of 

Notes to be met. The Interest Reinvestment Test will be used to determine whether funds which 

would otherwise be used to pay interest on the Subordinated Notes (up to a maximum of 25 per 

cent. of such funds available) may be reinvested in Substitute Collateral Debt Obligations to the 

extent necessary to cause the Interest Reinvestment Test to be met. 

Measurement of the degree of compliance with the Coverage Tests will be carried out by the 

Collateral Administrator as of each Measurement Date. For purposes of determining whether any of 

the Coverage Tests are met for purposes of allocating amounts in accordance with the Priorities of 

Payment, a Collateral Debt Obligation shall be considered a ‘‘Defaulted Obligation’’ only if a default 

as to payment of principal and/or interest has occurred and is continuing with respect to such 

Collateral Debt Obligation or another obligation of the same obligor which is senior or equal in right 

of payment to such Collateral Debt Obligation and provided further that a Synthetic Security shall be 

considered a ‘‘Defaulted Obligation’’ if the Reference Obligation to which such Synthetic Security is 

linked would constitute a ‘‘Defaulted Obligation’’ if it were itself a Collateral Debt Obligation. 

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12.1 Senior Par Value Test 

The ‘‘Senior Par Value Test’’ will be satisfied on any Measurement Date if the Senior Par Value 

Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 115 per cent. The Senior 

Par Value Ratio is expected to be approximately equal to 124.9 per cent. as at the Final Effective 

Date. 

12.2 Senior Interest Coverage Test 

The ‘‘Senior Interest Coverage Test’’ will be satisfied on any Measurement Date if the Senior 

Interest Coverage Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 120 per 

cent. The Senior Interest Coverage Ratio is expected to be approximately equal to 202.9 per cent. as 

at the Final Effective Date. For purposes of calculating the Senior Interest Coverage Ratio and for 

purposes of the Reinvestment Criteria, the expected interest income on floating rate Collateral Debt 

Obligations and Eligible Investments and the Accounts and the expected interest payable on the 

Senior Notes will be calculated using the then current interest rates applicable thereto. 

12.3 Class III Par Value Test 

The ‘‘Class III Par Value Test’’ will be satisfied on any Measurement Date if the Class III Par 

Value Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 107 per cent. The 

Class III Par Value Ratio is expected to be approximately equal to 113.0 per cent. as of the Final 

Effective Date. 

12.4 Class III Interest Coverage Test 

The ‘‘Class III Interest Coverage Test’’ will be satisfied on any Measurement Date if the Class 

III Interest Coverage Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 110 

per cent. The Class III Interest Coverage Ratio is expected to be approximately equal to 178.4 per 

cent. as of the Final Effective Date. For purposes of calculating the Class III Interest Coverage Ratio 

and for purposes of the Reinvestment Criteria, the expected interest income on floating rate Collateral 

Debt Obligations and Eligible Investments and the Accounts (to the extent applicable) and the 

expected interest payable on the Senior Notes will be calculated using the then current interest rates 

applicable thereto. 

12.5 Class IV Par Value Test 

The ‘‘Class IV Par Value Test’’ will be satisfied on any Measurement Date if the Class IV Par 

Value Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 105.5 per cent. The 

Class IV Par Value Ratio is expected to be approximately equal to 109.3 per cent. as of the Final 

Effective Date. 

12.6 Class IV Interest Coverage Test 

The ‘‘Class IV Interest Coverage Test’’ will be satisfied on any Measurement Date if the Class 

IV Interest Coverage Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 100 

per cent. The Class III Interest Coverage Ratio is expected to be approximately equal to 167.6 per 

cent. as of the Final Effective Date. For purposes of calculating the Class III Interest Coverage Ratio 

and for purposes of the Reinvestment Criteria, the expected interest income on floating rate Collateral 

Debt Obligations and Eligible Investments and the Accounts (to the extent applicable) and the 

expected interest payable on the Senior Notes and the Class III Mezzanine Notes will be calculated 

using the then current interest rates applicable thereto. 

12.7 Interest Reinvestment Test 

The ‘‘Interest Reinvestment Test’’ will be satisfied on any Determination Date if the Interest 

Reinvestment Ratio (as defined in Condition 1 (Definitions) of the Conditions) is at least 106 per cent. 

The Interest Reinvestment Ratio is expected to be approximately equal to 109.3 per cent. as of the 

Final Effective Date. 

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DESCRIPTION OF THE COLLATERAL MANAGEMENT AGREEMENT 

General 

The collateral management functions described herein will be performed by Natexis Banques 

Populaires in relation to all investment and management functions with respect to the Collateral 

except in respect of Financial Instruments and by Natexis Asset Management in relation to all 

investment and management functions in respect of Financial Instruments only, in each case, the 

‘‘Collateral Manager’’ and together, the ‘‘Collateral Managers’’. Under the Collateral Management 

Agreement, Natexis Banques Populaires in relation to all investment and management functions with 

respect to the Collateral except in respect of Financial Instruments and Natexis Asset Management in 

relation to all investment and management functions with respect to Financial Instruments (as defined 

below) only, (in each case, the ‘‘Collateral Manager’’ and together, the ‘‘Collateral Managers’’) have 

each agreed to act as the Issuer’s collateral manager and to act in specific circumstances on behalf of 

the Issuer and to carry out the functions described below. In managing the categories of Collateral 

Debt Obligations for which they are responsible each Collateral Manager shall act in compliance with 

the Collateral Management Agreement and the Conditions. Natexis Banques Populaires shall procure 

that Natexis Asset Management complies with its obligations under the Collateral Management 

Agreement (including its obligation to manage the categories of Collateral Debt Obligations to be 

managed by it in compliance with the terms of the Collateral Management Agreement and the 

Conditions of the Notes). The Collateral Managers shall prior to making investment or disposal 

decisions consult with each other with a view to ensuring that the Portfolio complies with the terms 

of the Collateral Management Agreement and the Conditions of the Notes (and, in particular, to 

ensure compliance with the obligations of the Collateral Managers thereunder in respect of the 

Investment Objectives and the Collateral Quality Tests to the extent required under the terms of the 

Collateral Management Agreement). 

In the event that Natexis Banques Populaires is granted an agrément de société de gestion 

(licence to provide portfolio asset management services) from the Autorité des Marchés Financiers (or 

any relevant successor authority), and the scope of its authorised programme of activities (programme 

d’activité) covers the management of Financial Instruments (including Synthetic Securities) for other 

legal entities in accordance with applicable French law and regulations, Natexis Banques Populaires 

may at its option assume the rights and obligations of Natexis Asset Management under the 

Collateral Management Agreement (together with any other Transaction Document to which Natexis 

Asset Management is party). 

Fees 

The Collateral Managers shall, subject to Condition 4(c) (Limited Recourse) under ‘‘Conditions 

of the Notes’’, be paid the Senior Collateral Management Fee and the Subordinated Collateral 

Management Fee in arrear on each Payment Date in accordance with the Priorities of Payment (see 

the definitions thereof as set forth above in Condition 1 (Definitions). Any Senior or Subordinated 

Collateral Management Fee not paid on the Payment Date on which it is due will be added to the 

Senior or, as the case may be, Subordinated Collateral Management Fee due on the next occurring 

Payment Date. 

In addition to the above, the Collateral Manager shall be paid a performance-related fee, the 

‘‘Incentive Collateral Management Fee’’. The Incentive Collateral Management Fee is due and payable 

to the Collateral Manager on the first Payment Date on which the Subordinated Noteholders receive 

the Subordinated Note Hurdle Return Amount and on each Payment Date thereafter and is equal to 

20 per cent. of the cash flow, if any, available for payment to the Subordinated Noteholders. 

The fees will be allocated between the two Collateral Managers on the terms set forth in the 

Collateral Management Agreement. 

Termination and Resignation 

Automatic Termination The Collateral Management Agreement shall be automatically terminated 

in the event that: (a) the Issuer determines in good faith that the Issuer or the Portfolio has become 

required to register as an investment company under the provisions of the Investment Company Act 

206

y virtue of any action taken by either or both of the Collateral Managers, and the Issuer notifies the 

Collateral Managers of such requirement; (b) the repayment in full of all amounts owing under or in 

respect of the Notes and all other amounts owing to the Secured Parties and the termination of the 

Trust Deed in accordance with its terms; and (c) the liquidation of the Portfolio and the final 

distribution of the proceeds of such liquidation as provided for in the Trust Deed. 

Removal without Cause Under the Collateral Management Agreement, either or both of the 

Collateral Managers may be removed without cause upon 90 days’ prior written notice by the Issuer, 

subject to (i) the Mezzanine Par Value Tests not being satisfied and (ii) the prior consent of the 

holders of more than 50 per cent. in aggregate principal amount outstanding of the Class I Senior 

Notes and of each of the other Classes of Notes each acting by Extraordinary Resolution (excluding 

the Notes held by the Collateral Managers and their respective Affiliates as defined herein). Either or 

both of the Collateral Managers may also be removed without cause upon 30 days’ prior written 

notice by the Trustee acting upon the directions of the holders of more than 50 per cent. in aggregate 

principal amount outstanding of the Class I Senior Notes in the event the Senior Par Value Ratio is 

less than 100 per cent., and if no Class I Senior Notes are Outstanding, upon the directions of the 

holders of more than 50 per cent. in aggregate principal amount outstanding of the Class II Senior 

Notes in the event that the Senior Par Value Ratio is less than 100 per cent., and if no Senior Notes 

are Outstanding, acting upon the directions of the holders of more than 50 per cent. in aggregate 

principal amount outstanding of the Class III Mezzanine Notes in the event the Class III Par Value 

Test is less than 100 per cent., and if no Class III Mezzanine Notes are Outstanding, upon the 

directions of the holders of more than 50 per cent. in aggregate principal amount outstanding of the 

Class IV Mezzanine Notes in the event that the Class IV Par Value Test is less than 100 per cent. 

(excluding the Notes held by the Collateral Managers or their respective Affiliates as defined herein, 

at the time of such vote). 

Removal with Cause In addition, either or both the Collateral Managers may be removed for 

cause upon ten Business Days’ prior written notice by the Issuer with the consent of or by the 

Trustee acting upon the directions of the holders of more than 50 per cent. in aggregate principal 

amount outstanding of the Notes of the Controlling Class. In determining whether the holders of the 

requisite percentage of Notes have given any such direction, notice or consent, Notes owned by the 

Collateral Managers or any Affiliate thereof shall be disregarded and deemed not to be Outstanding. 

For purposes of the Collateral Management Agreement, ‘‘cause’’ shall mean any one of the 

following events in relation to either or both the Collateral Managers: (a) wilful violation by any 

Collateral Manager of any material obligation by which it is bound under or pursuant to the 

Collateral Management Agreement or the Trust Deed, (b) violation by any Collateral Manager of any 

material provision of the Collateral Management Agreement and failure to cure such violation within 

30 days of its becoming aware of, or its receiving notice from the Trustee of, such violation, (c) the 

failure of any representation, warranty, certification or statement made or delivered by any Collateral 

Manager in or pursuant to the Collateral Management Agreement to be correct in any material 

respect when made and such failure (i) has a material adverse effect on the Noteholders of any Class 

and (ii) no correction is made for a period of 30 days after any Collateral Manager becoming aware 

of, or its receipt of notice from the Issuer or the Trustee of, such failure, (d) certain events of 

bankruptcy or insolvency in respect of any Collateral Manager, (e) the occurrence of an Event of 

Default pursuant to any of Condition 10(a)(i) (Non-payment of interest), Condition 10(a)(ii) (Nonpayment 

of principal) or Condition 10(a)(iv) (Collateral Debt Obligations) by the Issuer, (f) the 

occurrence of an act by any Collateral Manager that constitutes fraud or criminal activity in the 

performance of its obligations under the Collateral Management Agreement, or the Collateral 

Manager being found guilty of a criminal offence materially related to its primary businesses and (g) 

any Collateral Manager ceases to have regulatory authorisation to carry out the functions which it 

has undertaken to provide to the Issuer or ceases to have regulatory authorisation to carry out such 

functions for the Issuer on a cross-border basis into Ireland. 

Resignation The Collateral Managers may resign without cause upon 30 days’ written notice to 

the Issuer or upon 10 days’ written notice with cause (as defined in the Collateral Management 

Agreement). In the event that the Collateral Managers resign or their appointment is terminated and 

a replacement collateral manager has not been appointed in accordance with Clause 9.4 of the 

207

Collateral Management Agreement (Appointment of a Successor Collateral Manager), within 90 days 

of the receipt of notice of such resignation or termination the Notes shall be redeemed (subject to 

certain thresholds, in terms of the liquidation value of the Collateral) on the next following Payment 

Date. See Condition 7(g) (Redemption upon Failure to Appoint a Replacement Collateral Manager). 

Automatic Resignation or Removal of both Collateral Managers In the event that one only of the 

Collateral Managers resigns or is removed in accordance with the provisions of the Collateral 

Management Agreement then the appointment of the other Collateral Manager shall automatically be 

terminated on the same date unless the replacement collateral manager is an Affiliate of the Collateral 

Manager. 

Replacement Collateral Manager No termination or resignation shall be effective unless a 

replacement collateral manager has agreed to assume all the duties and obligations arising out of the 

Collateral Management Agreement and the Trust Deed, in accordance with the terms and conditions 

of the Collateral Management Agreement, Rating Agency Confirmation has been received in respect 

thereof and the appointment of any such replacement collateral manager has been notified to the 

Noteholders and has not been vetoed by a direction in writing of a majority of the holders of the 

aggregate principal amount outstanding of the Controlling Class, in each case within 20 days of 

issuance of such notice. Pursuant to the terms of the Collateral Management Agreement, the Issuer 

and any successor Collateral Manager may agree a level of compensation other than payable as 

described herein (subject to Rating Agency Confirmation) and the Controlling Class and the 

Subordinated Noteholders (in each case, acting by Ordinary Resolution) may agree with the Issuer 

and a successor Collateral Manager to any other changes to the duties and obligations of the 

Collateral Manager set forth in the Collateral Management Agreement (subject to Rating Agency 

Confirmation). 

Assignment 

The Collateral Managers may assign their rights or responsibilities under the Collateral 

Management Agreement on the terms set out therein. 

Information 

In relation to each Non-Euro Obligation, the Collateral Manager shall be obliged to inform the 

Issuer and any Currency Swap Counterparty (i) of any Non-Euro Obligation becoming a Defaulted 

Obligation, a Credit Risk Obligation or a Credit Improved Obligation promptly upon it becoming 

aware of the same or (ii) if a Non-Euro Obligation should be sold. 

Holding of Notes by Natexis Banques Populaires 

Natexis Banques Populaires has undertaken in the Collateral Management Agreement that for 

as long as it acts as Collateral Manager to the Issuer, it or one or more of its Affiliates will purchase 

and hold to maturity or earlier redemption at least A6,440,000 aggregate principal amount outstanding 

of Subordinated Notes other than in circumstances where they are advised such holding breaches any 

law and regulation by which they or the Issuer are bound or with which Natexis Banques Populaires 

or its Affiliates habitually comply. Natexis Banques Populaires has represented in the Collateral 

Management Agreement that it will not at any time hold more than 90 per cent. of the Senior Notes. 

Voting Rights of the Collateral Managers 

Any Notes held by (or on behalf of) either of the Collateral Managers, or one or more of their 

respective Affiliates thereof, will have no voting rights with respect to any vote (or written direction 

or consent) in connection with the removal of one or both of the Collateral Managers (with or 

without cause) and will be deemed not to be Outstanding in connection with any such vote; provided 

however that any Notes held by either of the Collateral Managers, or one or more of their respective 

Affiliates 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 

Collateral Manager which is not Affiliated with either of the Collateral Managers in accordance with 

the Collateral Management Agreement. 

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Liability of the Collateral Managers 

The Collateral Managers are exempted from liability arising out of or in connection with the 

performance by them of their duties under the Collateral Management Agreement except by reason of 

acts or omissions constituting bad faith, negligence or wilful misconduct in the performance of the 

obligations of the Collateral Managers pursuant to the Collateral Management Agreement. In the 

Collateral Management Agreement, Natexis Banques Populaires shall undertake to pay any loss, 

damage or other amount which Natexis Asset Management is liable to pay under the Collateral 

Management Agreement. 

209

DESCRIPTION OF THE COLLATERAL ADMINISTRATOR 

General 

ABN AMRO Bank N.V. (London Branch) will, under the terms of the Collateral Management 

Agreement, act as the Collateral Administrator. 

In the United Kingdom, ABN AMRO Bank N.V. (London Branch) has been authorised to 

accept deposits, and is regulated by, the Financial Services Authority and is subject to the Conduct of 

Business Rules. 

Termination and Resignation of Appointment of the Collateral Administrator 

The appointment of the Collateral Administrator may be terminated (a) without cause at any 

time upon 45 days’ prior written notice by the Issuer or the Trustee at its discretion or acting upon 

the directions of the holders of a majority in aggregate principal amount outstanding of each Class of 

Notes or (b) with cause by the Issuer or the Trustee at its discretion or acting upon the directions of 

the holders of a majority in principal amount outstanding of each Class of Notes. In addition the 

Collateral Administrator can resign its appointment without cause on 90 days’ written notice and 

with cause on 10 days’ prior written notice. No 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 DEPOSITARY AND REGISTRAR 

LaSalle Bank National Association will, under the terms of the Depositary Agreement, act as 

the Depositary and will, under the terms of the Agency Agreement, act as the Registrar (in the event 

of the exchange of Global Notes for Definitive Certificates). LaSalle Bank National Association has 

been duly formed and is validly existing as a national banking association in good standing under the 

laws of the United States of America. LaSalle Bank National Association is currently rated ‘‘AA-’’ by 

Fitch Ratings Limited, ‘‘Aa3’’ by Moody’s and ‘‘A+’’ by S&P. 

See also ‘‘Book-Entry Clearance Procedures and Certain Relevant Provisions of the Depositary 

Agreement – Certain Relevant Provisions of the Depositary Agreement’’ above. 

