Pangaea Prospectus - Irish Stock Exchange

PANGAEA ABS 2007-1 B.V.
(a private company with limited liability incorporated under the laws of The Netherlands and having its corporate seat in Amsterdam)
€220,000,000 Class A Floating Rate Notes due 2096
€16,000,000 Class B Floating Rate Notes due 2096
€18,000,000 Class C Floating Rate Notes due 2096
€22,000,000 Class D Deferrable Floating Rate Notes due 2096
€16,000,000 Class E Deferrable Floating Rate Notes due 2096
€5,000,000 Class F Deferrable Floating Rate Notes due 2096
€12,200,000 Subordinated Notes due 2096
€5,000,000 Class S1 Combination Notes due 2096*
________________________________________
*The initial principal amount outstanding of the Class S1 Combination Notes will consist of €4,000,000 of the Class D Notes and €1,000,000 of the Subordinated Notes. The initial
principal amount outstanding of the Class S1 Combination Notes is included in the initial principal amount outstanding of the Classes of Notes related to the respective Components of the
Class S1 Combination Notes.
________________________________________
Issue Price – Class A Floating Rate Notes due 2096: 100 per cent.
Issue Price – Class B Floating Rate Notes due 2096: 100 per cent.
Issue Price – Class C Floating Rate Notes due 2096: 100 per cent.
Issue Price – Class D Deferrable Floating Rate Notes due 2096: 100 per cent.
Issue Price – Class E Deferrable Floating Rate Notes due 2096: 100 per cent.
Issue Price – Class F Deferrable Floating Rate Notes due 2096: 100 per cent.
Issue Price – Subordinated Notes due 2096: 100 per cent.
Issue Price – Class S1 Combination Notes due 2096: 100 per cent.
________________________________________
Secured by a Portfolio of Asset Backed Securities
managed by Investec Principal Finance, a business unit division of Investec Bank (UK) Ltd
Pangaea ABS 2007-1 B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of The Netherlands (the “Issuer”)
will issue €220,000,000 Class A Floating Rate Notes due 2096 (the “Class A Notes”), €16,000,000 Class B Floating Rate Notes due 2096 (the “Class B Notes”), €18,000,000 Class C
Floating Notes due 2096 (the “Class C Notes”), €22,000,000 Class D Deferrable Floating Rate Notes due 2096 (the “Class D Notes”), €16,000,000 Class E Deferrable Floating Rate
Notes due 2096 (the “Class E Notes”), €5,000,000 Class F Deferrable Floating Rate Notes due 2096 (the “Class F Notes” and, together with the Class E Notes, the Class D Notes, the
Class C Notes, the Class B Notes and the Class A Notes, the “Senior Notes”), €12,200,000 Subordinated Notes due 2096 (the “Subordinated Notes”) and €5,000,000 Class S1
Combination Notes due 2096 (the “Class S1 Combination Notes” and, together with the Senior Notes and the Subordinated Notes, the “Notes” and each a “Class” of Notes). The initial
principal amount outstanding of the Class S1 Combination Notes will consist of €4,000,000 of the Class D Notes (the “Class S1/D Component”) and €1,000,000 of the Subordinated
Notes (the “Class S1/Subordinated Component”). Each of the Class S1/D Component and the Class S1/Subordinated Component are collectively referred to as the “Components” and
are comprised in the related Class of Notes listed above and do not represent additional obligations of the Issuer. Unless the context otherwise requires, all references to the Class D Notes
and the Subordinated Notes shall include the relevant Components comprised in the Class S1 Combination Notes.
The Notes will be issued and secured pursuant to a trust deed to be dated on or about 23 March 2007 (the “Trust Deed”) between (inter alios) the Issuer and The Law Debenture Trust
Corporation p.l.c. as trustee (the “Trustee”). The terms and conditions of the Notes (the “Conditions”) are set out herein under “Conditions of the Notes”. It is a condition of issuance of
the Notes that the Notes of each Class be issued concurrently. The Portfolio Collateral (as defined below) securing the Notes will be managed by Investec Principal Finance, a business
unit division of Investec Bank (UK) Ltd (the “Collateral Manager”).
It is a condition of the issue and sale of the Notes that the Class A Notes and the Class B Notes be issued with a rating of “AAA” from Fitch Ratings Limited (“Fitch” which term shall
include references to Fitch, Inc. and any subsidiaries including Derivative Fitch Inc. and Derivative Fitch Ltd) and “AAA” from Standard & Poor’s Ratings Group, a division of The
McGraw-Hill Companies, Inc. (“S&P” and, together with Fitch, the “Rating Agencies”), that the Class C Notes be issued with a rating of “AA” from Fitch and “AA” from S&P, that the
Class D Notes be issued with a rating of “A” from Fitch and “A” from S&P, that the Class E Notes be issued with a rating of “BBB-” from Fitch, that the Class F Notes be issued with a
rating of “BB-” from Fitch and that the Class S1 Combination Notes be issued with a rating of “A” from Fitch. The Class E Notes, the Class F Notes and the Class S1 Combination Notes
will not be rated by S&P. The Subordinated Notes will not be rated. The ratings assigned to the Class A Notes, the Class B Notes and the Class C Notes address the timely payment of
interest and the ultimate payment of principal. The ratings assigned to the Class D Notes, the Class E Notes and the Class F Notes address the ultimate payment of interest and the ultimate
payment of principal. The rating assigned to the Class S1 Combination Notes only addresses the ultimate receipt of the Rated Balance (as defined in Condition 1 (Definitions)). For the
purposes of such rating, any distribution received in respect of the Components will be considered to reduce the Rated Balance, as described more particularly in “Conditions of the Notes”
below. For the avoidance of doubt and for rating purposes only, once the Rated Balance has been reduced to zero, Fitch will deem the Rated Balance to have been redeemed and, in its
discretion, may not maintain a rating on the Class S1 Combination Notes beyond that point in time. 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 Agencies.
Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC (the “Prospectus Directive”) for this 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. It is anticipated that listing will take
place on or about the Closing Date. There can be no assurance that such listing will be granted. This Prospectus constitutes a prospectus for purposes of the Prospectus Directive.
The Class A Notes will bear interest at a floating rate equal to three month EURIBOR (or, in the case of the first Interest Accrual Period (as defined in the Conditions), a rate determined
through the use of linear interpolation by reference to 6 month EURIBOR and 7 month EURIBOR) plus 0.26 per cent. per annum, as provided herein. The Class B Notes will bear interest
at a floating rate equal to three month EURIBOR (or, in the case of the first Interest Accrual Period, a rate determined through the use of linear interpolation by reference to 6 month
EURIBOR and 7 month EURIBOR) plus 0.36 per cent. per annum, as provided herein. The Class C Notes will bear interest at a floating rate equal to three month EURIBOR (or, in the
case of the first Interest Accrual Period, a rate determined through the use of linear interpolation by reference to 6 month EURIBOR and 7 month EURIBOR) plus 0.47 per cent. per
annum, as provided herein. The Class D Notes will bear interest at a floating rate equal to three month EURIBOR (or, in the case of the first Interest Accrual Period, a rate determined
through the use of linear interpolation by reference to 6 month EURIBOR and 7 month EURIBOR) plus 0.71 per cent. per annum, as provided herein. The Class E Notes will bear interest
at a floating rate equal to three month EURIBOR (or, in the case of the first Interest Accrual Period, a rate determined through the use of linear interpolation by reference to 6 month
EURIBOR and 7 month EURIBOR) plus 1.90 per cent. per annum, as provided herein. The Class F Notes will bear interest at a floating rate equal to three month EURIBOR (or, in the
case of the first Interest Accrual Period, a rate determined through the use of linear interpolation by reference to 6 month EURIBOR and 7 month EURIBOR) plus 4.75 per cent. per
annum, as provided herein. The Subordinated Notes will pay interest at a fixed rate equal to 7.5 per cent. per annum, as provided herein. In addition, the Subordinated Notes will have the
benefits of residual interest payments. Such residual interest will be paid on an available funds basis. Interest on the Notes will accrue from the Closing Date (as defined below) and be
payable quarterly in arrear on the 28th day of March, June, September and December of each year (subject to adjustments for non-Business Days) (each a “Payment Date”), commencing
on 28 September 2007, in accordance with the Priorities of Payment described herein.
The Notes are offered by the Issuer through Bear, Stearns International Limited (the “Manager”). The Notes are offered when, as and if issued by the Issuer, subject to prior sale or
withdrawal, cancellation or modification of the offer without notice and subject to approval of certain legal matters by counsel and certain other conditions. It is expected that delivery of
the Notes will be made on or about 23 March 2007 (the “Closing Date”), against payment in immediately available funds. The Manager shall underwrite the 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.
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and may not be offered, sold, pledged, delivered or
otherwise transferred within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (“Regulation S”)) except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes (and any interest therein) are being offered and sold only
outside the United States to non-U.S. persons in compliance with Regulation S. The Notes will be in bearer form and are subject to United States tax law requirements.
See “Risk Factors” below for a description of certain factors which should be considered by prospective investors in connection with an investment in the Notes offered hereby.
This Prospectus is dated 23 March, 2007

