VALLAURIS II CLO PLC - Irish Stock Exchange

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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
Page 1 and 2: Prospectus dated 26 July 2006 VALLA
Page 3 and 4: information is in accordance with t
Page 5 and 6: AVAILABLE INFORMATION To permit com
Page 7 and 8: Page 4. Final Effective Date ......
Page 9 and 10: The Collateral Administrator: Branc
Page 11 and 12: Class VI Structured Combination Not
Page 13 and 14: Use of Proceeds: Priorities of Paym
Page 15 and 16: Collateral Quality Tests Overcollat
Page 17 and 18: Principal Repayments: Reinvestment
Page 19 and 20: Redemption upon an Effective Date R
Page 21 and 22: Purchase of Collateral Debt Obligat
Page 23 and 24: their respective functions under th
Page 25 and 26: Treatment of Interest Proceeds: Acc
Page 27 and 28: Authorised Denominations: Form, Reg
Page 29 and 30: The Depositary: Additional Issuance
Page 31 and 32: Component. In addition, Class VI St
Page 33 and 34: the obligor group. Second Lien Loan
Page 35 and 36: eferred to herein as ‘‘Particip
Page 37 and 38: Collateral Debt Obligation is enter
Page 39: Collateral Manager. The need to sat
Page 43 and 44: that Collateral Debt Obligations is
Page 45 and 46: 3.4 Subordination of Structured Com
Page 47 and 48: 3.9 Mandatory Redemption of the Not
Page 49 and 50: compensate for such withholding tax
Page 51 and 52: Condition 14(b) (Modification and W
Page 53 and 54: investment decisions for the Issuer
Page 55 and 56: In relation to the disposal of asse
Page 57 and 58: Investment Tax Act (the ‘‘Inves
Page 59 and 60: another member state, except that A
Page 61 and 62: payments, distributions, votes or c
Page 63 and 64: in each case, including any value a
Page 65 and 66: ‘‘Class IV Interest Coverage Ra
Page 67 and 68: ‘‘Credit Improved Obligation’
Page 69 and 70: Balance of all Collateral Debt Obli
Page 71 and 72: ‘‘Effective Date Requirements
Page 73 and 74: next following Payment Date, an amo
Page 75 and 76: ‘‘Interest Determination Date
Page 77 and 78: (a) a secured mezzanine loan or oth
Page 79 and 80: such obligation to purchase or othe
Page 81 and 82: (e) the Principal Balance of any Co
Page 83 and 84: (b) any Subordinated Note to be red
Page 85 and 86: (d) the retention of such Retained
Page 87 and 88: ‘‘Securities Act’’ means th
Page 89 and 90: (a) such Synthetic Security will no
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2. Form and Denomination, Title, Tr
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more bids from one or more brokers
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(2) any Interest Rate Hedge Termina
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(X) (Y) (Z) at the option of the Co
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III Mezzanine Notes, in whole or in
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Failure to Appoint a Replacement Co
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Obligation (save in the case of (i)
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the avoidance of doubt, any schedul
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(BB) termination of the Interest Ra
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(b) (c) (d) at any time in repaymen
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(I) (J) (K) (L) The Retained Portio
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pursuant thereto provided that such
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amount being referred to herein as
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(b) (viii) pay its debts generally
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Notes in accordance with Condition
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nearest one hundred-thousandth of a
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the Class II Senior Notes the Class
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(A) (B) (C) in respect of each Coll
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immediately prior to the related Pa
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(C) (D) the Collateral Administrato
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(b) (c) on the Register at the clos
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(d) as a result of presentation for
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(d) (e) (i) (ii) If an Event of Def
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12. Prescription (a) Note represent
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necessary to facilitate the adminis
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Except where expressly provided oth
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Combination Notes, in the proportio
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FORM OF THE NOTES References below
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interests in the Exchanged Global N
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BOOK-ENTRY CLEARANCE PROCEDURES AND
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Book-Entry Interests owned through
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A person acquiring a Book-Entry Int
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RATINGS OF THE NOTES It is a condit
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EXPECTED AVERAGE LIVES OF THE NOTES
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Deutsche International Finance (Ire
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DESCRIPTION OF THE COLLATERAL MANAG
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A three-dimensional organization -
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Contribution to revenues (consolida
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Directors’ work is prepared and o
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Jean-Luc Simon - CDO Director Jean-
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on behalf of, the Issuer of Synthet
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the Interest Account and/or to the
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to a non-default rate or an improve
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connection with any such sale or re
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in Sections 7.3 (Sale of Credit Imp
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7.6 Unscheduled Principal Proceeds
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(b) in the case of proceeds resulti
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Obligation. For the avoidance of do
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Institution, having a credit rating
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the Defaulted Obligation at the fai
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(a) where the Issuer, following con
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In the event that the Issuer receiv
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(C) at its own cost, (i) in the cas
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Upon the occurrence of any Event of
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For purposes of calculating the Div
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Aggregate Industry Equivalent Unit
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(3) shall be two subcategories abov
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(i) (ii) (iii) if such Collateral D
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Moody’s Recovery Rate Table Oblig
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Reinvestment Period, with the appli
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11.10 S&P CDO Evaluator Test The
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DESCRIPTION OF THE COLLATERAL MANAG
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Collateral Management Agreement (Ap
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DESCRIPTION OF THE COLLATERAL ADMIN
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DESCRIPTION OF THE REPORTS 1. Month
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(P) (Q) which consist of Participat
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Class I Senior Notes, Class II Seni
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In certain circumstances, Irish tax
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amount of interest paid, but also o
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General The following summary descr
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‘‘grossed up’’ for any mate
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maturity of such Notes will be the
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extent thereof), with payments attr
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PREFERRED EQUITY CERTIFICATES AND T
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or more (measured by vote or value)
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values at the time of purchase. A s
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associated territories. These apply
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The Class IV Mezzanine Notes, the S
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Any Plan fiduciary that proposes to
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For the avoidance of doubt, all ref
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(h) (i) (j) (k) (l) (m) any company
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means of sufficient information on
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(c) (d) (e) restrictions described
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(g) representations and warranties.
Page 259 and 260:
PLAN AS DEFINED IN SECTION 3(3) OF
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THE TERMS OF THE TRUST DEED. EACH T
Page 263 and 264:
GENERAL INFORMATION 1. Clearing Sys
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11. Expenses The total expenses rel
Page 267 and 268:
CDO Liabilities....................
Page 269 and 270:
Currency Swap Counterparty.........
Page 271 and 272:
Initial Ratings ...................
Page 273 and 274:
OAT Strips Pledge Agreement .......
Page 275 and 276:
Registered Notes ..................
Page 277 and 278:
Synthetic Counterparty Default ....
Page 279:
imprima de bussy — C94339
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VALLAURIS II CLO PLC - Irish Stock Exchange

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