211

DESCRIPTION OF THE REPORTS 

1. Monthly Reports 

The Collateral Administrator shall not later than the tenth Business Day after the last day of 

each month (excluding in respect of any month in which a Note Valuation Report is prepared) 

commencing September 2006 (assuming the Initial Effective Date falls in such month, or October 

2006 otherwise), on behalf of the Issuer and in consultation with the Collateral Manager, compile and 

make available (by posting on a website (www.cdotrustee.com) which shall not form a part of this 

prospectus) to the Trustee, the Collateral Manager, the Issuer and the Rating Agencies and, upon 

written request thereof in accordance with Condition 4(f) (Information Regarding the Portfolio) any 

Noteholder, a monthly report (the ‘‘Monthly Report’’), which shall contain the information set out 

below with respect to the Collateral Debt Obligations, determined by the Collateral Administrator as 

of the last Business Day of the immediately preceding month. In addition, the Issuer will be 

responsible for delivering an electronic copy of the information contained in the Monthly Report, on 

each date the Monthly Report is distributed, to any publishers of financial data designated for receipt 

of such information by the Issuer from time to time. In addition, for so long as any of the Notes are 

Outstanding, the Monthly Report will be available for inspection at, and copies thereof may be 

obtained free of charge upon request from, the Irish Listing Agent. 

Portfolio 

(i) 

(ii) 

(iii) 

(iv) 

Accounts 

(v) 

(vi) 

the aggregate of the Principal Balances of, respectively, the Collateral Debt Obligations, 

Eligible Investments and Collateral Enhancement Obligations; 

the identity of, the annual interest rate, Stated Maturity, obligor under, industry and 

Rating (if applicable)(but not any confidential credit estimate) of, each Collateral Debt 

Obligation and Collateral Enhancement Obligation and details of whether such obligation 

is Synthetic Security; 

the identity of, respectively, any Collateral Debt Obligations and Collateral Enhancement 

Obligations that were released for sale or other disposition or that were acquired since the 

date of determination of the last Monthly Report; 

the purchase or sale price of each Collateral Debt Obligation and Collateral Enhancement 

Obligations acquired and/or sold since the date of determination of the last Monthly 

Report and the identity of the purchasers or sellers thereof, if any, that are Affiliated with 

the Issuer or the Collateral Manager; 

the Balances standing to the credit of each of the Interest Account and the Principal 

Account; 

the Balances standing to the credit of the Expense Reserve Account, the Additional 

Collateral Account, the Collateral Enhancement Account, the Synthetic Collateral Account, 

the Retained Portion Account and the Currency Accounts; 

(vii) the Principal Balance, annual interest rate, Stated Maturity, obligor and rating of each 

Eligible Investment purchased with funds from any Account; 

Interest Rate Hedge and Currency Swap Transactions 

(viii) the outstanding notional amount of each Interest Rate Hedge Transaction; 

(ix) 

the amount scheduled to be received and paid by the Issuer pursuant to each Interest Rate 

Hedge Transaction and Currency Swap Transaction on the next Payment Date; 

Coverage Tests and Collateral Quality Tests 

(x) the Senior Par Value Ratio, Class III Par Value Ratio and Class IV Par Value Ratio and 

a statement as to whether each of the Senior Par Value Test, Class III Par Value Test and 

Class IV Par Value Test is satisfied; 

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(xi) 

the Senior Interest Coverage Ratio, the Class III Interest Coverage Ratio and the Class IV 

Interest Coverage Ratio and a statement as to whether each of the Senior Interest 

Coverage Test, the Class III Interest Coverage Test and the Class IV Interest Coverage 

Test is satisfied; 

(xii) the Interest Reinvestment Ratio and a statement as to whether the Interest Reinvestment 

Test is satisfied; 

(xiii) the Average Portfolio Rating and a statement as to whether the Maximum Portfolio 

Rating Test is satisfied; 

(xiv) the Diversity Score and, for each Monthly Report prepared during the Reinvestment 

Period, a statement as to whether the Minimum Diversity Test is satisfied; 

(xv) the Portfolio Weighted Average Life and a statement as to whether the Maximum 

Weighted Average Life Test is satisfied; 

(xvi) the result obtained upon calculation of the Weighted Average Spread and a statement as 

to whether the Minimum Weighted Average Spread Test is each satisfied; 

(xvii) the Weighted Average Moody’s Recovery Rate and a statement as to whether the Moody’s 

Minimum Weighted Average Recovery Rate Test is satisfied; 

(xviii) the S&P Minimum Weighted Average Recovery Rate and a statement as to whether the 

S&P Minimum Weighted Average Recovery Rate Test is satisfied; 

(xix) a statement as to whether the S&P CDO Monitor Test is satisfied (if applicable); 

(xx) a statement as to whether the S&P CDO Evaluator Test is satisfied (if applicable); 

Portfolio Profile Tests 

(xxi) the aggregate Principal Balance of Collateral Debt Obligations: 

(A) 

(B) 

(C) 

(D) 

(E) 

(F) 

(G) 

(H) 

(I) 

(J) 

(K) 

(L) 

which consist of Senior Secured Loans; 

which consist of Second Lien Loans; 

which consist of Mezzanine Obligations; 

which consist of Non-Euro Obligations; 

of each single obligor which consist of Senior Secured Loans; 

of each single obligor which consist of Second Lien Loans; 

of each single obligor which consist of Mezzanine Obligations; 

which provide for payment of interest in cash less frequently than semi-annually but 

at least as frequently as annually; 

which bear interest at other than a floating rate of interest; 

which have a Moody’s Rating of ‘‘Caa1’’ or less or an S&P Rating of ‘‘CCC+’’ or 

less; 

which consist of Participations or Synthetic Securities in respect of which the Selling 

Institution or Synthetic Counterparty has a rating of ‘‘A2’’ or better from Moody’s; 

which consist of Participations or Synthetic Securities from one Selling Institution; 

(M) which consist of Participations or Synthetic Securities from the Collateral Manager or 

an Affiliate thereof; 

(N) 

(O) 

which consist of Participations or Synthetic Securities from Selling Institutions or 

Synthetic Counterparties (other than the Collateral Manager) with a rating of ‘‘A1’’ 

or lower (but not lower than ‘‘A3’’) from Moody’s; 

which consist of Participations from Selling Institutions with a rating of ‘‘AA-’’ or 

better from S&P; 

213

(P) 

(Q) 

which consist of Participations and Synthetic Securities from Selling Institutions or 

Synthetic Counterparties with a rating of ‘‘A’’ or better from S&P (excluding all such 

Participations as are included in (M) above); and 

which consist of Structured Finance Securities, and 

a statement in respect of each Portfolio Profile Test 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. 

(xxii) any applicable rate of withholding tax on payments under any Collateral Debt Obligations. 

2. Note Valuation Report 

The Collateral Administrator, on behalf of the Issuer, shall render an accounting report (the 

‘‘Note Valuation Report’’), prepared and determined as of each Determination Date, and made 

available (by posting on a website (cdotrustee.com) which shall not form a part of this Prospectus) to 

the Collateral Manager, the Issuer, the Trustee and, upon written request thereof in accordance with 

Condition 4(f) (Information Regarding the Portfolio) any Noteholder and the Rating Agencies not 

later than the related Payment Date. Upon receipt of each Note Valuation Report, the Collateral 

Administrator, in the name and at the expense of the Issuer, shall notify the Irish Stock Exchange of 

the aggregate principal amount outstanding of the Notes of each Class Outstanding after giving effect 

to the principal payments, if any, on the next Payment Date. In addition, for so long as any of the 

Notes are Outstanding, the Note Valuation Report will be available for inspection at, and copies 

thereof may be obtained free of charge upon request from, the Irish Listing Agent. The Note 

Valuation Report shall contain the following information: 

Portfolio 

(i) 

(ii) 

Notes 

(iii) 

(iv) 

the aggregate of the Principal Balances of, respectively, the Collateral Debt Obligations, 

Eligible Investments and Collateral Enhancement Obligations as of the close of business on 

such Determination Date; 

a list of, respectively, the Collateral Debt Obligations, Eligible Investments and Collateral 

Enhancement Obligations indicating the Principal Balance and obligor of each; 

the aggregate principal amount outstanding 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 at the beginning of the Due Period, the amount of principal 

payments to be made on the Notes of each Class on the next Payment Date, 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; 

the interest payable in respect of each Class of Notes on the related Payment Date (in the 

aggregate and by Class); 

Payment Date Payments 

(v) the amounts payable pursuant to Condition 3(c)(i) (Application of Interest Proceeds) and 

Condition 3(c)(ii) (Application of Principal Proceeds) of the Conditions of the Notes on the 

related Payment Date; 

(vi) 

the Trustee Fees and Expenses and Administrative Expenses payable on the related 

Payment Date on an itemised basis; 

Accounts 

(vii) the Balances standing to the credit of each of the Interest Account and the Principal 

Account; 

214

(viii) the Balances standing to the credit of each of the Interest Account and the Principal 

Account immediately after all payments and deposits to be made on the next Payment 

Date; 

(ix) the Balance standing to the credit of the Expense Reserve Account at the end of the 

related Due Period; 

(x) the Balance standing to the credit of the Additional Collateral Account at the end of the 


(xi) the Balance standing to the credit of the Collateral Enhancement Account at the end of 

the related Due Period; 

(xii) the Balance standing to the credit of the Synthetic Collateral Account at the end of the 


(xiii) the Balance standing to the credit of the Currency Accounts at the end of the related Due 

Period; and 

(xiv) the Balance standing to the credit of the Retained Portion Account at the end of the 

related Due Period; and 

Coverage Tests, Collateral Quality Tests and Portfolio Profile Tests 

(xv) the information required pursuant to paragraphs (viii) to (xxii) (inclusive) of Paragraph 1 

(Monthly Reports). 

The Note Valuation Report shall include a reminder that each holder of a beneficial interest in 

a Rule 144A Note must be able to make the representations set out herein under ‘‘Transfer 

Restrictions – Rule 144A Notes’’. 

3. Subordinated Noteholder Report 

The Collateral Administrator on behalf of the Issuer, shall provide information (the 

‘‘Subordinated Noteholder Report’’), compiled and calculated (except with respect to the approximate 

value referenced in paragraph (i) below) as of, and delivered to the Collateral Manager, the Issuer 

and the Trustee on the dates so provided for the Monthly Report or the Note Valuation Report, as 

applicable. The Collateral Administrator shall, in addition, make available (by posting on a website 

(cdotrustee.com) which shall not form a part of this Prospectus) a copy of the Subordinated 

Noteholder Report to any holder of Subordinated Notes and, upon written request thereof in 

accordance with 4(f) (Information Regarding the Portfolio) any Noteholder. No Subordinated 

Noteholder Reports shall be mailed from within the United States. In addition, for so long as any of 

the Notes are Outstanding, the Subordinated Noteholder Report will be available for inspection at, 

and copies thereof may be obtained free of charge upon request from, the Irish Listing Agent. The 

Subordinated Noteholder Report shall contain the following information: 

Portfolio 

(i) 

(ii) 

(iii) 

the approximate aggregate Market Value of, respectively, the Collateral Debt Obligations, 

the Eligible Investments 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; 

Subordinated Notes 

the estimated Interest Amount payable in relation to Subordinated Notes Interest on the 

next Payment Date based on projected scheduled interest payments on the Collateral Debt 

Obligations included in the Collateral, less projected estimated amounts payable pursuant 

to paragraphs (A) to (S) (inclusive) and (U) to (X) (inclusive) of Condition 3(c)(i) 

(Application of Interest Proceeds) and paragraphs (A) to (O) of Condition 3(c)(ii) 

(Application of Principal Proceeds) (inclusive, but other than payments on the 

Subordinated Notes) on such Payment Date; 

215

Class I Senior Notes, Class II Senior Notes, Class III Mezzanine Notes and Class IV Mezzanine Notes 

(iv) the Interest Amount payable in respect of the Class I Senior Notes, Class II Senior Notes, 

Class III Mezzanine Notes and the Class IV Mezzanine Notes on the next Payment Date; 

(v) EURIBOR for the related Due Period and the Class I Floating Rate of Interest and the 

Class II Floating Rate of Interest and the Class III Floating Rate of Interest and the Class 

IV Floating Rate of Interest during the related Due Period; 

Coverage Ratios 

(vi) the Senior Par Value Ratio, Class III Par Value Ratio, Class IV Par Value Ratio, Senior 

Interest Coverage Ratio, Class III Interest Coverage Ratio and Class IV Interest Coverage 

Ratio as of the close of business on the related Measurement Date and as of the date of 

each purchase, sale or other disposition of Collateral Debt Obligations since the last 

report. 

The Subordinated Noteholder 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 Collateral Manager, the Issuer, the Trustee or the Collateral Administrator will have any 

liability for such estimates, approximations or projections. 

Nothing in this section (Description of the Reports) shall oblige the Issuer or the Collateral 

Manager to disclose, whether directly or indirectly, any information held under an obligation of 

confidentiality (in whatever form and whether under law or contract). 

216

TAX CONSIDERATIONS 

1. General 

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. 

Potential purchasers who are in any doubt about their tax position on purchase, ownership, 

transfer or exercise of any Note should consult their own tax advisers. In particular, no representation 

is made as to the manner in which payments under the Notes would be characterised by any relevant 

taxing authority. 

Potential purchasers should be aware that the relevant fiscal rules or their interpretation may 

change, possibly with retrospective effect, and that this summary is not exhaustive. This summary 

does not constitute legal or tax advice or a guarantee to any potential purchaser of the tax 

consequences of investing in the Notes. 

2. Irish Taxation 

The following is a summary based on the laws and practices currently in force in Ireland 

regarding the tax position of investors beneficially owning their Notes and should be treated with 

appropriate caution. Particular rules may apply to certain classes of taxpayers holding Notes. The 

summary does not constitute tax or legal advice and the comments below are of a general nature 

only. Prospective investors in the Notes should consult their professional advisers on the tax 

implications of the purchase, holding, redemption or sale of the Notes and the receipt of interest 

thereon under the laws of their country of residence, citizenship or domicile. 

Withholding Tax 

In general, tax at the standard rate of income tax (currently 20 per cent.) is required to be 

withheld from payments of Irish source interest. However, an exemption from withholding on interest 

payments exists under Section 64 of the Taxes Consolidation Act, 1997 (the ‘‘1997 Act’’) for certain 

securities (‘‘quoted eurobonds’’) issued by a body corporate (such as the Issuer) which are interest 

bearing and quoted on a recognised stock exchange (which would include the Irish Stock Exchange). 

Any interest paid on such quoted eurobonds can be paid free of withholding tax provided: 

1. the person by or through whom the payment is made is not in Ireland; or 

2. the payment is made by or through a person in Ireland, and either: 

(i) 

the quoted eurobond is held in a clearing system recognised by the Irish Revenue 

Commissioners (Euroclear and Clearstream, Luxembourg are so recognised), or 

(ii) the person who is the beneficial owner of the quoted eurobond and who is 

beneficially entitled to the interest is not resident in Ireland and has made a 

declaration to a relevant person (such as an Irish paying agent) in the prescribed 

form. 

So long as the Notes are quoted on a recognised stock exchange and are held in Euroclear and/ 

or Clearstream, Luxembourg (or if not so held, the interest on the Notes is paid through a paying 

agent not in Ireland), interest on the Notes can be paid by the Issuer and any paying agent acting on 

behalf of the Issuer without any withholding or deduction for or on account of Irish income tax. 

If, for any reason, the quoted eurobond exemption referred to above does not or ceases to 

apply, the Issuer can still pay interest on the Notes free of withholding tax provided it is a 

‘‘qualifying company’’ (within the meaning of Section 110 of the 1997 Act) and provided the interest 

is paid to a person resident in a ‘‘relevant territory’’ (i.e. a member state of the European Union 

(other than Ireland) or in a country with which Ireland has a double taxation agreement). For this 

purpose, residence is determined by reference to the law of the country in which the recipient claims 

to be resident. This exemption from withholding tax will not apply, however, if the interest is paid to 

a company in connection with a trade or business carried on by it through a branch or agency 

located in Ireland. 

217

In certain circumstances, Irish tax will be required to be withheld at the standard rate (currently 

being 20 per cent.) from interest on the Notes, where such interest is collected by a bank in Ireland 

on behalf of any Noteholder who is resident in Ireland. 

Taxation of Noteholders 

Notwithstanding that a Noteholder may receive interest on the Notes free of withholding tax 

(subject as provided in ‘‘Withholding Tax’’ above), the Noteholder may still be liable to pay Irish 

income tax. Interest paid on the Notes may have an Irish source and therefore be within the charge 

to Irish income tax and levies. Ireland operates a self assessment system in respect of income tax and 

any person, including a person who is neither resident nor ordinarily resident in Ireland, with Irish 

source income comes within its scope. 

However, interest on the Notes will be exempt from Irish income tax if the recipient of the 

interest is not resident in Ireland but is resident in a relevant territory provided either (i) the Notes 

are quoted eurobonds and are exempt from withholding tax as set out above or (ii) in the event of 

the Notes not being or ceasing to be quoted eurobonds exempt from withholding tax, if the Issuer is 

a qualifying company within the meaning of Section 110 of the 1997 Act, or (iii) if the Issuer has 

ceased to be a qualifying company, the recipient of the interest is a company. 

Notwithstanding these exemptions from income tax, a corporate recipient that carries on a trade 

in Ireland through a branch or agency in respect of which the Notes are held or attributed, may have 

a liability to Irish corporation tax on the interest. 

Interest on the Notes which does not fall within the above exemptions may be within the charge 

to Irish income tax. 

Capital Gains Tax 

A holder of Notes will be subject to Irish tax on capital gains on a disposal of Notes unless 

such holder is neither resident nor ordinarily resident in Ireland and does not carry on a trade in 

Ireland through a branch or agency in respect of which the Notes are used or held. 

Capital Acquisitions Tax 

A gift or inheritance comprising of Notes will be within the charge to capital acquisitions tax if 

either (i) the disponer or the donee/successor in relation to the gift or inheritance is resident or 

ordinarily resident in Ireland (or, in certain circumstances, if the disponer is domiciled in Ireland 

irrespective of his residence or that of the donee/successor) or (ii) if the Notes are regarded as 

property situate in Ireland. Bearer notes are generally regarded as situated where they are physically 

located at any particular time, but the Notes may be regarded as situated in Ireland regardless of 

their physical location as they are secured over Irish property, and they themselves secure a debt due 

by an Irish resident debtor. Accordingly, if such Notes are comprised in a gift or inheritance, the gift 

or inheritance may be within the charge to tax regardless of the residence status of the disponer or 

the donee/successor. 