CERTAIN SECURED ASSETS OF THE ISSUER ARE THE SOLE SOURCE OF PAYMENTS ON
THE NOTES. THE NOTES DO NOT REPRESENT OBLIGATIONS OF AND ARE NOT INSURED OR
GUARANTEED BY, ANY OF THE MANAGER, THE COLLATERAL MANAGER, THE
COLLATERAL ADMINISTRATOR, ANY ASSET SWAP COUNTERPARTY, THE AGENTS (EACH
SUCH PARTY AS DEFINED BELOW), THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES.
Save for the information contained in this document under the sections headed “Description of the Collateral
Manager” and “Description of the Collateral Administrator and the Account Bank”, the Issuer accepts
responsibility for the information contained in this document and to the best of the knowledge and belief of the
Issuer (who has taken all reasonable care to ensure that such is the case), such information is in accordance with
the facts and does not omit anything likely to affect the import of such information. The delivery of this
document at any time does not imply that the information contained in this document is correct at any time
subsequent to the date of this document.
The Collateral Manager accepts responsibility for the information contained in this document under the section
headed “Description of the Collateral Manager”. To the best of the knowledge and belief of the Collateral
Manager (who has taken all reasonable care to ensure that such is the case), such information is in accordance
with the facts and does not omit anything likely to affect the import of such information. The Collateral
Manager does not accept any responsibility for the accuracy and completeness of any other information
contained in this document. In addition, none of the Affiliates of the Collateral Manager accepts any
responsibility for the accuracy and completeness of any information contained in this document.
The Collateral Administrator and the Account Bank accept responsibility for the information contained in this
document under the section headed “Description of the Collateral Administrator and Account Bank”. To the
best of the knowledge and belief of the Collateral Administrator and the Account Bank (who have taken all
reasonable care to ensure that such is the case), such information is in accordance with the facts and does not
omit anything likely to affect the import of such information. The Collateral Administrator and the Account
Bank do not accept any responsibility for the accuracy and completeness of any other information contained in
this document.
Save for the sections in this document for which the Collateral Manager, the Collateral Administrator and the
Account Bank have taken responsibility, as described in the preceding paragraphs, none of the Manager, the
Trustee, the Collateral Manager, the Collateral Administrator, the Agents, any Asset Swap Counterparty, their
respective Affiliates or any other person (save for the Issuer as described above) has separately verified the
information contained in this document and accordingly none of the Manager, the Trustee, the Collateral
Manager, the Collateral Administrator, the Agents, any Asset Swap Counterparty, their respective Affiliates or
any other person (save for the Issuer as described above) makes any representation, recommendation or
warranty, express or implied, regarding the accuracy, adequacy, reasonableness or completeness of the
information contained in this document or in any further information, 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 Manager, the Trustee, the Collateral Manager, the Collateral Administrator, any Asset Swap
Counterparty, the Agents or any other party undertakes to review the financial condition or affairs of the Issuer
during the life of the arrangements contemplated by this document or to advise any investor or potential investor
in the Notes of any information coming to the attention of the Manager, the Trustee, the Collateral Manager, the
Collateral Administrator, any Asset Swap Counterparty or the Agents which is not included in this document.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF, OR AN INVITATION BY OR ON
BEHALF OF, THE ISSUER, THE MANAGER OR ANY OF THEIR AFFILIATES, THE COLLATERAL
MANAGER, THE COLLATERAL ADMINISTRATOR, THE TRUSTEE 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
AND THE MANAGER 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 WHO FALL WITHIN AN EXEMPTION SET FORTH IN THE FINANCIAL SERVICES
ii

AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 SO THAT SECTION 21(1) OF
THE FINANCIAL SERVICES AND MARKETS ACT 2000 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 “PLAN OF DISTRIBUTION” 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
DOCUMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORISED BY OR ON BEHALF OF THE ISSUER. THE
DELIVERY OF THIS DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION
CONTAINED IN IT IS CORRECT AS AT ANY TIME SUBSEQUENT TO ITS DATE.
EACH PURCHASER OF THE NOTES MUST COMPLY WITH ALL APPLICABLE LAWS AND
REGULATIONS IN FORCE IN EACH JURISDICTION IN WHICH IT PURCHASES, OFFERS OR SELLS
SUCH NOTES OR POSSESSES OR DISTRIBUTES THIS PROSPECTUS AND MUST OBTAIN ANY
CONSENT, APPROVAL OR PERMISSION REQUIRED FOR THE PURCHASE, OFFER OR SALE BY IT
OF SUCH NOTES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTIONS TO
WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES, AND
NONE OF THE ISSUER, THE MANAGER, THE COLLATERAL MANAGER (OR ANY OF THEIR
AFFILIATES), THE TRUSTEE, THE AGENTS OR THE COLLATERAL ADMINISTRATOR SPECIFIED
HEREIN SHALL HAVE ANY RESPONSIBILITY THEREFOR.
THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER APPLICABLE UNITED
STATES FEDERAL AND STATE SECURITIES LAWS. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT,
AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS USED IN THIS
PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. IN ADDITION, THE ISSUER WILL NOT BE REGISTERED UNDER THE U.S.
INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”).
THE NOTES ARE IN BEARER FORM AND ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS AND
MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR ITS
POSSESSIONS OR TO A UNITED STATES PERSON EXCEPT IN CERTAIN TRANSACTIONS
PERMITTED BY U.S. TAX REGULATION. TERMS USED IN THIS PARAGRAPH HAVE THE
MEANINGS GIVEN TO THEM BY THE U.S. INTERNAL REVENUE CODE AND REGULATIONS
THEREUNDER.
THE MANAGER HAS AGREED THAT, EXCEPT AS PERMITTED BY THE SUBSCRIPTION
AGREEMENT, IT WILL NOT OFFER, SELL OR DELIVER THE NOTES, (I) AS PART OF THEIR
DISTRIBUTION AT ANY TIME AND (II) OTHERWISE UNTIL 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING OR THE CLOSING DATE, WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, AND IT WILL HAVE SENT TO EACH
DEALER TO WHICH IT SELLS THE NOTES DURING THE DISTRIBUTION COMPLIANCE PERIOD,
AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT, A CONFIRMATION OR OTHER
NOTICE SETTING FORTH THE RESTRICTIONS ON OFFERS AND SALES OF THE NOTES WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS.
IN ADDITION, UNTIL 40 DAYS AFTER THE COMMENCEMENT OF THE OFFERING, AN OFFER OR
SALE OF THE NOTES WITHIN THE UNITED STATES BY A DEALER THAT IS NOT PARTICIPATING
iii

IN THE OFFERING MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.
FOR A DISCUSSION OF CERTAIN FACTORS REGARDING THE ISSUER AND THE NOTES THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES, SEE “RISK
FACTORS”.
SEE “PLAN OF DISTRIBUTION” AND “TRANSFER RESTRICTIONS” FOR CERTAIN TERMS AND
CONDITIONS OF THE OFFERING OF THE NOTES HEREUNDER.
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.
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 AND THE MANAGER 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 FOR
USE IN CONNECTION WITH THE OFFERING BY THE OFFEREE TO WHOM IT HAS BEEN
DELIVERED BY THE ISSUER, THE MANAGER OR ANY AFFILIATE THEREOF ONLY 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 OTHER DOCUMENTS RELATED HERETO AND
THERETO 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 THE MANAGER.
Unless otherwise specified, where the context requires references to “euro”, “Euro” and “€” are to the currency
introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty
establishing the European Community, as amended, references to “Sterling” and “£” are to the lawful currency
for the time being of the United Kingdom and references to “U.S. Dollars” and “$” are to the lawful currency
for the time being of the United States of America.
Where the context requires, references to “listing” should be taken to read “admission to trading”, for the
purposes of the Prospectus Directive.
IN CONNECTION WITH THIS OFFERING, BEAR, STEARNS INTERNATIONAL LIMITED 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 BEAR, STEARNS INTERNATIONAL
LIMITED WILL UNDERTAKE STABILISATION ACTION. ANY STABILISING ACTION MAY
BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE
TERMS OF THE OFFER OF THE RELEVANT CLASS OF 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 CLOSING DATE OF THE RELEVANT CLASS OF NOTES AND 60 DAYS AFTER THE
DATE OF THE ALLOTMENT OF THE RELEVANT CLASS OF NOTES.
NO STABILISATION ACTIVITIES WILL BE CARRIED OUT IN OR FROM THE NETHERLANDS.
This Prospectus has been prepared by the Issuer solely for use in connection with the offering of the Notes
described herein and may only be used for the purpose it is published.
iv

