VALLAURIS II CLO PLC - Irish Stock Exchange

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.
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