Stamp Duty 

No stamp duty or similar tax is imposed in Ireland on the issue (on the basis of an exemption 

provided for in Section 85(2)(c) of the Stamp Duties Consolidation Act 1999 provided the proceeds of 

the Notes are used in the course of the Issuer’s business), transfer or redemption of the Notes 

whether they are represented by Global Notes or Definitive Certificates. 

3. German Taxation 

The following information relating to German taxation is a general description of certain 

German tax considerations relating to the Notes and 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-10. Investment Tax Act (Germany)’’. 

218

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 of which they are residents, of purchasing, holding and 

disposing of the Notes and receiving payments under the Notes. 

German Investment Tax Act – General 

There is currently legal uncertainty in the Federal Republic of Germany as to whether the 

Investment Tax Act would apply to certain classes of CDO notes and similar instruments. In 

particular, although the German Federal Ministry of Finance issued the Decree, which should largely 

exclude CDO notes and similar instruments from the scope of the German Investment Tax Act 

provided that the tests set out in the Decree are met, there is a risk as to the interpretation of such 

tests. Such tax risk particularly applies with respect to the Subordinated Notes, the Mezzanine Notes 

and any Structured Combination Notes comprised of, inter alia, any Subordinated Component. With 

respect to the Senior Notes, however, there exists a remote risk that the German tax authorities take 

a different view regarding the application of the Investment Tax Act. 

Noteholders Subject to the Investment Tax Act 

If the Investment Tax Act would apply to any Class of Notes, this could have an adverse 

impact on the tax position of the relevant Noteholders if: 

(a) such Noteholder is resident in Germany for German tax purposes; or 

(b) such Noteholder is not resident in Germany for German tax purposes but holds such 

Notes through a permanent establishment (or a permanent representative) in Germany; or 

(c) such a Noteholder, either resident or nor resident in Germany for German tax purposes 

(other than a foreign credit institution or a foreign financial services institution) physically 

presents such Notes at the office of a ‘‘German Disbursing Agent‘‘, being 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 (an ‘‘overthe-counter-transaction’’ 

(Tafelgeschäft)) 

(all such Noteholders falling within categories (a), (b) and (c) above and holding Notes to which the 

Investment Tax Act is applicable, together, the ‘‘Noteholders Subject to the Investment Tax Act’’). 

Such adverse impact on the tax position of such investors would, however, be mitigated if the 

Issuer complies with the Investment Tax Act Reporting Requirements. The Issuer has made no 

arrangements to comply with the Investment Tax Act Reporting Requirements. Consequently, any 

Noteholders Subject to the Investment Tax Act holding such Notes will be subject to adverse lumpsum 

taxation provisions of section 6 of the Investment Tax Act. In this case, the higher of (i) 

distributions on such Notes and 70% of the annual increase in the market price of such Notes and 

(ii) 6% of the market price at the end of every calendar year (‘‘Assumed Profits’’) would be taxed. 

Furthermore, in such case, withholding tax may be levied not only on the gross amount of payments 

received by the Noteholders holding Notes which are subject to the Investment Tax Act, but also on 

the aggregate amount of Assumed Profits. 

Capital gains on the sale or partial or final redemption of the Notes are subject to ‘‘Income 

Tax’’ or corporate ‘‘Income Tax’’ and, as the case may be, trade tax in Germany. 

If the Investment Tax Act applies, Noteholders will also be subject to tax in Germany on the 

interim profit (Zwischengewinn) upon sale or Redemption of the Notes. The interim profit represents, 

for example, 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. The Issuer will 

not calculate and publish the interim profits. As a consequence, investors holding the Notes subject to 

the Investment Tax Act will upon Redemption or sale of the Notes be subject to a special lump sum 

taxation, i.e. 6% of the consideration for the Redemption or disposal of the Notes will be treated as 

taxable deemed interim profits. 

Where Notes to which the Investment Tax Act would apply 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% (plus solidarity charge thereon at a rate of 5.5%) not only of the gross 

219

amount of interest paid, but also on the aggregate amount of income deemed to have accrued to the 

holder of the Notes which are subject to the Investment Tax Act, i.e. on the Assumed Profits and not 

yet otherwise subject to taxation. In case of over-the-counter transactions (Tafelgeschäft), the 

withholding tax will be levied on the Assumed Profits at a rate of 35% (plus 5.5% solidarity surcharge 

thereon). This is also applicable with respect to interim profits. 

German Investors in Notes not Falling within the Scope of the German Investment Tax Act 

Payments of interest on Notes not falling within the scope of the Investment Tax Act 

(‘‘Interest’’) are subject to tax in Germany if paid to a Noteholder who: 

(a) is resident in Germany for German tax purposes; or 

(b) is not resident in Germany for German tax purposes but holds the Notes through a 

permanent establishment (or a permanent representative) in Germany 

(each such investor, a ‘‘German Investor’’). 

Interest paid to a German Investor is subject to income tax or corporate income tax (in each 

case plus solidarity surcharge thereon at a rate of 5.5%) and, as the case may be, trade tax. 

Interest paid to a German Investor is subject to withholding tax if: 

(a) the German Investor keeps the Notes in a custodial account with a German Disbursing 

Agent; or 

(b) if the Notes are physically presented at the office of a German Disbursing Agent (an 

‘‘over-the-counter-transaction’’ (Tafelgeschäft)). 

If such withholding tax is due, such withholding tax will be deducted at a rate of 30% or, in the 

case of an over-the-counter-transaction, at a rate of 35% (in each case plus solidarity surcharge 

thereon at a rate of 5.5%). Such withholding tax is credited against the income tax and corporate 

income tax liability, respectively, of the German Investors or, as the case may be, refunded. 

Capital gains made on the sale or partial or final redemption of the Notes (including accrued 

interest) over their current book value or otherwise realized by a German Investor are subject to 

income tax or corporate income tax and, as the case may be, trade tax in Germany. 

Capital gains realized by a German Investor are subject to withholding tax subject to the same 

conditions under which Interest paid to German Noteholders is subject to withholding tax (see 

above). The capital gain subject to withholding tax is the accrued interest if such accrued interest is 

charged separately (Stückzinsen). If such accrued interest is not charged separately, the capital gain 

subject to withholding tax is the sales revenue net of the purchase price provided that the Notes are 

acquired or sold and kept thereafter in a custodial account by a German Disbursing Agent; otherwise 

the capital gain subject to withholding tax is equal to 30% of the (gross) sales revenue. The German 

withholding tax (tax rate 30% or, in the case of an over-the-counter-transaction, 35%, in each case 

plus solidarity surcharge thereon at a rate of 5.5%) is credited against the income tax and corporate 

income tax liability, respectively, of the German Investor or, as the case may be, refunded. 

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 or interest payments (including accrued interest). 

Foreign investors in Notes not falling within the scope of the German Investment Tax Act 

Interest on the Notes not falling within the scope of the Investment Tax Act paid to an investor 

other than a German Investor is subject to tax in Germany if such investor physically presents the 

coupons at the office of a German Disbursing Agent (an ‘‘over-the-counter-transaction’’ 

(Tafelgeschäft)), unless (i) such investor qualifies as a foreign credit institution or foreign financial 

services institution, or (ii) the Notes are kept in a custodial account with the German Disbursing 

Agent) (each such investor, a ‘‘Foreign Taxable Investor’’). Interest paid to a Foreign Taxable Investor 

is subject to withholding tax at a rate of 35% (plus solidarity charge thereon at a rate of 5.5%). Such 

withholding tax is not credited or refunded. 

Capital gains made on the sale of the Notes not falling within the scope of the Investment Tax 

Act by a Foreign Taxable Investor are subject to withholding tax subject to the same conditions 

220

under which interest paid to a Foreign Taxable Investor is subject to tax in Germany. The capital 

gain subject to withholding tax is the accrued interest if such accrued interest is charged separately 

(Stückzinsen). If such accrued interest is not charged separately, the capital gain subject to 

withholding tax is the sales revenue net of the purchase price provided that the Notes are acquired or 

sold and kept thereafter in a custodial account by a German Disbursing Agent; otherwise the capital 

gain subject to withholding tax is equal to 30% of the (gross) sales revenue. The German withholding 

tax (tax rate 35% plus solidarity charge thereon at a rate of 5.5%) is not credited or refunded. 

Investors Subject to the German CFC Rules 

In accordance with the German CFC-rules, as set out in the German Foreign Tax Act 

(Außensteuergesetz, the ‘‘FTA’’), a non-German entity is classified as a so-called CFC 

(Zwischengesellschaft) (i) if it is organised in a legal form comparable to an entity which, if domiciled 

in Germany, would be subject to German corporate tax, (ii) if it does not conduct an ‘‘active 

business’’ within the meaning of Section 8 FTA, and (iii) which is taxed at an effective rate of less 

than 25%. 

The income of such a CFC is taxed at the level of German tax residents if German tax 

residents in total hold more than, in principle, 50% of the shares or voting rights in such CFC. 

However, the German CFC rules even apply if one German tax resident holds less than 1% of the 

shares or voting rights in such foreign entity and if such foreign entity exclusively earns income from 

‘‘capital investments’’, i.e. income from investments in receivables, stocks and bonds, shares or similar 

assets. Since the Notes do not provide for shareholder rights (e.g. voting rights) and are structured as 

a mere contractual relationship with contingent interest coupons, the Issuer believes that the Notes 

should not be considered as a shareholding within the meaning of the German CFC rules. 

However, it has to be noted that, according to the rules of the FTA, in the absence of a share 

capital or voting rights, the ‘‘profit participation in the assets’’ of the CFC shall be a decisive criteria 

for constituting a ‘‘controlling interest’’ of a German tax resident. There exists furthermore a risk that 

such rule could also be applied by the German tax authorities on the basis of a ‘‘substance over 

form’’ analysis, therefore, particularly the Subordinated Notes and any Structured Combination Notes 

comprised of, inter alia, Subordinated Components could be re-qualified into a ‘‘controlling interest’’ 

within the meaning of the German CFC rules according to which all income of the Issuer would be 

taxable at the level of the German Noteholders of the Subordinated Notes and such Structured 

Combination Notes in accordance with its pro rata share in the assets of the Issuer. This would lead 

to the tax consequence that any profit of the Issuer which is not distributed to holders of 

Subordinated Notes and any Structured Combination Notes comprised of, inter alia, Subordinated 

Components, would be taxable as of the end of the fiscal year of the Issuer for such Noteholders; in 

this context it has to be noted that ‘‘profits’’ within the meaning of the German CFC rules are to be 

determined by applying German taxation principles and therefore could be different from a mere 

cash-flow analysis. 

German Gift Tax 

The gratuitous transfer of Notes by an Investor as a gift is subject to German gift tax if the 

Investor or the recipient is resident or deemed to be resident in Germany under German law at the 

time of the transfer. If neither the Investor nor the recipient is resident, or deemed to be resident, in 

Germany at the time of the transfer no German gift tax is levied unless the Notes form part of the 

business property of a permanent establishment maintained in Germany by the Investor. Tax treaties 

concluded by Germany generally permit Germany to levy tax on gratuitous transfers. 

4. United States Federal Income Taxation 

The discussion of tax matters in this Prospectus is not intended or written to be used, and cannot 

be used by any person, for the purpose of avoiding United States federal, state or local tax penalties, 

and was written to support the promotion or marketing of the transaction or matters addressed in such 

Prospectus. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an 

independent tax advisor. 

221

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. 

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 is 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, 

POTENTIAL 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 (as defined in the Code) 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, persons 

subject to alternative minimum tax, 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 and subsequent purchasers of the Notes. 

In this summary, a Structured Combination Note will be treated as its respective Components 

rather than a single unit. Therefore, in the following discussions, any reference in the summary 

applicable to the Subordinated Notes also applies to the corresponding Component of the Structured 

Combination Notes. U.S. Holders of the Class V Structured Combination Notes should consult their 

own advisors as to the U.S. federal income tax consequences of the purchase, ownership and 

disposition of the OAT Strips. U.S. Holders of the Class VI Structured Combination Notes should 

consult their own advisors as to the U.S. federal income tax consequences of the purchase, ownership, 

and disposition of Natexis Zero Coupon Notes. 

222

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 

‘‘Description of 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 Collateral 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 (or the branch profits tax). 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. 

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 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 or the obligor is required to make ‘‘grossup’’ 

payments that offset fully any such tax on any such payments. 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 

223

‘‘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 

or the obligor of the Collateral Debt Obligation is required to make ‘‘gross-up’’ payments. 

Prospective investors should be aware that, under certain 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 Treasury regulations do 

not apply. Those Treasury regulations could require withholding of U.S. federal income tax from 

payments to the Issuer of interest on the Collateral Debt Obligations if the Issuer’s acquisition of the 

Collateral Debt Obligations and the issuance of the Notes are considered part of a ‘‘tax avoidance 

plan’’. Each holder and beneficial owner of a Subordinated Note in the Issuer that is not a ‘‘United 

States person’’ (as defined in Section 7701(a)(30) of the Code), by acquiring such Subordinated Note 

or an interest therein, will be deemed to make, a representation to the effect that either (i) it is not a 

bank (within the meaning of Section 88 1(c)(3)(A) of the Code) or an affiliate of a bank, or (ii) it is 

a person that is eligible for benefits under an income tax treaty with the United States that eliminates 

U.S. federal income taxation of U.S. source interest not attributable to a permanent establishment in 

the United States, or (iii) it is not purchasing the Subordinated Note in order to reduce its U.S. 

federal income tax liability or pursuant to a tax avoidance plan with respect to U.S. federal income 

taxes. The Issuer believes that on account of, among other things, those representations, it does not 

have such a plan and, accordingly, these Treasury regulations will not apply. 

Status of the Senior Notes and the Class III Mezzanine Notes 

The Issuer will treat the Senior Notes and the Class III Mezzanine Notes as debt for U.S. 

federal income tax purposes, and each U.S. holder and beneficial owner of such Notes, by acceptance 

of such Notes or a beneficial interest therein, will agree to treat these Notes as debt for such 

purposes. Such treatment is not binding on the IRS, and no ruling will be sought from the IRS 

regarding this, or any other aspect of the U.S. federal income tax treatment of these Notes. 

Accordingly, there can be no assurance that the IRS will not contend, and that a court will not 

ultimately hold, that these Notes are equity in the Issuer. If any of the Senior Notes and the Class 

III Mezzanine Notes were treated as equity in, rather than debt of, the Issuer for U.S. federal income 

tax purposes, the U.S. holders thereof would be subject to the treatment described below in ‘‘Tax 

Treatment of U.S. Holders of Subordinated Notes,’’ and there might be adverse tax consequences for 

such U.S. Holders upon sale, redemption, retirement or other disposition of, or the receipt of certain 

types of distributions on, the Notes of such Class. The remainder of this discussion assumes that the 

Senior Notes and the Class III Mezzanine Notes are treated as debt for U.S. federal income tax 

purposes. 

Status of the Class IV Mezzanine Notes 

For purposes of Irish law, the Class IV Mezzanine Notes will be treated as indebtedness of the 

Issuer. The Issuer intends to treat the Class IV Mezzanine Notes as debt of the Issuer for U.S. 

federal income tax purposes, and each U.S. Holder or beneficial owner of a Class IV Mezzanine 

Note, by acceptance of such Note or a beneficial interest therein, will agree to treat such Note as 

debt for such purposes. Such treatment is not binding on the IRS, and no ruling will be sought from 

the IRS regarding this, or any other, aspect of the U.S. federal income tax treatment of the Class IV 

Mezzanine Notes. There is a substantial risk that the Class IV Mezzanine Notes will be treated as 

equity in the Issuer. Accordingly, no assurance can be provided, that the IRS will not contend, and 

that a court will not ultimately hold, that the Class IV Mezzanine Notes are properly characterized as 

equity of the Issuer. If the Class IV Mezzanine Notes were treated as equity in, rather than debt of, 

the Issuer, U.S. Holders thereof would be subject to the treatment described under ‘‘Tax Treatment of 

U.S. Holders of Subordinated Notes,’’ and there may be adverse tax consequences for such U.S. 

224

Holders upon sale, redemption, retirement or other disposition of or the receipt of certain types of 

distributions on the Class IV Mezzanine Notes. In addition, it is unclear whether a U.S. holder of 

Class IV Mezzanine Notes as debt will be able to make a protective QEF election described in ‘‘Tax 

Treatment of U.S. Holders of Subordinated Notes – Investment in a Passive Foreign Investment 

Company’’, in anticipation of any possible recharacterisation of the Class IV Mezzanine Notes as 

equity in the issuer. Prospective U.S. investors in the Class IV Mezzanine Notes are strongly urged to 

consult their tax advisors as to whether it is possible to make a protective QEF election with respect 

to their investment in the Class IV Notes and the consequences of making such an election. The 

remainder of this discussion assumes that the Class IV Mezzanine Notes are treated as debt for U.S. 

federal income tax purposes. 

Tax Treatment of U.S. Holders of the Senior Notes and the Mezzanine Notes 

Treatment of the Notes The Issuer expects the Senior Notes and the Mezzanine Notes to be 

treated as debt for U.S. federal income tax purposes. Although the Subordinated Notes are 

denominated as debt, based on the capital structure of the Issuer and the characteristics of the 

Subordinated Notes, it is likely that the 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 Senior Notes and the Mezzanine Notes. The Subordinated Notes are discussed below 

under ‘‘Tax Treatment of U.S. Holders of 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. With regard to the 

characterisation for U.S. federal income tax purposes of the Notes issued after the Closing 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 facts and circumstances 

existing at the time such instrument is issued and material changes from those existing on the Closing 

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 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 IV Mezzanine Notes because of their place in the capital structure of the 

Issuer) are equity in the Issuer. 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 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 Subordinated Notes-Investment in a Passive Foreign Investment Company’’) in 

anticipation of any possible recharacterisation of such Note as equity in the Issuer. 

Interest on the Notes in U.S. Dollars Subject to the discussion below, U.S. Holders of Senior 

Notes generally will include in gross income payments of stated interest received on the Senior 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. 