TABLE OF CONTENTS
Page
SUMMARY OF TERMS .........................................................................................................1
RISK FACTORS ....................................................................................................................20
CONDITIONS OF THE NOTES ...........................................................................................36
USE OF PROCEEDS ...........................................................................................................100
FORM OF THE NOTES ......................................................................................................101
BOOK-ENTRY CLEARANCE PROCEDURES.................................................................103
RATINGS OF THE NOTES ................................................................................................105
DESCRIPTION OF THE ISSUER.......................................................................................108
DESCRIPTION OF THE COLLATERAL MANAGER .....................................................110
DESCRIPTION OF THE COLLATERAL ADMINISTRATOR AND ACCOUNT
BANK .......................................................................................................................113
DESCRIPTION OF THE PORTFOLIO...............................................................................114
DESCRIPTION OF THE COLLATERAL MANAGEMENT AGREEMENT...................137
DESCRIPTION OF THE COLLATERAL ADMINISTRATION AGREEMENT .............139
DESCRIPTION OF THE HEDGING ARRANGEMENTS.................................................141
DESCRIPTION OF THE REPORTS ...................................................................................145
TAX CONSIDERATIONS...................................................................................................148
PLAN OF DISTRIBUTION.................................................................................................150
TRANSFER RESTRICTIONS.............................................................................................152
GENERAL INFORMATION...............................................................................................153
v

SUMMARY OF TERMS
This summary does not purport to be complete and is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and related documents referred to herein. Prospective
investors are advised to read carefully, and should rely solely on, the detailed information appearing elsewhere
in this document relating to the Notes in making their investment decision. Capitalised terms not specifically
defined in this summary have the meanings set out in Condition 1 (Definitions) under “Conditions of the
Notes”. References to a “Condition” or “Conditions” are to the specified Condition or Conditions in the
“Conditions of the Notes” below. For a discussion of certain risk factors to be considered in connection with
an investment in the Notes, see “Risk Factors”.
The Issuer:
Notes:
Pangaea ABS 2007-1 B.V., a private company with limited liability
(besloten vennootschap met beperkte aansprakelijkheid) incorporated under
the laws of The Netherlands for the sole purpose of acquiring the Portfolio,
issuing the Notes and engaging in certain related transactions, having its
registered office at Locatellikade 1, 1076 AZ, Amsterdam, The Netherlands
(the “Issuer”).
€220,000,000 Class A Floating Rate Notes due 2096 (the “Class A Notes”);
€16,000,000 Class B Floating Rate Notes due 2096 (the “Class B Notes”);
€18,000,000 Class C Floating Rate Notes due 2096 (the “Class C Notes”);
€22,000,000 Class D Deferrable Floating Rate Notes due 2096 (the “Class
D Notes”);
€16,000,000 Class E Deferrable Floating Rate Notes due 2096 (the “Class E
Notes”);
€5,000,000 Class F Deferrable Floating Rate Notes due 2096 (the “Class F
Notes” and, together with the Class E Notes, the Class D Notes, the Class C
Notes, the Class B Notes and the Class A Notes, the “Senior Notes”);
€12,200,000 Subordinated Notes due 2096 (the “Subordinated Notes”);
and
€5,000,000 Class S1 Combination Notes due 2096 (the “Class S1
Combination Notes”).
The Senior Notes, the Subordinated Notes and the Class S1 Combination
Notes are together referred to as the “Notes” and, each, a “Class” of Notes.
The initial principal amount outstanding of the Class S1 Combination Notes
will consist of €4,000,000 of the Class D Notes (the “Class S1/D
Component”) and €1,000,000 of the Subordinated Notes (the “Class
S1/Subordinated Component”). Each of the Class S1/D Component and
the Class S1/Subordinated Component are collectively referred to as
“Components” and are comprised in the related Class of Notes listed above
and do not represent additional obligations of the Issuer. Unless the context
otherwise requires, all references to the Class D Notes and the Subordinated
Notes shall include the relevant Components comprised in the Class S1
Combination Notes.
The Notes will be constituted by and issued pursuant to a trust deed (the
“Trust Deed”) between, amongst others, the Issuer and The Law Debenture
Trust Corporation p.l.c. as Trustee (as defined below) on or about 23 March
2007 (the “Closing Date”).
1

