VALLAURIS II CLO PLC - Irish Stock Exchange

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
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