However, 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 

225

maturity of such Notes will be the sum of all payments to be received on such Notes, other than 

payments of stated interest which are unconditionally payable in money at least annually during the 

entire term of a debt instrument (‘‘Qualified Stated Interest’’). Prospective U.S. Holders of the 

Mezzanine Notes should note that, because interest on the Mezzanine Notes is not unconditionally 

payable in money on each Payment Date (and, therefore, will not be Qualified Stated Interest), all of 

the stated interest payments on the Mezzanine Notes will be included in the stated redemption prices 

at maturity of such 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 

and without regard to the timing of the payments on such Notes. In addition, a 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 interest period of the Notes will remain constant throughout their term. To the 

extent such rate varies with respect to any interest 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 Mezzanine 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. 

In the absence of controlling authority, the Issuer intends to accrue any remaining discount on 

the Mezzanine Notes (which generally will equal the excess of the Note’s stated principal amount 

over its issue price) over the period that starts on the Closing Date and ends on the last day of the 

Non-Call Period based on a constant yield method. 

The Issuer intends to take the position, and the foregoing discussion assumes, that the Notes 

will not be classified as ‘‘contingent payment debt obligations’’ for purposes of calculating OID. 

However, it is possible that the IRS will take a contrary view and seek to so classify some or all of 

the Notes. If the IRS were successful in so classifying the Notes, among other consequences, any gain 

recognized upon the sale, redemption, retirement or other disposition of such Notes might be treated 

as ordinary income rather than capital gain. 

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. 

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 any de minimis discount or original issue discount) in income 

as interest, based on a constant yield method. The election to accrue interest and discount 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 (ii) reduced by any amortised 

premium and by payments on such Note, other than payments of stated interest on a Senior 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 Senior 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 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. 

226

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 Euro 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 will be required to include in gross 

income the U.S. Dollar value of the payment in Euro (as applicable) on the date such payment is 

received (based on the U.S. Dollar spot rate for the Euro on the date such payment is received) 

regardless of whether the payment is in fact converted to U.S. 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 interest 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 the Euro (as applicable) in effect during the interest period or, 

with respect to an interest 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 Euro (as applicable) on the last day of the interest period or, with respect to 

an interest period that spans two taxable years, on the last day of the taxable year. If the last day of 

an interest period is within five Business Days of the date of receipt of the accrued interest, a U.S. 

Holder may translate such 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 the Euro received (based on the 

U.S. Dollar spot rate for the Euro 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 interest period on a Note will be 

determined in Euro (as applicable) and then translated into U.S. 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 

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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 Euro Euro 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. Euros that are purchased will generally have a tax basis 

equal to the U.S. Dollar value of the Euro on the date of purchase. Any exchange gain or loss 

recognized on a sale, exchange, redemption, retirement or other taxable disposition of the Euro 

(including its use to purchase Notes or upon exchange for U.S. 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 Euro (as applicable) 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 the Euro 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 Euro. If a U.S. Holder receives Euro 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 Euro 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 outstanding 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 Euro (as applicable) on such date and the U.S. Dollar value of principal amount outstanding of 

such Note, determined on the date the U.S. Holder acquired such Note based on the U.S. Dollar 

spot rate for the Euro (as applicable) 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. 

Tax Treatment of U.S. Holders of Subordinated Notes 

Investment in a Passive Foreign Investment Company The Issuer will constitute a passive foreign 

investment company (‘‘PFIC’’) and the Subordinated Notes will be treated as equity in the Issuer. 

Accordingly, U.S. Holders of 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 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 U.S. Dollars using the average U.S. 

Dollar exchange rate for the Euro 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 

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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 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 Subordinated Notes, the rules pertaining to a controlled foreign 

corporation or a foreign personal holding company, 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 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 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, 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. It is possible that some portion of the investments of the 

Issuer will constitute obligations that are not in registered form. 

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 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 

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 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 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 Subordinated Notes as security for a loan may 

be treated as a taxable disposition of the Subordinated Notes. Very generally, an ‘‘excess distribution’’ 

is the amount by which distributions during a taxable year with respect to a 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 Subordinated Note). 

In addition, a stepped-up basis in the 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 SUBORDINATED NOTES SHOULD CONSIDER 

CAREFULLY WHETHER TO MAKE A QEF ELECTION WITH RESPECT TO THE 

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PREFERRED EQUITY CERTIFICATES 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) 10 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 Subordinated Notes do not vote for directors of the Issuer, it 

is possible that the IRS would assert that the Subordinated Notes are de facto voting securities and 

that U.S. Holders possessing (actually or constructively) 10 per cent. or more of the total stated 

amount of outstanding Subordinated Notes are U.S. Shareholders. If this argument were successful 

and 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 reserved 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 

Subordinated Notes). If the qualified portion of such U.S. Holder’s holding period for the 

Subordinated Notes subsequently ceased (either because the Issuer ceased to be a CFC or the U.S. 

Holder ceased to be a U.S. Shareholder), then solely for purposes of the PFIC rules, such U.S. 

Holder’s holding period for the 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 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 

Subordinated Notes would continue to be the date upon which such U.S. Holder acquired the 

Subordinated Notes, unless the U.S. Holder made an election to recognize gain with respect to the 

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 issued by 

a non-U.S. corporation that is treated as equity for U.S. federal income tax purposes, U.S. Holders 

230

of the Subordinated Notes could be treated as owning an indirect equity interest in a PFIC 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 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 ‘‘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 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 Subordinated Notes. 

Accordingly, if any of the Collateral Debt Obligations 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 Subordinated Notes The treatment of actual distributions of cash on the 

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 ‘‘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 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 Subordinated Notes may constitute excess distributions, 

taxable as previously described. See ‘‘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 rules or are treated as excess distributions, 

distributions on the 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 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. 

231

or more (measured by vote or value) of the 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 Euro 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 U.S. 

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 the Euro 

received by a U.S. Holder generally will equal the U.S. Dollar value of the Euro determined at the 

spot rate of exchange in effect on the date the Euro are received, regardless of whether the payment 

is converted into U.S. Dollars at that time. Any gain or loss recognized on a subsequent conversion 

of the Euro for U.S. Dollars, in an amount equal to the difference between the U.S. Dollars received 

and the U.S. Holder’s tax basis in the Euro, generally will be U.S. source ordinary income or loss. 

Purchase or Disposition of the Subordinated Notes A U.S. Holder that purchases the 

Subordinated Notes with Euro 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 Euro used 

to purchase the Subordinated Notes determined at the spot rate of exchange in effect on the date of 

purchase of the Subordinated Notes and such U.S. Holder’s tax basis in the Euro. In general, a U.S. 

Holder of a Subordinated Note will recognize a gain or loss upon the sale, exchange, redemption, 

retirement or other taxable disposition of a Subordinated Note equal to the difference between the 

amount realized and such U.S. Holder’s adjusted tax basis in the 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 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 or recognized by a U.S. Holder on the sale, exchange, 

redemption, retirement or other taxable disposition of a 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 Subordinated Note will equal the cost of such 

Subordinated Note to such U.S. Holder. The cost of a Subordinated Note to a U.S. Holder will be 

the U.S. Dollar value of the Euro 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 nontaxable 

reduction to the U.S. Holder’s tax basis for the Subordinated Note (as described above). If a 

U.S. Holder receives Euro on the sale or other taxable disposition of a Subordinated Note, the 

amount realized in U.S. 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 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 ‘‘Tax Considerations-Investment in a Passive Foreign Investment 

Company’’. 

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 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 Subordinated Notes or the Structured Combination Notes should consider whether 

interest it receives with respect to the Notes (including the Components of the Structured 

Combination 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 or foreign personal holding companies with respect to the Subordinated Notes 

generally should not be subject to the tax on UBTI with respect to income from such 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 Subordinated Notes will be taxed on excess distributions in the manner discussed above 

under ‘‘Tax Considerations-Tax Treatment of U.S. Holders of Subordinated Notes and Tax 

Considerations-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 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 10 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 10 per cent. of the gross amount paid for such 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 Subordinated Notes. 

Tax Treatment of Structured Combination Notes 

Although each Structured 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 Structured 

Combination Notes will be treated as if it directly owned the OAT Strips in the case of Class V 

Structured Combination Notes, or Natexis Zero Coupon Notes, in the case of Class VI Structured 

Combination Notes and Subordinated Notes corresponding to the Components of such Structured 

Combination Notes. The Issuer will treat, and each U.S. Holder and beneficial owner of Structured 

Combination Notes (by acquiring such Structured Combination Notes or interests therein) will agree 

to treat, the Structured Combination Notes as consisting of the separate OAT Strips or Natexis Zero 

Coupon Notes as the case may be, and Subordinated Notes corresponding to the Components of 

such Structured Combination Notes for U.S. federal income tax purposes. In accordance with such 

treatment of the Structured Combination Notes, in calculating its tax basis in the Components 

comprising a Structured Combination Note, a U.S. Holder will allocate the purchase price paid for 

such Structured Combination Note among the Components in proportion to their relative fair market 

233

values at the time of purchase. A similar principle will apply in determining the amount allocable to 

the Components upon a sale of a Structured Combination Note. The exchange of Structured 

Combination Notes for the separate OAT Strips or Natexis Zero Coupon Notes (as the case may be) 

and Subordinated Notes corresponding to the Components of the Structured Combination Notes 

should not be a taxable event. A U.S. Holder of a Structured Combination Note should review the 

applicable discussion above with respect to the Subordinated Notes (See – ‘‘Tax Treatment of U.S. 

Holders of Subordinated Notes’’) relating to the U.S. federal income tax consequences of the purchase, 

ownership and disposition of such Subordinated Notes. A U.S. Holder of a Structured Combination 

Note should consult its own advisors as to the U.S. federal income tax consequences of the purchase, 

ownership and disposition of the OAT Strips or as applicable, Natexis Zero Coupon Notes. 

Tax Return Disclosure and Investor List Requirements 

Under Treasury regulations, 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. federal income 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 organisers 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 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, if it results in the claiming of a loss 

or losses for U.S. federal income tax purposes in excess of certain threshold amounts. 

In addition, under these Treasury regulations, if the Issuer participates in a ‘‘reportable 

transaction,’’ a U.S. Holder of Subordinated Notes (or any other Notes, if such Notes are treated as 

equity for U.S. federal income tax purposes) 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 not expected to give rise to ‘‘reportable transactions,’’ the 

Issuer nevertheless may participate in certain types of transactions that could be treated as 

‘‘reportable transactions.’’ A U.S. Holder of Subordinated Notes or other equity in the Issuer will be 

treated as a ‘‘reporting shareholder’’ of the Issuer if (i) such U.S. Holder owns 10% or more of the 

Subordinated Notes or other equity in the Issuer 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. The Issuer intends to provide to U.S. Holders of Subordinated Notes that are 

‘‘reporting shareholders;’’ any information necessary to complete IRS Form 8886 (or its successor 

form). 

Prospective investors in the Notes should consult their own tax advisors concerning any possible 

disclosure obligations under these Treasury regulations 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 

In general, payments on the 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 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 nonresident alien individual who holds the 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 payment of the 

234

proceeds from the disposition of the 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 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 generally will not be subject to these information reporting 

requirements or backup withholding with respect to payments of interest or distributions on the 

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 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 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 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. 

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 are instead applying 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 noncorporate 

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 

235

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. 

Ireland has implemented the directive into national law. Any Irish paying agent making an 

interest payment on behalf of the Issuer to an individual, and certain residual entities defined in the 

implementing legislation, resident in another EU Member State will have to provide details of the 

payment to the Irish Revenue Commission who in turn will provide such information to the 

competent authorities of the member state of residence of the individual or residual entity concerned. 

236

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 adviser. 

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’’, as calculated under the Plan Assets Regulation. The term ‘‘benefit plan 

investor’’ includes (a) an employee benefit plan (as defined in Section 3(3) of ERISA) whether or not 

subject to ERISA, (b) a plan as defined in Section 4975(e)(1) of the Code whether or not subject to 

Section 4975 or (c) any entity whose underlying assets include ‘‘plan assets’’ by reason of any such 

plan’s investment in the entity and thus would include most governmental, church and non-U.S. 

plans. 

237

The Class IV Mezzanine Notes, the Subordinated Notes and the Structured Combination Notes 

would likely be considered to have substantial equity features under the Plan Assets Regulation, and 

the Issuer does not intend to limit the value of the interests held by benefit plan investors in each 

class of Notes to below 25 per cent. However, as (i) no employee benefit plan as defined in Section 

3(3) of ERISA which is subject to ERISA, (ii) no plan as defined in Section 4975(e)(1) of the Code 

which is subject to Section 4975 of the Code and (iii) no entity whose underlying assets include ‘‘plan 

assets’’ by reason of such plan’s investment of the entity (collectively, ‘‘ERISA Plans’’) shall be 

permitted to acquire Class IV Mezzanine Notes, the Subordinated Notes and the Structured 

Combination Notes in the initial offering or thereafter, the fiduciary responsibility and prohibited 

transaction provisions of ERISA and Section 4975 of the Code will not be applicable to the Issuer or 

to any other benefit plan investors who invest in the Class IV Mezzanine Notes, the Subordinated 

Notes or Structured Combination Notes. Therefore, provided no ERISA Plans acquire Class IV 

Mezzanine Notes, the Subordinated Notes or the Structured Combination Notes, even if other types 

of benefit plan investors hold 25 per cent. of the value of the Class IV Mezzanine Notes or one or 

more classes of Subordinated Notes or Structured Combination Notes, the assets of the Issuer should 

not be deemed plan assets under the Plan Asset Regulations for purposes of ERISA or Section 4975 

of the Code. 

In determining whether or not a benefit plan investor is an ERISA Plan, life insurance company 

general accounts (both U.S. and non-U.S.) should consider the effect of the U.S. Supreme Court’s 

decision in John Hancock Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), 

which held that those funds allocated to the general account of an insurance company pursuant to 

contracts which vary with the investment experience of the insurance company’s general account and 

are attributable to ERISA Plans are considered to be ‘‘plan assets’’. Despite the presence of such 

contracts attributable to ERISA Plans invested in the general account, if the insurance company 

complies with certain regulations issued by the Department of Labor under ERISA Section 401(c), it 

will not be deemed to hold the plan assets of any ERISA Plans. However, any separate account 

funds held on behalf of an ERISA Plan by a life insurance company (whether held in or outside of 

the U.S.) would generally be considered to be plan assets. Any benefit plan investor, including a life 

insurance company general account, should consult with its counsel in determining whether or not it 

is an ERISA Plan prior to investing in the Class IV Mezzanine Notes, the Subordinated Notes or the 

Structured Combination Notes. 

Despite the prohibition upon, and the procedures employed to prevent, the acquisition of the 

Class IV Mezzanine Notes, the Subordinated Notes and the Structured Combination Notes by 

ERISA Plans, there can be no assurances that an ERISA Plan will not in fact acquire Class IV 

Mezzanine Notes, Subordinated Notes or Structured Combination Notes in violation of such 

restriction. In such an event, if the total value of the Class IV Mezzanine Notes, the Subordinated 

Notes or the Structured Combination Notes in one or more classes held by benefit plan investors 

(both ERISA Plans and non-ERISA plans) were to equal or exceed 25 per cent., the assets of the 

Issuer could be deemed plan assets. 

If, for any reason the assets of the Issuer are deemed to be ‘‘plan assets’’ of an ERISA Plan, 

then, among other possible adverse results, certain transactions the Issuer might enter into, or may 

have entered into, 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. The Collateral Manager, as a person with discretionary authority to manage the assets of 

the Issuer, would probably be deemed an ERISA fiduciary. As a result, the Collateral Manager may 

be prevented from making certain investments on behalf of the Issuer (as not being deemed consistent 

with the ERISA prudent investment standards) or engaging in certain transactions or fee 

arrangements because they may cause non-exempt prohibited transactions. 

BY ITS PURCHASE OR HOLDING OF A CLASS IV MEZZANINE NOTE, A 

SUBORDINATED NOTE OR A STRUCTURED COMBINATION NOTE, OR ANY INTEREST 

THEREIN, THE PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE 

WILL BE REQUIRED OR WILL BE DEEMED TO HAVE REPRESENTED, WARRANTED 

AND AGREED THAT, AT THE TIME OF ITS ACQUISITION, AND THROUGHOUT THE 

PERIOD THAT IT HOLDS SUCH CLASS IV MEZZANINE NOTE, SUBORDINATED NOTE 

238

OR STRUCTURED COMBINATION NOTE OR INTEREST THEREIN, THAT (1) IT IS NOT 

AN ERISA PLAN; AND IF AFTER ITS INITIAL ACQUISITION OF A CLASS IV 

MEZZANINE NOTE, A SUBORDINATED NOTE OR A STRUCTURED COMBINATION 

NOTE OR ANY INTEREST THEREIN, THE INVESTOR DETERMINES, OR IT IS 

DETERMINED BY ANOTHER PARTY, THAT SUCH INVESTOR IS AN ERISA PLAN, THE 

INVESTOR WILL DISPOSE OF ALL OF ITS CLASS IV MEZZANINE NOTES, 

SUBORDINATED NOTES OR STRUCTURED COMBINATION NOTES IN A MANNER 

CONSISTENT WITH THE RESTRICTIONS SET FORTH IN THE TRUST DEED, AND (2) IF 

IT IS A BENEFIT PLAN INVESTOR OTHER THAN AN ERISA PLAN, ITS PURCHASE, 

HOLDING AND DISPOSITION OF THE CLASS IV MEZZANINE NOTES, SUBORDINATED 

NOTES OR STRUCTURED COMBINATION NOTES WILL NOT CAUSE A NON-EXEMPT 

VIOLATION OF ANY U.S. FEDERAL, STATE OR LOCAL LAW OR ANY NON-U.S. LAW 

WHICH IS SUBSTANTIALLY SIMILAR TO ERISA OR SECTION 4975 OF THE CODE AS A 

RESULT OF THE TRANSACTIONS CONTEMPLATED HEREIN AND (3) IT WILL NOT 

SELL OR OTHERWISE TRANSFER ANY SUCH CLASS IV MEZZANINE NOTE, 

SUBORDINATED NOTE OR STRUCTURED COMBINATION NOTE OR ANY INTEREST 

THEREIN TO ANY PERSON WHO IS UNABLE TO SATISFY THE SAME FOREGOING 

REPRESENTATIONS AND WARRANTIES. 