Collateral Manager:
Collateral Administrator:
Account Bank:
Trustee:
Asset Swap Counterparty:
Custodian:
Principal Paying Agent and
Agent Bank:
Irish Paying Agent:
Irish Listing Agent:
Use of Proceeds:
Investec Principal Finance, a business unit division of Investec Bank (UK)
Ltd (the “Collateral Manager”), will manage the Portfolio Collateral on
behalf of the Issuer pursuant to a collateral management agreement to be
entered into between, amongst others, the Issuer and the Collateral Manager
(the “Collateral Management Agreement”). Pursuant to the Collateral
Management Agreement, the Collateral Manager will, on behalf of the
Issuer, manage the selection, acquisition and disposition of the Portfolio
Collateral (including, without limitation, exercising rights and remedies
associated with the Portfolio Collateral). For a summary of certain of the
provisions of the Collateral Management Agreement and certain other
information concerning the Collateral Manager, see “Description of the
Collateral Management Agreement” and “Description of the Collateral
Manager”.
Certain administrative functions with respect to the Portfolio Collateral
including, without limitation, the calculation of the Coverage Tests, the
Additional Coverage Test, the Portfolio Profile Tests, the Collateral Quality
Tests and preparation of certain Reports (as defined herein) will be
performed by Law Debenture Asset Backed Solutions Limited (in such
capacity, the “Collateral Administrator”). For a summary of certain of the
provisions of the Collateral Administration Agreement and certain other
information concerning the Collateral Administrator, see “Description of the
Collateral Administration Agreement” and “Description of the Collateral
Administrator and Account Bank”.
The Issuer will enter into an agency agreement (the “Agency Agreement”)
with HSBC Bank plc (the “Account Bank”) and others on or about 22
March 2007. Under the terms of the Agency Agreement, the Account Bank
agrees to maintain all of the Accounts. The Account Bank will be required
to satisfy the applicable Required Ratings.
The Law Debenture Trust Corporation p.l.c., having its registered office at
Fifth Floor, 100 Wood Street, London EC2V 7EX in its capacity as trustee
under the Trust Deed (the “Trustee”) and each of its permitted successors or
assigns.
An Asset Swap Counterparty may be appointed by the Issuer at any time
after the Closing Date, provided that any such Asset Swap Counterparty
shall be required to satisfy the applicable Required Rating (the “Asset Swap
Counterparty”). See “Description of the Hedging Arrangements”.
HSBC Bank plc, acting through its office at 8 Canada Square, London E14
5HQ in its capacity as custodian (the “Custodian”). The Custodian shall be
required to satisfy the applicable Required Ratings.
HSBC Bank plc, acting through its office at 8 Canada Square, London E14
5HQ in its capacity as principal paying agent (the “Principal Paying
Agent”) and in its capacity as agent bank (the “Agent Bank”).
HSBC Institutional Trust Services (Ireland) Limited, acting through its
office at HSBC House, Harcourt Centre, Harcourt Street, Dublin 2, Ireland
(the “Irish Paying Agent”).
Arthur Cox Listing Service Limited, acting through its office at Earlsfort
Centre, Earlsfort Terrace, Dublin 2, Ireland (the “Listing Agent”).
The proceeds of the issue and offering of the Notes will be used by the
Issuer:
2

(a)
(b)
(c)
(d)
to acquire a portfolio consisting of a diversified pool of Asset
Backed Securities (including the entry into Asset Swap
Transactions) and Synthetic Securities satisfying the Eligibility
Criteria with an Aggregate Principal Balance of approximately
€185,000,000 (the “Initial Portfolio Collateral” and, together with
all other Asset Backed Securities and Synthetic Securities
purchased by the Issuer from time to time as described herein, the
“Portfolio Collateral”);
in payment into an account (the “Unused Proceeds Account”) on
the Closing Date of an amount expected as of such date to enable
the Issuer to purchase, after the Closing Date, Portfolio Collateral,
so that, together with the Initial Portfolio Collateral, there is on or
before 24 December 2007 (the “Effective Date”) an Aggregate
Principal Balance of Original Portfolio Collateral (as defined
below) equal to at least €300,000,000 (the “Required Portfolio
Collateral Balance”), which amount will be invested in Eligible
Investments (as defined below) pending the investment in
additional Original Portfolio Collateral (as defined below) on or
before the Effective Date;
in payment into an account (the “Expense Reimbursement
Account”) on the Closing Date of €70,000, which amount will be
available for payment from time to time of future expenses of the
Issuer pending receipt of amounts in respect of the Portfolio
Collateral; and
in the payment of certain other fees and expenses incurred in
connection with the issue and offering of the Notes. See “Use of
Proceeds”.
Portfolio Collateral purchased on or before the Effective Date, including the
Initial Portfolio Collateral, is referred to as “Original Portfolio Collateral”.
Portfolio Collateral purchased by the Issuer after the Effective Date is
referred to as “Additional Portfolio Collateral”. Portfolio Collateral
purchased by the Issuer with Sale Proceeds from other Portfolio Collateral is
referred to as “Substitute Portfolio Collateral”.
Accounts:
Form and Transfer of the
Notes:
For the purposes of the Notes, the Issuer shall, prior to the Closing Date,
establish with the Account Bank, the Principal Collection Account, the
Interest Collection Account, the Expense Reimbursement Account, the
Unused Proceeds Account, the Non-Euro Currency Account, the Semi
Annual Interest Smoothing Account and the Payment Account. The Issuer
may also open custody accounts with the Custodian in accordance with the
Agency Agreement. See Condition 3(i) (Accounts). The Issuer shall also
establish the Issuer Dutch Account.
The Notes of each Class will each be initially represented by a temporary
global note in bearer form without coupons (each, a “Temporary Global
Note” and, together, the “Temporary Global Notes”) which will be
deposited on or about the Closing Date with a common depositary for
Euroclear Bank S.A./N.V., as operator of the Euroclear System
(“Euroclear”), and Clearstream Banking, société anonyme (“Clearstream,
Luxembourg”). Each Temporary Global Note will be exchangeable (in
whole or in part) not earlier than 40 days after the Closing Date for a
permanent global note in bearer form without coupons (each, a “Permanent
Global Note” and, together, the “Permanent Global Notes” and, the
Temporary Global Notes and the Permanent Global Notes together, the
“Global Notes” and each a “Global Note”) upon certification as to non-
U.S. beneficial ownership. In certain limited circumstances, beneficial
3

