VALLAURIS II CLO PLC - Irish Stock Exchange

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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