Based on the credit quality and the absence of rights to payment in excess of principal and 

stated interest, the Issuer believes that the Rated Notes (other than the Class IV Mezzanine Notes) 

should not be considered ‘‘equity interests’’ for purposes of the Plan Assets Regulation. Nevertheless, 

prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code 

may arise if the Notes are acquired by a Plan with respect to which the Issuer or any of the Joint- 

Lead Managers 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 a 

Rated Note (other than a Class IV Mezzanine 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) 

and PTCE 96-23 (relating to transactions determined by an in-house asset manager). 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 Rated Notes. The purchase and holding of the Rated Notes 

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 ANY RATED NOTES (OTHER THAN THE 

CLASS IV MEZZANINE NOTES), OR ANY INTEREST THEREIN, THE PURCHASER AND/ 

OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE 

REPRESENTED, WARRANTED AND AGREED EITHER THAT (A) IT IS NOT AND WILL 

NOT BE AN EMPLOYEE BENEFIT PLAN AS DEFINED IN SECTION 3(3) OF ERISA AND 

SUBJECT TO ERISA, OR A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE CODE AND 

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, HOLDING AND DISPOSITION 

OF A RATED NOTE (OTHER THAN THE CLASS IV MEZZANINE 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 AND WILL NOT CAUSE A NON-EXEMPT VIOLATION OF ANY 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. 

239

Any Plan fiduciary that proposes to cause a Plan to purchase any Notes should consult with its 

counsel 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 the Code or any substantially similar 

law. 

The sale of any Notes to a Plan is in no respect a representation by the Issuer, the Lead 

Manager, the Joint Lead Managers or the Portfolio 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. 

240

SUBSCRIPTION AND SALE 

Natexis Banques Populaires, (the ‘‘Lead Manager’’) has, pursuant to a Subscription Agreement 

to be dated on or about 26 July 2006, agreed with the Issuer, subject to the satisfaction of certain 

conditions, to subscribe and pay for, or procure subscription and payment for, the Class I Senior 

Notes, the Class II Senior Notes, the Class III Mezzanine Notes, the Class IV Mezzanine Notes, the 

Subordinated Notes and the Structured Combination Notes in each case (save to the extent that such 

Notes may constitute Components of the Structured Combination Notes) at the initial issue price of 

100 per cent. of their respective principal amounts (less underwriting commissions and placement and 

advisory fees to be agreed between the Issuer and the Lead Manager and subject to individually 

negotiated transactions between the Joint Lead Managers and the purchasers thereof). The 

Subscription Agreement entitles the Lead Manager to terminate it in certain circumstances prior to 

payment being made to the Issuer. 

Natexis Banques Populaires and Dresdner Bank AG London Branch, together, in such capacity, 

the ‘‘Joint Lead Managers’’) have, pursuant to a Subscription Agreement to be dated on or about 

26 July 2006, agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe and 

pay for, or procure subscription and payment for, the Subordinated Notes at the initial issue price of 

100 per cent. of their principal amounts (less underwriting commissions and placement and advisory 

fees to be agreed between the Issuer and the Joint Lead Managers and subject to individually 

negotiated transactions between the Joint Lead Managers and the purchasers thereof). The 

Subscription Agreement entitles the Joint Lead Managers to terminate it in certain circumstances 

prior to payment being made to the Issuer. 

The Lead Manager’s and the Joint Lead Managers’ underwriting and placement and advisory 

fees and expenses, and the expenses of other transaction parties (including the Trustee and the 

Agents) will be deducted from the gross proceeds of the issue of the Notes. 

In connection with the Issue of the Notes, the Lead Manager (or any person acting on behalf of 

the Lead Manager) may over-allot Notes (provided that the aggregate principal amount of the Notes 

allotted does not exceed 105 per cent. of the aggregate principal amount of the relevant Class) 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 Lead Manager (or persons 

acting on behalf of the Lead Manager) will undertake stabilisation action. Any stabilisation action 

may begin on or after the date on which adequate public disclosure of the terms of the offer of the 

Notes is made, and, if begun, may be ended at any time, but it must end no later than the earlier of 

30 days after the issue of the Notes and 60 days after the date of the allotment of the Notes. 

It is a condition of the issuance of the Notes of each Class that the Notes of each other Class 

be issued in the following principal amounts: Class I Senior Notes: A187,800,000; Class II Senior 

Notes: A52,300,000; Class III Mezzanine Notes: A25,400,000; Class IV Mezzanine Notes: A8,900,000; 

Class V Structured Combination Notes: A18,000,000; Class VI Structured Combination Notes: 

A3,500,000; Subordinated Notes: A32,200,000. 

The Issuer has agreed to indemnify the Lead Manager, the Joint Lead Managers, the Collateral 

Managers, the Collateral Administrator, the Trustee (to its satisfaction) 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 Lead Manager or the Joint Lead Managers. In addition, the Lead Manager or Joint Lead 

Managers may have in the past performed and may in the future perform investment banking services 

or other services for obligors of the Collateral Debt Obligations. In addition, each of Natexis 

Banques Populaires and Dresdner Bank AG London Branch or one or more of their respective 

affiliates, may from time to time as a principal or through one or more investment fund that it 

manages, make investments in the equity securities of one or more of the obligors of the Collateral 

Debt Obligations with a result that one or more of such obligors may be or may become controlled 

by Natexis Banques Populaires, Dresdner Bank AG London Branch or one or more of its affiliates. 

241

For the avoidance of doubt, all references in this section ‘‘Subscription and Sale’’ hereafter to 

‘‘Notes, shall also include CDIs. 

Ireland 

Each Manager has agreed that: 

(a) it will not underwrite the issue of, or place 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; 

(b) it will not underwrite the issue of, or place, the Notes, otherwise than in conformity with 

the provisions of the Irish Central Bank Acts 1942 – 2003 (as amended) and any codes of 

conduct rules made under Section 117(1) thereof; 

(c) it will not underwrite the issue of, or place, or do anything in Ireland in respect of the 

Notes otherwise in conformity with the provisions of the Irish Prospectus (Directive 2003/ 

71/EC) Regulations 2005 and any rules issued under Section 51 of the Irish Investment 

Funds, Companies and Miscellaneous Provisions Act 2005, by the Irish Central Bank and 

Financial Services Regulatory Authority (IFSRA); and 

(d) it will not underwrite the issue of, place or otherwise act in Ireland in respect of the 

Notes, otherwise than in conformity with the provisions of the Irish Market Abuse 

(Directive 2003/6/EC) Regulations 2005 and any rules issued under Section 34 of the Irish 

Investment Funds, Companies and Miscellaneous Provisions Act 2005 by IFSRA. 

France 

Each of the Lead Manager, the Joint Lead Managers and the Issuer has represented and agreed 

that (i) it has not offered or sold and will not offer or sell, directly or indirectly, any Notes to the 

public in the Republic of France, and (ii) any such offers or sales of Notes have been and shall be 

made in the Republic of France only to a) providers of investment services relating to portfolio 

management for the account of third parties and/or b) qualified investors (investisseurs qualifiés) 

acting for their own account, each as defined in and in accordance with article L411-1, article L411-2 

and articles D411-1 to D411-2 (excluding individuals) of the Code Monétaire et Financier. 

In addition, each of the Lead Manager, the Joint Lead Managers and the Issuer has represented 

and agreed that it has not distributed or caused to be distributed and will not distribute or cause to 

be distributed, in the Republic of France, the Prospectus or any other any offering material relating 

to the Notes other than to investors to whom offers and sales of Notes in the Republic of France 

may be made as described above. 

The Netherlands 

The Notes (including rights representing an interest in a Note in global form) may only be 

offered, directly or indirectly, as part of their initial distribution or at any time thereafter, in The 

Netherlands, to Dutch Residents qualifying as ‘‘Professional Market Parties’’ or ‘‘PMPs’’ provided 

they acquire the Notes for their own account and provided that the Notes bear a legend to the 

following effect: 

‘‘THIS NOTE (OR ANY INTEREST THEREIN) MAY NOT BE SOLD, TRANSFERRED 

OR DELIVERED TO INDIVIDUALS OR LEGAL ENTITIES WHO ARE ESTABLISHED, 

DOMICILED OR HAVE THEIR RESIDENCE IN THE NETHERLANDS (‘‘DUTCH 

RESIDENTS’’) OTHER THAN PROFESSIONAL MARKET PARTIES WITHIN THE MEANING 

OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION 

OF CREDIT INSTITUTIONS 1992 (AS AMENDED OR RE-ENACTED) (EACH, A ‘‘PMP’’). 

EACH DUTCH RESIDENT HOLDER OF THIS NOTE (OR ANY INTEREST THEREIN), 

BY PURCHASING THIS NOTE (OR ANY INTEREST THEREIN), WILL BE DEEMED TO 

HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) IT IS 

A PMP AND IS ACQUIRING THIS NOTE (OR ANY INTEREST THEREIN) FOR ITS OWN 

ACCOUNT OR FOR THE ACCOUNT OF A PMP, THAT (2) THIS NOTE (OR ANY 

INTEREST THEREIN) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE 

242

TRANSFERRED TO DUTCH RESIDENTS OTHER THAN A PMP ACQUIRING FOR ITS 

OWN ACCOUNT OR FOR THE ACCOUNT OF A PMP AND THAT (3) IT WILL, IN 

ACCORDANCE WITH THE 2005 POLICY RULES ON KEY CONCEPTS OF MARKET 

ACCESS AND ENFORCEMENT OF THE WTK (BELEIDSREGEL 2005 KERNBEGRIPPEN 

MARKTTOETREDING EN HANDHAVING WTK 1992) BY THE DUTCH CENTRAL BANK (DE 

NEDERLANDSCHE BANK N.V.), VERIFY THAT SUCH TRANSFEREE QUALIFIES AS A 

PMP; AND (4) IT WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS 

DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE’’. 

‘‘Dutch Residents’’ means: 

Individuals or legal entities who are established, domiciled or have their residence in The 

Netherlands. 

‘‘Professional Market Parties’’ or ‘‘PMPs’’ means: 

(a) any person or entity who or which is subject to supervision by a regulatory authority in 

any country in order to lawfully operate in the financial markets (which includes: 

authorised credit institutions, investment firms, other authorised or regulated financial 

institutions, insurance companies, collective investment schemes and their management 

companies, pension funds and their management companies, commodity dealers); 

(b) any person or entity who or which engages in a regulated activity on the financial markets 

but who or which is not subject to supervision by a regulatory authority (which includes: 

exempt credit institutions, investment firms, financial institutions, insurance companies, 

collective investment schemes and their management companies, pension funds and their 

management companies, commodity dealers); 

(c) the Dutch government (de Staat der Nederlanden), the Dutch Central Bank (De 

Nederlandsche Bank N.V.), a foreign governmental body being part of a central 

government, a foreign central bank, Dutch or foreign regional, local or other decentralised 

governmental institutions, international treaty organisations and supranational 

organisations; 

(d) any entity whose corporate purpose is solely to invest in securities (which includes, without 

limitation, hedge funds); 

(e) any company or legal entity which meets at least two of the following three criteria 

according to its most recent consolidated or nonconsolidated annual accounts: (i) an 

average number of employees during the financial year of at least 250; (ii) total assets of at 

least EUR 43,000,000; or (iii) an annual net turnover of at least EUR 50,000,000; 

(f) any company having its registered office in The Netherlands which does not meet at least 

two of the three criteria mentioned in (e) above and which has (a) expressly requested the 

Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten; the 

‘‘AFM’’) to be considered as a qualified investor, and (b) been entered on the register of 

qualified investors maintained by the AFM; 

(g) any natural person who is resident in The Netherlands if this person meets at least two (2) 

of the following criteria: 

(1) the investor has carried out transactions of a significant size on securities markets at 

an average frequency of, at least, ten (10) per quarter over the previous four (4) 

quarters; 

(2) the size of the investor’s securities portfolio exceeds EUR 500,000; 

(3) the investor works or has worked for at least one (1) year in the financial sector in a 

professional position which requires knowledge of investment in securities; 

provided this person has: 

(i) expressly requested the AFM to be considered as a qualified investor; and 

(ii) been entered on the register of qualified investors maintained by the AFM; 

243

(h) 

(i) 

(j) 

(k) 

(l) 

(m) 

any company or legal entity that has been specifically established for the purpose of 

engaging (and that has engaged) in transactions resulting in the acquisition of assets 

(within the meaning of Article 2:364 Dutch Civil Code) that serve as security for 

negotiable instruments that are offered or about to be offered (including without limitation 

companies or entities engaged in securitisation transactions involving RMBS, CMBS, 

CDO’s, Credit Default Swaps, CLN’s and Covered Bonds); 

where relevant and applicable, the subsidiaries of any of the entities mentioned under (a) 

through (h) above, provided such subsidiaries are subject to prudential supervision (either 

directly or indirectly through consolidated supervision at the level of their parent 

company); 

any enterprise or entity with total assets of at least EUR 500,000,000 (or the equivalent 

thereof in another currency) according to its balance sheet at the end of the financial year 

preceding the date it provides repayable funds within the meaning of the Dutch Act on the 

Supervision of Credit Institutions (Wet toezicht kredietwezen 1992; the ‘‘WTK’’); 

any enterprise, entity or natural person with a net equity (eigen vermogen) of at least EUR 

10,000,000 (or the equivalent thereof in another currency) according to its balance sheet at 

the end of the financial year preceding the date it provides repayable funds within the 

meaning of the WTK and who or which has been active in the financial markets on 

average twice a month over a period of at least two consecutive years preceding such date; 

any entity that has a credit rating from an approved rating agency or that has issued 

securities having such a rating; and 

such other entities designated by the competent Netherlands authorities after the date 

hereof by any amendment of the applicable regulations. 

United States 

The Notes have not been and will not be registered under the Securities Act. The Notes (and 

any beneficial interest or participation therein) may not be offered, sold, delivered, pledged or 

otherwise transferred 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 to qualified institutional buyers (‘‘QIBs’’) as defined in Rule 144A in reliance on Rule 144A 

under the Securities Act who are also Qualified Purchasers (‘‘Qualified Purchasers’’) for the purposes 

of Section 3(c)(7) of the Investment Company Act. Each purchaser of a Note agrees to be bound by 

the foregoing restriction on transfers and to make certain representations and undertakings in respect 

thereof upon purchasing the Notes (or any beneficial interest or participation therein). Terms used in 

this paragraph have the meanings given to them by Regulation S under the Securities Act. 

The Lead Manager and the Joint Lead Managers may offer and sell the Notes only (a) in the 

United States or to U.S. Persons to persons who are QIBs in reliance on Rule 144A under the 

Securities Act who are also Qualified Purchasers for the purposes of Section 3(c)(7) of the Investment 

Company Act and (b) outside the United States to non-U.S. Persons in reliance on Regulation S. In 

addition, ERISA Plans and other Plans are not permitted to acquire or hold any Class IV Mezzanine 

Notes, Subordinated Notes, or Structured Combination Notes. 

Each of the Lead Manager and the Joint Lead Managers has agreed that, except as permitted 

by the Subscription Agreement, it will not offer, sell or deliver the Notes, as part of their distribution 

at any time within the United States or to, or for the account or benefit of, U.S. persons or U.S. 

residents other than to persons who are QIBs that are also Qualified Purchasers and that it will send 

to each distributor, dealer or other person receiving a selling commission, fee or other remuneration 

to which it sells Notes a confirmation or other notice setting forth the restrictions on offers, sales and 

deliveries of the Notes within the United States or to, or for the account or benefit of, U.S. persons. 

The Notes sold in reliance on Rule 144A will be issued in minimum denominations of A250,000 

and integral multiples of A10,000 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 Lead Manager or the Joint Lead Managers. 

244

Each of the Lead Manager and the Joint Lead Managers 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 its 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 outside the United States to non-U.S. persons and for the offer and sale of the Notes in 

the United States to QIBs that are also Qualified Purchasers and for the listing of the Notes on the 

Irish Stock Exchange. The Issuer, the Lead Manager and the Joint Lead Managers 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 other than a QIB to whom an offer has been made directly 

by the Lead Manager or the Joint Lead Managers or an Affiliate thereof. Distribution of this 

Prospectus to any such U.S. person or to any person within the United States, other than those 

persons, if any, retained to advise a QIB that is also a Qualified Purchaser with respect thereto, is 

unauthorised and any disclosure of any of its contents, without the prior written consent of the 

Issuer, is prohibited. 

United Kingdom 

Each of the Lead Manager and the Joint Lead Managers represents, warrants and agrees that: 

(a) 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 Financial Services and Markets Act 2000, as 

amended (the ‘‘FSMA’’)), received by it 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 

(b) 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. 

European Economic Area 

In relation to each Member State of the European Economic Area which has implemented the 

Prospectus Directive (each, a ‘‘Relevant Member State’’), each of the Lead Manager and the Joint 

Lead Managers has represented and agreed that with effect from and including the date on which the 

Prospectus Directive is implemented in that Relevant Member State (the ‘‘Relevant Implementation 

Date’’) it has not made and will not make an offer of Notes to the public in that Relevant Member 

State prior to the publication of an prospectus in relation to the notes which has been approved by 

the competent authority in that Relevant Member State or, where appropriate, approved in another 

Relevant Member State and notified to the competent authority in that Relevant Member State, all in 

accordance with the Prospectus Directive, except that each may, with effect from and including the 

Relevant Implementation Date, make an offer of Notes to the public in that Relevant Member State 

at any time: 

(a) to the legal entities which are authorised or regulated to operate in the financial markets 

or, if not so authorised or regulated, whose corporate purpose is solely to invest in 

securities; 

(b) to any legal entity which has two or more of (1) an average of at least 250 employees 

during the last financial year; (2) a total balance sheet of more than A43,000,000 and (3) 

an annual net turnover of more than A50,000,000, as shown in its last annual or 

consolidated accounts; or 

(c) in any other circumstances which do not require the publication by the issuer of an 

offering memorandum pursuant to Article 3 of the Prospectus Directive. 

For the purposes of this provision, the expression an ‘‘offer of Notes to the public’’ in relation 

to any Notes in any Relevant Member State means the communication in any form and by any 

245

means of sufficient information on the terms of the offer and the Notes to be offered so as to enable 

an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member 

State by any measure implementing the Prospectus Directive in that Member State and the expression 

‘‘Prospectus Directive’’ means Directive 2003/71/EC and includes any relevant implementing measure 

in each Relevant Member State. 

General 

Each Manager 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 strictly confidential and 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; and 

(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. 