interests in the Permanent Global Notes will be exchangeable for Notes in
definitive bearer form (“Definitive Notes”). Beneficial interests in Global
Notes may be held only through, and transfers thereof will only be effected
through, records maintained by Euroclear or Clearstream, Luxembourg at
any time. See “Form of the Notes” and “Book-Entry Clearance Procedures”.
Interests in any Global Note may not at any time be held by a U.S. Person
(as defined in Regulation S under the Securities Act).
The Components of the Class S1 Combination Notes form part of a single
security and are not separately transferable. However, a Class S1
Noteholder may exchange all or a proportionate amount of each Component
(subject to any minimum denomination requirements) for proportional
interests in the Notes relating to such Components; provided that all such
exchanges are in compliance with all transfer provisions and certifications
related to the Notes related to such Components as set out in the Trust Deed
and the Agency Agreement. Thereafter, a Class S1 Noteholder who has
exchanged the Components for the related Notes will be treated as a
Noteholder of the related Notes so exchanged. Upon such an exchange, the
Class S1 Noteholder will not subsequently be entitled to exchange the
interest in the Notes back into Components of the related Class S1
Combination Notes.
Transfers of interests in the Notes are subject to certain restrictions and must
be made in accordance with the procedures set forth in the Trust Deed. See
“Form of Notes”, “Book-Entry Clearance Procedures” and “Transfer
Restrictions”.
Authorised Denomination:
Payment Dates:
Interest:
The Notes of each Class (other than the Class S1 Combination Notes) will
be issued in denominations of €100,000. The Class S1 Combination Notes
will be issued in minimum denominations of €500,000.
Save as stated below in “Consequences of Non-Payment of Interest”, interest
in respect of the Notes of each Class will be payable quarterly in arrear on
the 28th day of March, June, September and December of each year (subject
to adjustment for non-Business Days) commencing on 28 September 2007
in accordance with the Conditions.
Interest is payable on the Notes at the following rates:
Class A Notes: Euro Interbank Offered Rate (determined as set out herein,
“EURIBOR”) for three months plus 0.26 per cent. per annum (the “Class A
Floating Rate of Interest”).
Class B Notes: Three month EURIBOR plus 0.36 per cent. per annum (the
“Class B Floating Rate of Interest”).
Class C Notes: Three month EURIBOR plus 0.47 per cent. per annum (the
“Class C Floating Rate of Interest”).
Class D Notes: Three month EURIBOR plus 0.71 per cent. per annum (the
“Class D Floating Rate of Interest”).
Class E Notes: Three month EURIBOR plus 1.90 per cent. per annum (the
“Class E Floating Rate of Interest”).
Class F Notes: Three month EURIBOR plus 4.75 per cent. per annum (the
“Class F Floating Rate of Interest”).
Subordinated Notes: Interest at the rate of 7.5 per cent. per annum (the
“Subordinated Fixed Rate of Interest”). In addition, to the extent that
4

there are available funds, the Subordinated Noteholders shall also be entitled
to additional interest (the “Subordinated Residual Interest”) payable on an
available funds basis out of Interest Proceeds, subject to prior payment in
accordance with the Priorities of Payment of certain fees and expenses and
interest payable in respect of each of the other Classes of Notes.
Class S1 Combination Notes: The rate of interest for the Components
comprising the Class S1 Combination Notes will be the rates of interest for
the Classes of Notes listed above to which the respective Components
correspond and the amount of interest payable on the Components
comprising the Class S1 Combination Notes will be payable on the same
terms as the Classes of Notes to which the respective Components
correspond. On each Payment Date on which payments of interest are made
in respect of any Class of Notes that has a corresponding Component, a
portion of such payment shall be allocated to the relevant Class S1
Combination Note of which that Component is a part, in the proportion that
the principal amount of such Component bears to the principal amount of
the related Class as a whole (including the Component for the purposes of
such calculation). No other interest payments will be made on the Class S1
Combination Notes.
For the purposes of making payments to the Class S1 Noteholders, the Class
S1 Combination Notes shall not be treated as a separate Class of Notes, but
the Components of the Class S1 Combination Notes will be treated as the
relevant Class of Notes to which such Components relate.
On each Payment Date on which any payments of interest are made in
respect of the Components that comprise the Class S1 Combination Notes,
the payment by the Issuer of such amounts will discharge the Issuer’s
obligation to make any payments under the Class S1 Combination Notes. No
other payments in respect of interest will be made on the Class S1
Combination Notes.
The interest amounts payable on any Payment Date will be calculated in
accordance with the provisions of Condition 6 (Interest) and the Priorities of
Payment.
Actions of Class S1
Noteholders:
The Class S1/D Component and the Class S1/Subordinated Component of
the Class S1 Combination Notes will be treated respectively as Class D
Notes and Subordinated Notes for the purposes of requests, demands,
authorisations, directions, notices, consents, waivers or other actions. The
Class S1 Noteholders shall be entitled to vote in respect of the Class S1/D
Component and the Class S1/Subordinated Component and will not
otherwise be entitled to vote.
Notwithstanding the above, interest payable on the Senior Notes and the
Class S1 Combination Notes in respect of the first Interest Accrual Period
commencing on and including the Closing Date up to but excluding the
Payment Date falling on or about 28 September 2007 shall be based on a
rate determined through the use of linear interpolation by reference to 6
month EURIBOR and 7 month EURIBOR.
Consequences of Non-
Payment of Interest:
Class A Notes, Class B Notes, Class C Notes and Class D Notes: Nonpayment
of interest in respect of any Class A Notes will (upon expiry of the
applicable grace period) constitute an Event of Default under the Notes,
following the occurrence of which the security over the Collateral may
become enforceable. Following redemption in full of the Class A Notes,
non-payment of interest in respect of the Class B Notes will (on expiry of
the applicable grace period) constitute an Event of Default, following the
occurrence of which the security over the Collateral may become
5