246

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 (including the CDIs) 

A beneficial interest in a Regulation S Global Note may be transferred to a person who wishes 

to take delivery of such interest through a Rule 144A Global Note 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 who is also a Qualified Purchaser (for the purposes 

of section 3(c)(7) of the Investment Company Act, as amended) and in accordance with any 

applicable securities laws of any state of the United States or any other jurisdiction. Neither U.S. 

Persons (as defined in Regulation S under the Securities Act) nor U.S. residents (as determined for 

the purposes of the Investment Company Act) may hold an interest in a Regulation S Global Note at 

any time. 

For the avoidance of doubt, all references in this section ‘‘Transfer Restrictions’’ hereafter to 

‘‘Notes’’ shall also include CDIs. 

Rule 144A Notes 

Each prospective purchaser of Rule 144A Notes, by accepting delivery of this Prospectus, will be 

deemed to have represented, agreed and acknowledged as follows: 

(a) 

(b) 

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 or in offshore transactions in accordance with 

Regulation S. 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; and 

such person agrees not to make any photocopies of this Prospectus or any documents 

referred to herein and, if such person does not purchase any Notes or the offering is 

terminated, to return this Prospectus and all documents referred to herein to the Lead 

Manager or the Joint Lead Managers or the Affiliate thereof who furnished this Prospectus 

and those documents. 

Each purchaser of Notes represented by a Rule 144A Global Note will be deemed to have 

represented and agreed as follows: 

(a) 

(b) 

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 outstanding 

of not less than A250,000 for the purchaser and for each such account and (d) will provide 

notice of the transfer restrictions described 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. 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 

247

(c) 

(d) 

(e) 

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 (b) shall be null and void ab initio. 

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. The purchaser 

understands that an investment in the Rule 144A Notes involves certain risks, including 

the risk of loss of its entire investment in the Rule 144A 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 Rule 144A 

Notes, including an opportunity to ask questions of, and request information from, the 

Issuer. 

In connection with the purchase of the Rule 144A Notes: (a) none of the Issuer, the Lead 

Manager, the Joint Lead Managers, the Trustee, the Collateral Manager or the Collateral 

Administrator is acting as a fiduciary or financial or investment advisor 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 Lead Manager, the Joint Lead Managers, the Trustee, the Collateral 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 Lead Manager, the Joint Lead Managers, the Trustee, the Collateral 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 Rule 144A 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 judgment 

and upon any advice from such advisors as it has deemed necessary and not upon any 

view expressed by the Issuer, the Lead Manager, the Joint Lead Managers, the Trustee, the 

Collateral 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 

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 (f) the purchaser is a sophisticated investor. 

The purchaser and each account for which the purchaser is acquiring such Rule 144A 

Notes is a qualified purchaser (‘‘Qualified Purchaser’’) for purposes of Section 3(c)(7) of the 

Investment Company Act. The purchaser is acquiring the Rule 144A Notes in a principal 

amount outstanding of not less than A250,000. 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 in the Rule 144A Notes (except when 

each beneficial owner of the purchaser and each such account is a Qualified Purchaser for 

purposes of Section 3(c)(7) of the Investment Company Act); (b) to the extent the 

purchaser is a private investment company formed before 30 April 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 

248

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 Qualified Purchaser 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. Such purchaser understands that the Issuer may 

receive a list of participants holding positions in the Notes from one or more book-entry 

depositories. 

(f) (I) By its purchase or holding of any Rated Notes (other than Class IV Mezzanine 

Notes), or any interest therein, the purchaser and/or holder thereof and each 

transferee will be deemed to have represented, warranted and agreed either that (a) it 

is not and will not be an employee benefit plan as defined in Section 3(3) of the U.S. 

Employee Retirement Income Security Act of 1974, as amended (‘‘ERISA’’) and 

subject to ERISA, or a plan as defined in section 4975(e)(1) of the U.S. Internal 

Revenue Code of 1986, as amended (the ‘‘Code’’) and 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, holding and disposition of a 

Rated Note (other than a Class IV Mezzanine 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 and will not cause a non-exempt violation of 

any federal, state, local or non-U.S. law which is substantially similar to Section 406 

of ERISA or Section 4975 of the Code. Any acquisition or transfer of a Rated Note 

(other than a Class IV Mezzanine Note) in violation of the above restrictions shall be 

void ab initio. 

(II) 

With respect to its purchase, holding or disposition of a Class IV Mezzanine Note, a 

Subordinated Note or a Structured Combination Note, or any interest therein, the 

purchaser and/or holder thereof and each transferee will be required to represent, 

warrant and agree that, at the time of its acquisition, and throughout the period that 

it holds such Class IV Mezzanine Note, Subordinated Note or a Structured 

Combination Note or any interest therein, that (1) it is (i) not an employee benefit 

plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) not a plan 

as defined in Section 4975(e)(1) of the Code which is subject to Section 4975 of the 

Code and (iii) not an entity whose underlying assets include ‘‘plan assets’’ by reason 

of such plan’s investment in the entity (collectively, an ‘‘ERISA Plan’’); and if after 

its initial acquisition of a Class IV Mezzanine Note, a Subordinated Note or a 

Structured Combination Note or any interest therein, the investor determines, or it is 

determined by another party, that such investor is an ERISA Plan, the investor will 

dispose of all of its Class IV Mezzanine Notes, Subordinated Notes or Structured 

Combination Notes in a manner consistent with the restrictions set forth in the Trust 

Deed, and (2) if it is a ‘‘benefit plan investor’’ as defined in the U.S. Department of 

Labor regulations set forth at 29 C.F.R. Section 2510.3-101 other than an ERISA 

Plan, its purchase, holding and disposition of the Class IV Mezzanine Notes, 

Subordinated Notes or Structured Combination Notes will not cause a non-exempt 

violation of any U.S. federal, state or local law or any non-U.S. law which is 

substantially similar to ERISA or Section 4975 of the Code as a result of the 

transactions contemplated herein and (3) it will not sell or otherwise transfer any 

such Class IV Mezzanine Note, Subordinated Note or Structured Combination Note 

or any interest therein to any person who is unable to satisfy the same foregoing 

249

(g) 

representations and warranties. Any acquisition or transfer of a Class IV Mezzanine 

Note, Subordinated Note or Structured Combination Note in violation of the above 

restrictions shall be void ab initio. 

(III) The purchaser acknowledges that the Issuer, the Lead Manager, the Joint Lead 

Managers, the Trustee, the Collateral Manager and the Collateral Administrator and 

their Affiliates, and others, will rely upon the truth and accuracy of the foregoing 

acknowledgements, representations and agreements. 

The purchaser understands that pursuant to the terms of the Trust Deed, the Issuer has 

agreed that the Rule 144A Global Notes (and, for the avoidance of doubt, the CDIs 

corresponding to the Rule 144A Global Notes) offered in reliance on Rule 144A will bear 

the legend set forth below (in respect of the CDIs, as if references to ‘‘Notes’’ were to 

‘‘CDIs’’ and ‘‘Trust Deed’’ were to ‘‘Depositary Agreement’’), and will be represented by 

one or more Rule 144A Global Notes. The Rule 144A Global Notes may not at any time 

be held by or on behalf of U.S. Persons that are not both QIBs and Qualified Purchasers. 

Before any interest in a Rule 144A Global 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 Note, 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 

OR (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR 

RULE 904 OF REGULATION S OF THE SECURITIES ACT AND, IN THE CASE 

OF CLAUSE (1), IN A PRINCIPAL AMOUNT OUTSTANDING OF NOT LESS 

THAN A250,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR WHICH 

IT IS ACTING, IN EACH CASE 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 OR IN THE CASE OF CLAUSE (2), IN A 

PRINCIPAL AMOUNT OUTSTANDING OF NOT LESS THAN A250,000 AND (B) IN 

ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES 

OF THE UNITED STATES. ANY TRANSFER IN VIOLATION OF THE 

FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO 

250

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, IN THE EVENT OF A VIOLATION OF (V) THROUGH (Z), 

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 OUTSTANDING BY INQUIRY OF THE 

REGISTRAR. 

BY ITS PURCHASE OR HOLDING OF ANY RATED NOTES (OTHER THAN ANY 

CLASS IV MEZZANINE NOTES), OR ANY INTEREST THEREIN, THE 

PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE 

DEEMED TO HAVE REPRESENTED, WARRANTED AND AGREED EITHER 

THAT (A) IT IS NOT AND WILL NOT BE AN EMPLOYEE BENEFIT PLAN AS 

DEFINED IN SECTION 3(3) OF THE U.S. EMPLOYEE RETIREMENT INCOME 

SECURITY ACT OF 1974, AS AMENDED (‘‘ERISA’’) AND SUBJECT TO ERISA, 

OR A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE 

CODE OF 1986, AS AMENDED, (THE ‘‘CODE’’) AND 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, HOLDING 

AND DISPOSITION OF A RATED NOTE (OTHER THAN A CLASS IV 

MEZZANINE 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 AND WILL NOT 

CAUSE A NON-EXEMPT VIOLATION OF ANY FEDERAL, STATE, LOCAL OR 

NON-U.S. LAW WHICH IS SUBSTANTIALLY SIMILAR TO SECTION 406 OF 

ERISA OR SECTION 4975 OF THE CODE. ANY ACQUISITION OR TRANSFER OF 

A RATED NOTE (OTHER THAN A CLASS IV MEZZANINE NOTE) IN 

VIOLATION OF THE ABOVE RESTRICTIONS SHALL BE VOID AB INITIO. 

BY ITS PURCHASE, HOLDING OR DISPOSITION OF A CLASS IV MEZZANINE 

NOTE, A SUBORDINATED NOTE OR A STRUCTURED COMBINATION NOTE, 

OR ANY INTEREST THEREIN, THE PURCHASER AND/OR HOLDER THEREOF 

AND EACH TRANSFEREE WILL BE REQUIRED TO REPRESENT, WARRANT 

AND AGREE THAT, AT THE TIME OF ITS ACQUISITION, AND THROUGHOUT 

THE PERIOD THAT IT HOLDS SUCH CLASS IV MEZZANINE NOTE, SUCH 

SUBORDINATED NOTE OR SUCH STRUCTURED COMBINATION NOTE OR 

ANY INTEREST THEREIN, THAT (1) IT IS (i) NOT AN EMPLOYEE BENEFIT 

251

PLAN AS DEFINED IN SECTION 3(3) OF ERISA WHICH IS SUBJECT TO ERISA, 

(ii) NOT A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE CODE WHICH IS 

SUBJECT TO 4975 OF THE CODE AND (iii) NOT AN ENTITY WHOSE 

UNDERLYING ASSETS INCLUDE ‘‘PLAN ASSETS’’ BY REASON OF SUCH 

PLAN’S INVESTMENT IN THE ENTITY (COLLECTIVELY, AN ‘‘ERISA PLAN’’); 

AND IF AFTER ITS INITIAL ACQUISITION OF A CLASS IV MEZZANINE NOTE, 

A SUBORDINATED NOTE OR A STRUCTURED COMBINATION NOTE OR ANY 

INTEREST THEREIN, THE INVESTOR DETERMINES, OR IT IS DETERMINED 

BY ANOTHER PARTY, THAT SUCH INVESTOR IS AN ERISA PLAN, THE 


SUBORDINATED NOTES OR STRUCTURED COMBINATION NOTES IN A 

MANNER CONSISTENT WITH THE RESTRICTIONS SET FORTH IN THE TRUST 

DEED, AND (2) IF IT IS A ‘‘BENEFIT PLAN INVESTOR’’ AS DEFINED IN THE 

U. S. DEPARTMENT OF LABOR REGULATIONS SET FORTH AT 29 C.F.R. 

SECTION 2510.3-101 OTHER THAN AN ERISA PLAN, ITS PURCHASE, HOLDING 

AND DISPOSITION OF THE CLASS IV MEZZANINE NOTES, SUBORDINATED 

NOTES OR STRUCTURED COMBINATION NOTES WILL NOT CAUSE A NON- 

EXEMPT VIOLATION OF ANY U.S. FEDERAL, STATE OR LOCAL LAW OR ANY 

NON-U.S. LAW WHICH IS SUBSTANTIALLY SIMILAR TO ERISA OR SECTION 

4975 OF THE CODE AS A RESULT OF THE TRANSACTIONS CONTEMPLATED 

HEREIN AND (3) IT WILL NOT SELL OR OTHERWISE TRANSFER ANY SUCH 

CLASS IV MEZZANINE NOTE, SUCH SUBORDINATED NOTE OR STRUCTURED 

COMBINATION NOTE OR ANY INTEREST THEREIN TO ANY PERSON WHO IS 

UNABLE TO SATISFY THE SAME FOREGOING REPRESENTATIONS AND 

WARRANTIES. ANY ACQUISITION OR TRANSFER OF A CLASS IV 

MEZZANINE NOTE, A SUBORDINATED NOTE OR A STRUCTURED 

COMBINATION NOTE IN VIOLATION OF THE ABOVE RESTRICTIONS SHALL 

BE VOID AB INITIO. 

(h) 

(i) 

(j) 

(k) 

The purchaser will not, at any time, offer to buy or offer to sell the 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. 

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. 

In the case of the purchasers of Subordinated Notes, the purchaser agrees to treat the 

Subordinated Notes as equity of the Issuer for U.S. federal income tax purposes. 

In the case of the purchasers of Structured Combination Notes, the purchaser agrees to 

treat each Component of the Structured Combination Notes as a separate Note for U.S. 

federal income tax purposes and to treat the Component representing the Subordinated 

Notes as equity of the Issuer for U.S. federal income tax purposes. 

Regulation S Notes 

Each purchaser of Regulation S Notes will be deemed to have made the representations set 

forth in clauses (d) and (f) above and to have further represented and agreed as follows: 

(a) It is located outside the United States and is not a U.S. Person (as defined in 

Regulation S). 

(b) It understands that the 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 Lead Manager, the Joint Lead 

Managers and any of their Affiliates, that, if it decides to resell, pledge or otherwise 

transfer such Notes (or any beneficial interest or participation therein) purchased by it, any 

offer, sale or transfer of such Notes (or any beneficial interest or participation therein) will 

be made in compliance with the Securities Act and only (i) to a person (A) it reasonably 

252

elieves is a QIB purchasing for its own account or for the account of a QIB in a nominal 

amount of not less than A250,000 for it and each such account, in a transaction that meets 

the requirements of Rule 144A and takes delivery in the form of a Rule 144A Note and 

(B) that is a qualified purchaser for the purposes of Section 3(c)(7) of the Investment 

Company Act; 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. 

(c) 

It understands that unless the Issuer determines otherwise in compliance with applicable 

law, such Notes (and for the avoidance of doubt, CDIs corresponding to Regulation S 

Notes) will bear a legend set forth below (in respect of the CDIs, as if references to 

‘‘Notes’’ were to ‘‘CDIs’’ and ‘‘Trust Deed’’ were to ‘‘Depositary Agreement’’). 

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 

OR (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR 

RULE 904 OF REGULATION S OF THE SECURITIES ACT AND, IN THE CASE 

OF CLAUSE (1), IN A PRINCIPAL AMOUNT OUTSTANDING OF NOT LESS 

THAN A250,000 FOR THE PURCHASER AND FOR EACH ACCOUNT FOR WHICH 

IT IS ACTING, IN EACH CASE 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 OR, IN THE CASE OF CLAUSE (2), IN A 

PRINCIPAL AMOUNT OUTSTANDING OF NOT LESS THAN A50,000 AND (B) IN 

ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES 

OF THE UNITED STATES. 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, IN THE EVENT OF A VIOLATION OF (V) THROUGH (Z), 

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 

253

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 OUTSTANDING BY INQUIRY OF THE 

REGISTRAR. 

BY ITS PURCHASE OR HOLDING OF ANY RATED NOTES (OTHER THAN 

CLASS IV MEZZANINE NOTES), OR ANY INTEREST THEREIN, THE 

PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE 

DEEMED TO HAVE REPRESENTED, WARRANTED AND AGREED EITHER 

THAT (A) IT IS NOT AND WILL NOT BE AN EMPLOYEE BENEFIT PLAN AS 

DEFINED IN SECTION 3(3) OF THE U.S. EMPLOYEE RETIREMENT INCOME 

SECURITY ACT OF 1974, AS AMENDED (‘‘ERISA’’) AND SUBJECT TO ERISA, 

OR A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE 

CODE OF 1986, AS AMENDED, (THE ‘‘CODE’’) AND 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, HOLDING 

AND DISPOSITION OF A RATED NOTE (OTHER THAN A CLASS IV 

MEZZANINE 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 AND WILL NOT 

CAUSE A NON-EXEMPT VIOLATION OF ANY FEDERAL, STATE, LOCAL OR 

NON-U.S. LAW WHICH IS SUBSTANTIALLY SIMILAR TO SECTION 406 OF 

ERISA OR SECTION 4975 OF THE CODE. ANY ACQUISITION OR TRANSFER OF 

A RATED NOTE (OTHER THAN A CLASS IV MEZZANINE NOTE) IN 

VIOLATION OF THE ABOVE RESTRICTIONS SHALL BE VOID AB INITIO. 

BY ITS PURCHASE, HOLDING OR DISPOSITION OF A CLASS IV MEZZANINE 

NOTE, A SUBORDINATED NOTE OR A STRUCTURED COMBINATION NOTE, 

OR ANY INTEREST THEREIN, THE PURCHASER AND/OR HOLDER THEREOF 

AND EACH TRANSFEREE WILL BE REQUIRED TO REPRESENT, WARRANT 

AND AGREE THAT, AT THE TIME OF ITS ACQUISITION, AND THROUGHOUT 

THE PERIOD THAT IT HOLDS SUCH CLASS IV MEZZANINE NOTE, SUCH 

SUBORDINATED NOTE OR SUCH STRUCTURED COMBINATION NOTE OR 

ANY INTEREST THEREIN, THAT (1) IT IS (i) NOT AN EMPLOYEE BENEFIT 

PLAN AS DEFINED IN SECTION 3(3) OF ERISA WHICH IS SUBJECT TO ERISA, 

(ii) NOT A PLAN AS DEFINED IN SECTION 4975(e)(1) OF THE CODE WHICH IS 

SUBJECT TO 4975 OF THE CODE AND (iii) NOT AN ENTITY WHOSE 

UNDERLYING ASSETS INCLUDE ‘‘PLAN ASSETS’’ BY REASON OF SUCH 

PLAN’S INVESTMENT IN THE ENTITY (COLLECTIVELY, AN ‘‘ERISA PLAN’’); 

AND IF AFTER ITS INITIAL ACQUISITION OF A CLASS IV MEZZANINE NOTE, 

A SUBORDINATED NOTE OR A STRUCTURED COMBINATION NOTE OR ANY 

254

INTEREST THEREIN, THE INVESTOR DETERMINES, OR IT IS DETERMINED 

BY ANOTHER PARTY, THAT SUCH INVESTOR IS AN ERISA PLAN, THE 


SUBORDINATED NOTES OR STRUCTURED COMBINATION NOTES IN A 

MANNER CONSISTENT WITH THE RESTRICTIONS SET FORTH IN THE TRUST 

DEED, AND (2) IF IT IS A ‘‘BENEFIT PLAN INVESTOR’’ AS DEFINED IN THE 

U. S. DEPARTMENT OF LABOR REGULATIONS SET FORTH AT 29 C.F.R. 

SECTION 2510.3-101 OTHER THAN AN ERISA PLAN, ITS PURCHASE, HOLDING 

AND DISPOSITION OF THE CLASS IV MEZZANINE NOTES, SUBORDINATED 

NOTES OR STRUCTURED COMBINATION NOTES WILL NOT CAUSE A NON- 

EXEMPT VIOLATION OF ANY U.S. FEDERAL, STATE OR LOCAL LAW OR ANY 

NON-U.S. LAW WHICH IS SUBSTANTIALLY SIMILAR TO ERISA OR SECTION 

4975 OF THE CODE AS A RESULT OF THE TRANSACTIONS CONTEMPLATED 

HEREIN AND (3) IT WILL NOT SELL OR OTHERWISE TRANSFER ANY SUCH 

CLASS IV MEZZANINE NOT, SUCH SUBORDINATED NOTE OR SUCH 

STRUCTURED COMBINATION NOTE OR ANY INTEREST THEREIN TO ANY 

PERSON WHO IS UNABLE TO SATISFY THE SAME FOREGOING 

REPRESENTATIONS AND WARRANTIES. ANY ACQUISITION OR TRANSFER 

OF A CLASS IV MEZZANINE NOTE, A SUBORDINATED NOTE OR A 

STRUCTURED COMBINATION NOTE IN VIOLATION OF THE ABOVE 

RESTRICTIONS SHALL BE VOID AB INITIO. 

(d) It acknowledges that the Issuer, the Lead Manager, the Joint Lead Managers, the Trustee, 

the Collateral Manager or the Collateral Administrator and their Affiliates, and others will 

rely upon the truth and accuracy of the foregoing acknowledgements, representations and 

agreements. 

(e) It understands that the Regulation S Notes may not, at any time, be held by, or on behalf 

of, U.S. Persons. 

A transferor who transfers an interest in a Regulation S Global Note to a transferee who will 

hold the interest in the same form is not required to make any additional representation or 

certification. 

255

GENERAL INFORMATION 

1. Clearing Systems 

The Notes of each Class have been accepted for clearance through Euroclear, Clearstream 

Luxembourg and Clearstream Banking AG. The Common Code and International Securities 

Identification Number (‘‘ISIN’’) for each of the Notes of each Class is: 

Regulation S Notes 

Rule 144A Notes 

Common Code ISIN Common Code ISIN 

Class I Senior Notes ................... 026159148 XS0261591480 026163706 XS0261637069 

Class II Senior Notes.................. 026159270 XS0261592702 026163781 XS0261637812 

Class III Mezzanine Notes.......... 026162700 XS0261627003 026163846 XS0261638463 

Class IV Mezzanine Notes.......... 026162912 XS0261629124 026163919 XS0261639198 

Class V Structured Combination 

Notes....................................... 026163218 XS0261632185 026164028 XS0261640287 

Class VI Structured Combination 

Notes....................................... 026163293 XS0261632938 026164117 XS0261641178 

Subordinated Notes .................... 026162980 XS0261629801 026163978 XS0261639784 

2. Listing 

Application has been made to list the Notes of each Class on the Official List of the Irish Stock 

Exchange to admit the Notes of each Class to trading on the regulated market of the Irish Stock 

Exchange. 

3. Consents and Authorisations 

The Issuer has obtained all necessary consents, approvals and authorisations in Ireland (if any) 

in connection with the issue and performance of the Notes. The issue of the Notes is authorised by a 

resolution of the Board of Directors of the Issuer passed on or about 15 May 2006. 

4. No Material Adverse Change 

There has been no material adverse change in the financial or trading position of the Issuer 

since 17 May 2006 and there has been no material adverse change in the prospects of the Issuer since 

its incorporation on 17 May 2006. 

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 

Closing Date and no financial accounts have been made up as of the date of this document. 

So long as any Note remains outstanding, copies of the most recent annual audited financial 

statements of the Issuer, when published, can be obtained at the specified offices of the Paying Agents 

during normal business hours. The first financial statements of the Issuer will be in respect of the 

period from incorporation to 31 March 2007. The annual accounts of the Issuer will be audited. 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 or upon request that no Event of Default or other matter which is required to be brought to 

the Trustee’s attention has occurred. 

256

7. No Operations 

Since the date of its incorporation, the Issuer has not commenced any operations and no annual 

reports or accounts have been prepared as of the date of this Prospectus. 

8. Documents Available for Inspection 

So long as any of the Notes are outstanding, copies of the following documents will be 

physically and electronically available for inspection and may be obtained free of charge during 

normal business hours at the offices of Goodbody Stockbrokers (the ‘‘Irish Listing Agent’’) in the city 

of Dublin and at the offices of the Issuer: 

(a) the Memorandum and Articles of Association of the Issuer; 

(b) The Corporate Services Agreement; 

(c) the Subscription Agreement; 

(d) the Trust Deed (which includes the form of each Note of each Class); 

(e) the Agency Agreement; 

(f) the Depositary Agreement; 

(g) the Collateral Management Agreement; 

(h) any Collateral Acquisition Documents; 

(i) any Interest Rate Hedge Agreement; 

(j) any Currency Swap Agreement; 

(k) the Euroclear Pledge Agreement; 

(l) the Natexis Zero Coupon Notes Pledge Agreement; 

(m) the OAT Strips Pledge Agreement; and 

(n) Natexis Banques Populaires Base Prospectus dated 6 September 2005 and the Final Terms 

dated 21 July 2006 in respect of the Natexis Zero Coupon Notes. 

In addition, for so long as any of the Notes are Outstanding, the following documents will be 

available both (i) for inspection at and (ii) copies thereof may be obtained free of charge upon 

request from, the Irish Listing Agent: 

(a) each Monthly Report; 

(b) each Note Valuation Report; and 

(c) each Subordinated Noteholder Report. 

9. Enforceability of Judgments 

The Issuer is a company incorporated under the laws of Ireland. None of the 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 judgements obtained in United States courts, 

including judgements predicated upon civil liability provisions of the securities laws of the United 

States or any State or territory within the United States. 

10. Irish Paying and Transfer Agent 

Deutsche International Corporate Services (Ireland) Limited has been appointed as Irish 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) only with respect to Notes held by residents of Ireland; and 

(b) only in the event that no entity is performing the duties of principal paying agent in 

relation to the Notes. 

257

11. Expenses 

The total expenses related to the admission to trading on the Irish Stock Exchange will be 

approximately A5782. 

258

GLOSSARY OF DEFINED TERMS 

£.................................................................................................................................................................. iv 

A.................................................................................................................................................................. iv 

$.................................................................................................................................................................. iv 

Account Bank ............................................................................................................................................54 

Accounts.....................................................................................................................................................55 

Additional Collateral Account ..................................................................................................................55 

Additional Collateral Debt Obligation......................................................................................................55 

Administrative Expenses ....................................................................................................................55, 153 

Affected Party ............................................................................................................74, 183, 185, 186, 187 

Affected Transactions ..............................................................................................................................187 

Affiliate.......................................................................................................................................................56 

Affiliated.....................................................................................................................................................56 

AFM.........................................................................................................................................................243 

Agency Agreement .....................................................................................................................................54 

Agent..........................................................................................................................................................56 

Aggregate Industry Equivalent Unit Score.............................................................................................191 

aggregate principal amount outstanding ...................................................................................................56 

Annual Interest Payment...........................................................................................................................56 

Annual Interest Payment Amount ............................................................................................................56 

Assignment ...............................................................................................................................................180 

Assignments................................................................................................................................................27 

Associated Country..................................................................................................................................200 

Assumed Profits .......................................................................................................................................219 

Authorised Denomination .........................................................................................................................56 

Authorised Officer......................................................................................................................................56 

Average Portfolio Rating ........................................................................................................................194 

Average Principal Balance.......................................................................................................................191 

Balance .......................................................................................................................................................56 

Basel Committee ........................................................................................................................................51 

Basel II.......................................................................................................................................................51 

Bearer Notes ....................................................................................................................................... 56, 84 

Beneficial Owner ......................................................................................................................................143 

Book-Entry Interest .................................................................................................................................143 

Book-Entry Interests..................................................................................................................... ii, 21, 138 

Break-even Rate Case..............................................................................................................................201 

Business Day....................................................................................................................................... 57, 85 

Calculation Agent ......................................................................................................................................54 

capital asset..............................................................................................................................................226 

CDI ............................................................................................................................................... ii, 20, 138 

CDIs ...........................................................................................................................................................50 

259

CDO Liabilities..........................................................................................................................................57 

CDO Principal Balance .............................................................................................................................57 

centre of main interest.............................................................................................................................110 

Certain ERISA Considerations .......................................................................................................... 21, 48 

CFC..........................................................................................................................................................230 

Class ................................................................................................................................................ ii, 58, 84 

Class I Break-even Loss Rate .................................................................................................................202 

Class I Floating Rate of Interest ......................................................................................................57, 113 

Class I Loss Differential..........................................................................................................................202 

Class I Margin ...................................................................................................................................57, 114 

Class I Scenario Loss Rate .....................................................................................................................202 

Class I Senior Noteholders........................................................................................................................57 

Class I Senior Notes.............................................................................................................................. i, 53 

Class II Break-even Loss Rate................................................................................................................203 

Class II Floating Rate of Interest.....................................................................................................57, 113 

Class II Loss Differential ........................................................................................................................203 

Class II Margin..................................................................................................................................57, 114 

Class II Scenario Loss Rate....................................................................................................................203 

Class II Senior Noteholders ......................................................................................................................57 

Class II Senior Notes ............................................................................................................................ i, 53 

Class III Break-even Loss Rate ..............................................................................................................203 

Class III Coverage Test.............................................................................................................................57 

Class III Floating Rate of Interest ...................................................................................................57, 113 

Class III Interest Coverage Ratio .............................................................................................................57 

Class III Interest Coverage Test .......................................................................................................57, 205 

Class III Loss Differential.......................................................................................................................203 

Class III Margin ................................................................................................................................57, 114 

Class III Mezzanine Noteholders..............................................................................................................57 

Class III Mezzanine Notes .................................................................................................................... i, 53 

Class III Par Value Ratio .........................................................................................................................57 

Class III Par Value Test....................................................................................................................57, 205 

Class III Scenario Loss Rate ..................................................................................................................203 

Class IV Break-even Loss Rate...............................................................................................................203 

Class IV Coverage Test .............................................................................................................................57 

Class IV Floating Rate of Interest ...................................................................................................57, 113 

Class IV Interest Coverage Ratio .............................................................................................................57 

Class IV Interest Coverage Test........................................................................................................57, 205 

Class IV Loss Differential .......................................................................................................................203 

Class IV Margin ................................................................................................................................58, 114 

Class IV Mezzanine Noteholders ..............................................................................................................58 

Class IV Mezzanine Notes .................................................................................................................... i, 53 

Class IV Par Value Ratio..........................................................................................................................58 

260

Class IV Par Value Test....................................................................................................................58, 205 

Class IV Scenario Loss Rate...................................................................................................................203 

Class of Noteholders .................................................................................................................................58 

Class of Notes............................................................................................................................................58 

Class V Structured Combination Noteholders .........................................................................................58 

Class V Structured Combination Notes................................................................................................i, 53 

Class V Subordinated Component....................................................................................................... 3, 58 

Class VI Structured Combination Noteholders ........................................................................................58 

Class VI Structured Combination Notes .............................................................................................. i, 53 

Class VI Subordinated Component...................................................................................................... 4, 58 

Clearing Systems ......................................................................................................................................142 

Clearstream, Luxembourg............................................................................................................. ii, 20, 138 

Closing Date ......................................................................................................................................i, ii, 58 

Code ...................................................................................................................................................48, 249 

Collateral....................................................................................................................................................58 

Collateral Acquisition Documents.............................................................................................................58 

Collateral Administrator....................................................................................................................... 2, 54 

Collateral Debt Obligation ........................................................................................................................58 

Collateral Enhancement Account..............................................................................................................58 

Collateral Enhancement Obligation ..........................................................................................................59 

Collateral Management Agreement...................................................................................................... 2, 54 

Collateral Management Fees .....................................................................................................................59 

Collateral Manager ................................................................................................. 2, 54, 59, 154, 163, 206 

Collateral Manager Advance...................................................................................................................176 

Collateral Manager Advances ...................................................................................................................59 

Collateral Managers................................................................................................ 2, 54, 59, 154, 163, 206 

Collateral Quality Tests .............................................................................................................................59 

Collection Account ....................................................................................................................................59 

Common Depositary..................................................................................................................... ii, 20, 138 

Competent Authority................................................................................................................................... i 

Components ...............................................................................................................................................59 

Conditions .............................................................................................................................................. i, 59 

Controlling Class .......................................................................................................................................59 

Corporate Administrator .........................................................................................................................151 

Corporate Services Agreement ................................................................................................................151 

Counterparty Downgrade Collateral.........................................................................................................59 

Counterparty Downgrade Collateral Account ..........................................................................................59 

Coverage Test ............................................................................................................................................60 

Credit Improved Obligation ......................................................................................................................60 

Credit Risk Obligation ..............................................................................................................................60 

Currency Accounts.....................................................................................................................................61 

Currency Swap Agreement ........................................................................................................................61 

261

Currency Swap Counterparty....................................................................................................................61 

Currency Swap Obligation ........................................................................................................................61 

Currency Swap Replacement Receipt .......................................................................................................61 

Currency Swap Termination Payment ......................................................................................................61 

Currency Swap Termination Receipt ........................................................................................................61 

Currency Swap Transaction ......................................................................................................................61 

Currency Swap Transaction Exchange Rate.............................................................................................61 

Current Pay Obligation .............................................................................................................................61 

Current Portfolio .....................................................................................................................................203 

Custody Account .......................................................................................................................................62 

Decree.........................................................................................................................................................49 

Defaulted Equity Security .........................................................................................................................62 

Defaulted Obligation .................................................................................................................. 62, 63, 204 

Defaulting Party.........................................................................................................................74, 183, 185 

Deferred Interest ................................................................................................................................63, 112 

Deferring Mezzanine Obligation ...............................................................................................................63 

Definitive Certificate ...............................................................................................................ii, 21, 63, 138 

Deliverable Obligation .......................................................................................................................34, 179 

Deliverable Obligations......................................................................................................................34, 179 

Depositary .................................................................................................................................ii, 20, 22, 54 

Depositary Agreement .................................................................................................................... ii, 20, 54 

Determination Date ...................................................................................................................................63 

Direct Participants ...................................................................................................................................142 

Directors...................................................................................................................................................152 

disqualified person ...................................................................................................................................237 

Distressed Exchange ..................................................................................................................................62 

Distribution ................................................................................................................................................63 

Diversion of Interest Proceeds ................................................................................................................... 9 

Diversity Score.........................................................................................................................................191 

DTC ...........................................................................................................................................................42 

Due Date....................................................................................................................................................63 

Due Period .................................................................................................................................................63 

Dutch Residents.......................................................................................................................................243 

Effective Date Rating Event......................................................................................................................63 

Effective Date Requirements .....................................................................................................................64 

EI Minimum Long-Term Rating ..............................................................................................................64 

EI Minimum Short-Term Rating ..............................................................................................................64 

Eligibility Criteria ..............................................................................................................................64, 166 

Eligible Investments ...................................................................................................................................64 

equitable subordination .............................................................................................................................35 

equity interest...........................................................................................................................................237 

Equivalent Unit Score .............................................................................................................................191 

262

ERISA........................................................................................................................48, 237, 249, 251, 254 

ERISA Plan .............................................................................................................................................249 

ERISA Plans............................................................................................................................................238 

EU Savings Directive...............................................................................................................................124 

EURIBOR..................................................................................................................................................65 

Euro............................................................................................................................................................ iv 

Euro Equivalent.........................................................................................................................................65 

Euro-zone ...........................................................................................................................................66, 114 

Euroclear .................................................................................................................................ii, 20, 65, 138 

Euroclear Pledge Agreement .....................................................................................................................65 

Euroclear Pledged Account .......................................................................................................................42 

Event of Default ................................................................................................................................66, 125 

Exchange Act .............................................................................................................................................. v 

Exchange Date .........................................................................................................................................140 

Exchanged Global Note ..........................................................................................................................139 

Expected Net Proceeds ............................................................................................................................117 

Expense Reserve Account..........................................................................................................................66 

Extraordinary Resolution ..........................................................................................................................66 

Final Effective Date...........................................................................................................................66, 165 

Final Portfolio ...................................................................................................................................14, 163 

Financial Instruments ........................................................................................................... 2, 66, 154, 163 

first Selling Institution .............................................................................................................................179 

Foreign Taxable Investor ........................................................................................................................220 

Form-Approved Synthetic Security ...........................................................................................................66 

FSMA ................................................................................................................................................ iii, 245 

FTA..........................................................................................................................................................221 

German Disbursing Agent.......................................................................................................................219 

German Investor ......................................................................................................................................220 

Global Note ........................................................................................................................................ 66, 84 

Global Notes...........................................................................................................................ii, 66, 84, 138 

Gross Up Tax Amounts..........................................................................................................................117 

Group.......................................................................................................................................................200 

Hedge Agreement.....................................................................................................................................186 

Hedge Counterparty ................................................................................................................................186 

IFSRA.......................................................................................................................................................... i 