enforceable. Following redemption in full of the Class A Notes and the
Class B Notes, non-payment of interest in respect of the Class C Notes will
(on expiry of the applicable grace period) constitute an Event of Default,
following the occurrence of which the security over the Collateral may
become enforceable. Following redemption in full of the Class A Notes, the
Class B Notes and the Class C Notes, non-payment of interest in respect of
the Class D Notes will (on expiry of the applicable grace period) constitute
an Event of Default, following the occurrence of which the security over the
Collateral may become enforceable. To the extent that interest payments on
the Class B Notes or Class C Notes are not made on the relevant Payment
Date in circumstances where such non-payment does not constitute an Event
of Default as described above, such unpaid interest (together with interest
accrued on such unpaid interest which shall accrue, from and including such
Payment Date, at the rate and in accordance with the terms applicable to
interest payable on the Class of Notes to which such unpaid interest is
related) shall be paid on the immediately succeeding Payment Date in
accordance with the Priorities of Payment. To the extent that interest
payments on the Class D Notes are not made on the relevant Payment Date
in circumstances where such non-payment does not constitute an Event of
Default as described above, an amount equal to such unpaid interest (the
“Class D Deferred Interest”) will be added to the principal amount
outstanding of the Class D Notes, and with effect from and including such
Payment Date, interest will accrue on such unpaid amount at the rate of
interest applicable to the Class D Notes.
Class E Notes and Class F Notes: For so long as any of the Class A Notes,
the Class B Notes, the Class C Notes and the Class D Notes remain
outstanding, non-payment of interest on the Class E Notes and the Class F
Notes on the relevant Payment Date will not constitute an Event of Default
under the Class E Notes and the Class F Notes. To the extent that interest
payments on the Class E Notes and the Class F Notes are not made on the
relevant Payment Date in such circumstances, an amount equal to such
unpaid interest (respectively, the “Class E Deferred Interest” and the
“Class F Deferred Interest”) will be added to the principal amount
outstanding of the Class E Notes and the Class F Notes, respectively, and
with effect from and including such Payment Date, interest will accrue on
such unpaid amount at the rate of interest applicable to such Class of Notes.
Following redemption in full of the Class A Notes, the Class B Notes, the
Class C Notes and the Class D Notes, non-payment of interest on the Class
E Notes shall (on expiry of the applicable grace period) constitute an Event
of Default, following the occurrence of which the security over the
Collateral may become enforceable. Following redemption in full of the
Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and
the Class E Notes, non-payment of interest on the Class F Notes shall (on
expiry of the applicable grace period) constitute an Event of Default,
following the occurrence of which the security over the Collateral may
become enforceable.
Subordinated Notes: Non-payment of interest on the Subordinated Notes
will not constitute an Event of Default in any circumstance. To the extent
that payment of the Subordinated Fixed Rate of Interest is not made on the
relevant Payment Date in such circumstances, an amount equal to such
unpaid interest (the “Subordinated Deferred Interest”) will be added to
the principal amount outstanding of the Subordinated Notes, and with effect
from and including such Payment Date, interest will accrue on such unpaid
amount at the Subordinated Fixed Rate of Interest.
Class S1 Combination Notes: The non-payment of interest on the Class S1
Combination Notes will only affect such Notes to the extent that the
corresponding Components of the Class S1 Combination Notes are affected
6

as described above.
Principal Repayments:
Principal repayments on the Notes will be made in the following
circumstances, each as described in further detail below:
1. on their respective Maturity Dates (as defined herein);
2. upon breach of the Coverage Tests and, after the Reinvestment
Period, the Additional Coverage Test (each as defined herein);
3. during the Reinvestment Period, at the option of the Issuer, upon
failure to identify Additional Portfolio Collateral and Substitute
Portfolio Collateral;
4. on each Payment Date after the Reinvestment Period, out of all:
(i)
(ii)
Sale Proceeds;
Scheduled Principal Proceeds; and
(iii) Unscheduled Principal Proceeds received under the Portfolio
Collateral, to the extent that the Additional Reinvestment
Criteria are not satisfied;
5. upon the occurrence of an Event of Default;
6. upon optional redemption in full by the Subordinated Noteholders
after expiry of the Non-Call Period or upon the occurrence of a
Collateral Tax Event (being the imposition of withholding tax on
payments on the Portfolio Collateral above a specified threshold);
and
7. on each Payment Date after the Effective Date, in the event of an
Effective Date Rating Event.
Coverage Tests:
The coverage tests applicable to the relevant Classes of Senior Notes (being
the Class C Coverage Test, the Class D Coverage Test, the Class E
Coverage Test, the Class F Coverage Test and the Interest Coverage Test,
respectively (each as defined below and, together, the “Coverage Tests”))
will be used to determine primarily whether interest may be paid on certain
Classes of Notes and whether Principal Proceeds may be invested in
Additional Portfolio Collateral or Substitute Portfolio Collateral or must
instead be used to repay principal on the Notes to the extent necessary to
cause such Coverage Test to be met, each as provided in the Priorities of
Payment. Measurement of the degree of compliance with each of the
Coverage Tests will be required on each Measurement Date, including,
without limitation:
(a)
(b)
(c)
(d)
(other than in respect of the Interest Coverage Test) the Closing
Date;
the Effective Date;
each Determination Date after the Effective Date;
after the Effective Date, any day on which the purchase of
Additional Portfolio Collateral or Substitute Portfolio Collateral
occurs;
7