Incentive Collateral Management Fee...............................................................................................66, 206 

Income Tax ..............................................................................................................................................219 

Independent Accountants’ Report...........................................................................................................164 

Independent Director...............................................................................................................................109 

Indirect Participants.................................................................................................................................142 

Industry Diversity Score..........................................................................................................................192 

Initial Effective Date .........................................................................................................................66, 164 

263

Initial Ratings ............................................................................................................................................66 

Insolvency Law ........................................................................................................................................126 

Interest .....................................................................................................................................................220 

Interest Account.........................................................................................................................................66 

Interest Accrual Period..............................................................................................................................67 

Interest Amount.........................................................................................................................................67 

Interest Coverage Numerator ....................................................................................................................67 

Interest Determination Date..............................................................................................................68, 113 

Interest Proceeds ........................................................................................................................................68 

Interest Rate Hedge Agreement ................................................................................................................68 

Interest Rate Hedge Counterparty ............................................................................................................68 

Interest Rate Hedge Receipts ....................................................................................................................68 

Interest Rate Hedge Replacement Receipt ...............................................................................................68 

Interest Rate Hedge Termination Payment ..............................................................................................68 

Interest Rate Hedge Termination Receipt ................................................................................................68 

Interest Rate Hedge Transaction ......................................................................................................68, 184 

Interest Rate Risk............................................................................................................................... 38, 39 

Interest Reinvestment Ratio ......................................................................................................................68 

Interest Reinvestment Test ................................................................................................................68, 205 

Interim Targets ..........................................................................................................................................68 

Investment Company Act...................................................................................................................... i, 69 

Investment Period ......................................................................................................................................69 

Investment Tax Act ...................................................................................................................................49 

Investment Tax Act Reporting Requirements ..........................................................................................50 

Irish Listing Agent...................................................................................................................................257 

IRS ...........................................................................................................................................................222 

ISIN..........................................................................................................................................................256 

Issue Price ................................................................................................................................................222 

Issuer ...................................................................................................................................................... i, 53 

Issuer Irish Account ..................................................................................................................................69 

Joint Lead Manager ..................................................................................................................................69 

Joint Lead Managers ..................................................................................................................... i, 69, 241 

Lead Manager................................................................................................................................ i, 69, 241 

lender liability ............................................................................................................................................35 

Letter of Undertaking................................................................................................................................69 

limited recourse........................................................................................................................................111 

Limited Recourse Obligations ...................................................................................................................39 

Location Criteria......................................................................................................................................200 

look-through rule .....................................................................................................................................237 

Lower-Tier PFICs....................................................................................................................................231 

Market Value .....................................................................................................................................69, 118 

Maturity Date ..................................................................................................................................... 10, 69 

264

Maximum Portfolio Rating Test.............................................................................................................194 

Measurement Date.............................................................................................................................69, 190 

Mezzanine Coverage Tests ........................................................................................................................69 

Mezzanine Interest Coverage Tests ...........................................................................................................69 

Mezzanine Noteholders .............................................................................................................................69 

Mezzanine Notes.................................................................................................................................... i, 53 

Mezzanine Obligation ................................................................................................................................69 

Mezzanine Par Value Tests .......................................................................................................................70 

Minimum Denomination ...........................................................................................................................70 

Minimum Diversity Test..........................................................................................................................191 

Minimum Retained Portion Release Amount ..........................................................................................78 

Minimum Weighted Average Spread Test ..............................................................................................198 

Monthly Report .................................................................................................................................70, 212 

Moody’s ...........................................................................................................................................i, 19, 70 

Moody’s Minimum Weighted Average Recovery Rate Test..................................................................199 

Moody’s Rating ...............................................................................................................................167, 194 

Moody’s Rating Factor ...........................................................................................................................197 

Moody’s Recovery Rate ....................................................................................................................82, 199 

Moody’s Weighted Average Recovery Rate ...........................................................................................200 

Natexis Zero Coupon Collateral ...............................................................................................................70 

Natexis Zero Coupon Notes .....................................................................................................................70 

Natexis Zero Coupon Notes Custody Account........................................................................................70 

Natexis Zero Coupon Notes Pledge Agreement.......................................................................................70 

Natexis Zero Coupon Notes Portion........................................................................................................70 

Natexis Zero Coupon Security Component......................................................................................... 4, 70 

Non-Call Period.........................................................................................................................................70 

Non-Euro Notional Amount...................................................................................................................180 

Non-Euro Obligation.......................................................................................................................... 13, 70 

Non-Permitted Holder .................................................................................................................. 49, 70, 85 

non-U.S. Holder ......................................................................................................................................234 

Note EURIBOR ......................................................................................................................................199 

Note Valuation Report......................................................................................................................71, 214 

Noteholders ................................................................................................................................................71 

Noteholders Subject to the Investment Tax Act ....................................................................................219 

Notes ........................................................................................................i, 53, 54, 135, 225, 247, 250, 253 

Notice of Default.....................................................................................................................................126 

OAT Custody Account..............................................................................................................................71 

OAT Relevant Sale Portion ......................................................................................................................71 

OAT Sale Formula ....................................................................................................................................71 

OAT Security Component.................................................................................................................... 3, 71 

OAT Strips............................................................................................................................................ 3, 71 

OAT Strips Collateral................................................................................................................................71 

265

OAT Strips Pledge Agreement ..................................................................................................................71 

OAT Strips Portion ...................................................................................................................................71 

OAT Strips Sale Proceeds .........................................................................................................................71 

Obligor Principal Balance........................................................................................................................191 

Offer ...................................................................................................................................................71, 166 

Offering ...................................................................................................................................................... iv 

offshore transactions..................................................................................................................................19 

OID ..........................................................................................................................................................225 

operating company ..................................................................................................................................237 

Ordinary Resolution ..................................................................................................................................72 

Outstanding................................................................................................................................................72 

over-the-counter-transaction ....................................................................................................................220 

Overcollateralisation Tests.........................................................................................................................72 

Par Coverage Numerator ..........................................................................................................................72 

Participants...............................................................................................................................................142 

Participation .......................................................................................................................................72, 180 

Participation Agreement ............................................................................................................................72 

Participations..............................................................................................................................................28 

Paying Agents ............................................................................................................................................54 

Payment Account.......................................................................................................................................72 

Payment Date ....................................................................................................................................i, 6, 73 

Person.........................................................................................................................................................73 

PFIC.........................................................................................................................................................228 

plan assets ........................................................................................................................................237, 238 

Plan Assets Regulation ............................................................................................................................237 

Plans ...................................................................................................................................................48, 237 

PMP .........................................................................................................................................................242 

PMPs ................................................................................................................................................242, 243 

Portfolio .....................................................................................................................................................73 

portfolio interest exemption ....................................................................................................................223 

Portfolio Profile Tests................................................................................................................................73 

Portfolio Weighted Average Life ............................................................................................................194 

Potential Event of Default ........................................................................................................................73 

pounds sterling........................................................................................................................................... iv 

Pre-Approved Form...................................................................................................................................73 

Prepayment Receipts................................................................................................................................182 

Presentation Date.......................................................................................................................................73 

Principal Account ......................................................................................................................................73 

Principal Amount.....................................................................................................................................169 

principal amount outstanding....................................................................................................................73 

Principal Balance .......................................................................................................................................73 

Principal Paying Agent ..............................................................................................................................54 

266

Principal Proceeds......................................................................................................................................74 

Priorities of Payment .................................................................................................................................74 

Priority Termination Event .......................................................................................................................74 

pro rata basis .............................................................................................................................................74 

Proceedings...............................................................................................................................................135 

Professional Market Parties.............................................................................................................242, 243 

prohibited transactions ......................................................................................................................48, 238 

Proposed Portfolio ...................................................................................................................................203 

Prospectus Directive..................................................................................................................................... i 

publicly-offered security...........................................................................................................................237 

Purchased Accrued Interest .......................................................................................................................74 

QBUs........................................................................................................................................................222 

QEF..........................................................................................................................................................228 

QIB.....................................................................................................................................................74, 247 

QIB/QP.......................................................................................................................................................75 

QIBs ............................................................................................................................................ 19, 20, 244 

Qualified institutional Buyers ..................................................................................................................... 1 

Qualified Purchaser ............................................................................................................................75, 248 

Qualified Purchasers............................................................................................................................. i, 244 

Qualified Stated Interest ..........................................................................................................................226 

qualifying company..................................................................................................................................217 

Qualifying Country ....................................................................................................................................75 

Quality Case.............................................................................................................................................190 

Rated Notes .......................................................................................................................................i, 3, 75 

Rating Agencies .........................................................................................................................................75 

Rating Agency Confirmation.....................................................................................................................75 

Rating Confirmation Plan .......................................................................................................................165 

Receiver....................................................................................................................................................126 

Record Date.......................................................................................................................................75, 123 

Recovery Period.......................................................................................................................................181 

Recovery Value ..........................................................................................................................................75 

Redemption Date.......................................................................................................................................75 

Redemption Determination Date ......................................................................................................75, 117 

Redemption Notice ....................................................................................................................................75 

Redemption Price.......................................................................................................................................75 

Redemption Threshold Amount..............................................................................................................117 

Reference Banks.................................................................................................................................76, 113 

Reference Entity.........................................................................................................................................33 

Reference Obligation..................................................................................................................................76 

Reference Obligations ................................................................................................................................33 

Register ............................................................................................................................................... 76, 84 

Registered...................................................................................................................................................76 

267

Registered Notes ........................................................................................................................................84 

Registrar.....................................................................................................................................................54 

Regulation S Global Note................................................................................................ii, 20, 76, 84, 138 

Regulation S Global Notes ........................................................................................................................ ii 

Regulation S Notes................................................................................................................................ i, 76 

Reinvestment Criteria ........................................................................................................................76, 174 

Reinvestment Period ..................................................................................................................................76 

Relevant Date ............................................................................................................................................76 

Relevant Implementation Date................................................................................................................245 

Relevant Member State ...........................................................................................................................245 

relevant persons ......................................................................................................................................... iii 

Relevant Tax Event .................................................................................................................... 50, 77, 117 

relevant territory ......................................................................................................................................217 

Replacement Currency Swap Agreement ..................................................................................................77 

Replacement Currency Swap Transaction ................................................................................................77 

Replacement Interest Rate Hedge Agreement ..........................................................................................77 

Replacement Interest Rate Hedge Transaction ........................................................................................77 

Replacement Rating Agency .....................................................................................................................75 

Report ........................................................................................................................................................77 

reportable transaction ..............................................................................................................................234 

reporting shareholder...............................................................................................................................234 

Required Ratings .......................................................................................................................................77 

Retained Portion........................................................................................................................................77 

Retained Portion Account.........................................................................................................................78 

Retained Portion Release Amount............................................................................................................78 

Risk Factors...............................................................................................................................................23 

RSA............................................................................................................................................................. v 

Rule 144A Global Note ...................................................................................................ii, 20, 78, 84, 138 

Rule 144A Global Notes............................................................................................................................ ii 

Rule 144A Notes ................................................................................................................................... i, 78 

S&P .................................................................................................................................................. i, 19, 78 

S&P CDO Evaluator Test.......................................................................................................................204 

S&P CDO Monitor .................................................................................................................................148 

S&P CDO Monitor Test .........................................................................................................................202 

S&P Class I Scenario Default Rate ........................................................................................................204 

S&P Class II Scenario Default Rate.......................................................................................................204 

S&P Class III Scenario Default Rate .....................................................................................................204 

S&P Class IV Scenario Default Rate .....................................................................................................204 

S&P Minimum Weighted Average Recovery Rate Test.........................................................................201 

S&P Rating ......................................................................................................................................167, 197 

S&P Recovery Rate .................................................................................................................................202 

S&P Tests Matrix ....................................................................................................................................201 

268

Sale Proceeds..............................................................................................................................................78 

Scheduled Interest Rate Hedge Counterparty Payments..........................................................................79 

Scheduled Interest Rate Issuer Payments .................................................................................................79 

Scheduled Principal Proceeds ....................................................................................................................79 

SD ..............................................................................................................................................................62 

SEC ............................................................................................................................................................49 

Second Lien Loan......................................................................................................................................79 

second Selling Institution.........................................................................................................................179 

Section 110 Asset.......................................................................................................................................79 

Secured Party .............................................................................................................................................79 

Securities Act ......................................................................................................................................... i, 80 

Selling Institution.......................................................................................................................................80 

Senior Collateral Management Fee...........................................................................................................80 

Senior Coverage Tests ...............................................................................................................................80 

Senior Fee Cap ..........................................................................................................................................80 

Senior Interest Coverage Ratio .................................................................................................................80 

Senior Interest Coverage Test ...........................................................................................................80, 205 

Senior Notes........................................................................................................................................... i, 53 

Senior Par Value Ratio .............................................................................................................................80 

Senior Par Value Test........................................................................................................................80, 205 

Senior Secured Loan..................................................................................................................................80 

Settlement and Transfer of Interests in CDIs ........................................................................................142 

shortfall ....................................................................................................................................................108 

significant .................................................................................................................................................237 

Stabilising Manager .................................................................................................................................... 5 

Stated Maturity..........................................................................................................................................80 

stated redemption price at maturity........................................................................................................225 

Structured Combination Notes.............................................................................................................. i, 53 

Structured Finance Security ......................................................................................................................80 

Sub-Custodian............................................................................................................................................42 

Subordinated Collateral Management Fee................................................................................................81 

Subordinated Component..........................................................................................................................80 

Subordinated Note Hurdle Return Amount.............................................................................................81 

Subordinated Note Interest .......................................................................................................... 6, 81, 111 

Subordinated Noteholder Report............................................................................................................215 

Subordinated Noteholders .........................................................................................................................81 

Subordinated Notes ............................................................................................................................... i, 53 

Substitute Collateral Debt Obligation.......................................................................................................81 

SVTs............................................................................................................................................................ 3 

Synthetic Collateral....................................................................................................................................81 

Synthetic Collateral Account.....................................................................................................................81 

Synthetic Counterparty..............................................................................................................................81 

269

Synthetic Counterparty Default ................................................................................................................81 

Synthetic Security.......................................................................................................................................81 

Target Par Amount ............................................................................................................................ 14, 82 

TARGET System.......................................................................................................................................82 

Tax Charges .............................................................................................................................................117 

Tax Subsidiary .........................................................................................................................................170 

Tax-Exempt U.S. Holders .......................................................................................................................233 

Taxed Collateral Debt Obligation...........................................................................................................170 

Termination Event .....................................................................................................................68, 185, 186 

Termination Payment ..............................................................................................................................189 

Transaction Creditors ................................................................................................................................82 

Transaction Documents .............................................................................................................................82 

Transfer Agents..........................................................................................................................................54 

Triple C Asset............................................................................................................................................82 

Triple C Asset Adjusted Market Value ....................................................................................................82 

Triple C Asset Adjusted Par Value...........................................................................................................82 

Triple C Asset Aggregate Market Value ..................................................................................................82 

Triple C Asset Market Value Percentage .................................................................................................83 

Triple C Asset Par Percentage ..................................................................................................................83 

Triple C Asset Percentage .........................................................................................................................83 

Triple C Asset Percentage Limit ...............................................................................................................83 

Trust Deed .................................................................................................................................................53 

Trustee................................................................................................................................................i, 2, 53 

Trustee Fees and Expenses........................................................................................................................83 

U.S. business............................................................................................................................................223 

U.S. dollars ................................................................................................................................................ iv 

U.S. Holder..............................................................................................................................................222 

U.S. Person ................................................................................................................................................49 

U.S. Residents..........................................................................................................................................244 

U.S. Shareholder......................................................................................................................230, 232, 234 

U.S. Shareholders ....................................................................................................................................230 

U.S. tax structure........................................................................................................................................ 4 

U.S. tax treatment ...................................................................................................................................... 4 

UBTI ........................................................................................................................................................233 

Underlying Instruments .............................................................................................................................83 

Underlying Notes.......................................................................................................................................83 

Unscheduled Principal Proceeds................................................................................................................83 

Weighted Average Life Test ....................................................................................................................194 

Weighted Average Spread .......................................................................................................................198 

Withholding Tax ......................................................................................................................................218 

WTK ........................................................................................................................................................244 

270

REGISTERED OFFICE OF THE ISSUER 

VALLAURIS II CLO PLC 

5 Harbourmaster Place 

International Financial Services Centre 

Dublin 1 

Ireland 

COLLATERAL MANAGERS 

Natexis Banques Populaires 

45, rue Saint-Dominique 

75007 Paris 

France 

TRUSTEE 

ABN AMRO Trustees Limited 

82 Bishopsgate 

London EC2N 4BN 

England 

Natexis Asset Management 

68-76, quai de la Rapée 

75012 Paris 

France 

COLLATERAL ADMINISTRATOR, 

PRINCIPAL PAYING AGENT, CUSTODIAN, 

TRANSFER AGENT, CALCULATION 

AGENT AND ACCOUNT BANK 

ABN AMRO Bank N.V. (London Branch) 

82 Bishopsgate 

London EC2N 4BN 

England 

REGISTRAR AND DEPOSITARY 

IRISH PAYING AND TRANSFER AGENT 

LaSalle Bank National Association 

Deutsche International Corporate Services 

181 West Madison Street, 32nd floor 

(Ireland) Limited 

Chicago 

5 Harbourmaster Place 

Illinois 60602 

International Financial Services Centre 

U.S.A 

Dublin 1 

Ireland 

LEGAL ADVISERS 

To the Joint Lead Managers as to 

English Law 

Clifford Chance Europe LLP 

9 Place Vendôme 

CS 50018 

75038 Paris Cedex 01 

To the Joint Lead Managers as to 

U.S. Law 

Clifford Chance 

31 West 52nd Street 

New York 

New York 10019-6131 

To the Trustee as to 

English Law 

Clifford Chance LLP 

10 Upper Bank Street 

London E14 5JJ 

England 

To the Issuer as to 

Irish Law 

A&L GoodbodySolicitors 

International Financial 

Services Centre 

North Wall Quay 

Dublin 1, Ireland 

To the Collateral Managers as to 

French and English Law 

Mayer, Brown, Rowe & Maw 

LLP 

41 avenue Hoche 

75008 Paris 

France 

271

imprima de bussy — C94339

VALLAURIS II CLO PLC - Irish Stock Exchange

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