(e)
(f)
(g)
after the Effective Date, any day on which the sale, default or
prepayment of Portfolio Collateral occurs;
the date as of which any Report to Noteholders is prepared; and
upon request (by at least five Business Days’ notice) by any of the
Rating Agencies or by the Trustee at the direction of the holders of
at least 66⅔ per cent. of the Aggregate Principal Amount
outstanding of any Class of Notes.
The Coverage Tests are applicable until the Notes are redeemed in full and
all amounts payable in respect thereof are paid. Satisfaction or, in certain
cases, the maintenance or improvement, of the Coverage Tests is a condition
to the purchase of Additional Portfolio Collateral or Substitute Portfolio
Collateral and to the reinvestment of Sale Proceeds and other Principal
Proceeds.
The “Class C Coverage Test” will be satisfied as at any Measurement Date
if the Class C Overcollateralisation Ratio (as described below) is at least
equal to 110 per cent.
The “Class D Coverage Test” will be satisfied as at any Measurement Date
if the Class D Overcollateralisation Ratio (as described below) is at least
equal to 105 per cent.
The “Class E Coverage Test” will be satisfied as at any Measurement Date
if the Class E Overcollateralisation Ratio (as described below) is at least
equal to 100.5 per cent.
The “Class F Coverage Test” will be satisfied as at any Measurement Date
if the Class F Overcollateralisation Ratio (as described below) is at least
equal to 100.01 per cent.
The “Interest Coverage Test” is applicable on any Measurement Date
following, and including, the Effective Date until the Notes are redeemed in
full and all amounts payable in respect thereof are paid. The Interest
Coverage Test will be satisfied as at any such Measurement Date if the
Interest Coverage Ratio is at least equal to 101 per cent.
Measurement of Coverage Tests: Each of the Coverage Tests will be met as
at any applicable Measurement Date if the applicable ratios (determined as
described below) satisfy the requirements specified above. At any time that
any of the Notes are Outstanding, if any of the Class C Coverage Test, the
Class D Coverage Test, the Class E Coverage Test or the Class F Coverage
Test is not satisfied on any Determination Date after the Effective Date, a
mandatory redemption event will occur as described under Condition 7(c)
(Redemption upon Breach of Coverage Tests and Additional Coverage Test)
and funds standing to the credit of the Interest Collection Account and, to
the extent required, the Principal Collection Account will be applied on the
next Payment Date in reduction of the outstanding principal amount of the
Notes in accordance with the Priorities of Payment.
Class C Overcollateralisation Ratio: The Class C Overcollateralisation
Ratio is equal to the ratio (expressed as a percentage) obtained by dividing
(a) the Net Portfolio Collateral Balance (as defined in the Conditions) by (b)
the sum of the Aggregate Principal Amount of the Class A Notes, the Class
B Notes and the Class C Notes Outstanding.
Class D Overcollateralisation Ratio: The Class D Overcollateralisation
Ratio is equal to the ratio (expressed as a percentage) obtained by dividing
8

(a) the Net Portfolio Collateral Balance by (b) the sum of the Aggregate
Principal Amount of the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes Outstanding and any outstanding Class D
Deferred Interest.
Class E Overcollateralisation Ratio: The Class E Overcollateralisation
Ratio is equal to the ratio (expressed as a percentage) obtained by dividing
(a) the Net Portfolio Collateral Balance by (b) the sum of the Aggregate
Principal Amount of the Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes and the Class E Notes Outstanding and any
outstanding Class D Deferred Interest and Class E Deferred Interest.
Class F Overcollateralisation Ratio: The Class F Overcollateralisation
Ratio is equal to the ratio (expressed as a percentage) obtained by dividing
(a) the Net Portfolio Collateral Balance by (b) the sum of the Aggregate
Principal Amount of the Senior Notes Outstanding and any outstanding
Class D Deferred Interest, Class E Deferred Interest and Class F Deferred
Interest.
Interest Coverage Ratio: The Interest Coverage Ratio is equal to the ratio
(expressed as a percentage) obtained by:
Dividing
(a)
the amount which, on the relevant Measurement Date, is equal to
the sum of the following:
(i)
(ii)
(iii)
(iv)
the Balances standing to the credit of the Interest
Collection Account and the Expense Reimbursement
Account on such Measurement Date (and, for the
avoidance of doubt, for the purpose of calculating the
Interest Coverage Ratio to determine whether the
Interest Coverage Test would be satisfied after giving
effect to a proposed purchase, such Balances shall be
calculated as if such purchase had been made);
Scheduled Periodic Asset Swap Counterparty Payments
under any Asset Swap Transaction payable on or before
the Payment Date following the relevant Measurement
Date (to the extent not already taken into account in
paragraph (i) above);
projected interest payments not yet received on the
Portfolio Collateral in respect of the full Payment Period
in which such Measurement Date occurs, excluding (in
relation to such Payment Period): (A) interest on any
Defaulted Portfolio Collateral to be accrued and as yet
unpaid; (B) interest on any Accruing PIK Security to be
accrued and as yet unpaid; (C) any amounts expected to
be withheld at source or otherwise deducted in respect of
taxes; and (D) all accrued interest which the Collateral
Manager, acting on behalf of the Issuer, is aware that the
Issuer will not, or in the Collateral Manager’s reasonable
commercial judgement does not expect the Issuer to,
receive; and
the projected interest on the Balances standing to the
credit of the Principal Collection Account, the Interest
Collection Account, the Unused Proceeds Account, the
Semi Annual Interest Smoothing Account and the
9

Expense Reimbursement Account (including any portion
of principal payments on any Eligible Investments
purchased at a discount which represents interest) to the
extent not already taken into account in paragraph (i)
above, to be received in the full Payment Period in
which such Measurement Date occurs,
Minus
(v)
the sum for the related Payment Period of amounts due
and payable pursuant to paragraphs (A) to (F) inclusive
of Condition 3(c)(i) (Application of Interest Proceeds),
by
(b)
the aggregate of the Interest Amount on the Class A Notes, the
Class B Notes and the Class C Notes falling due for payment on the
following Payment Date.
Additional Coverage Test:
As provided for and in accordance with the Priorities of Payment, the
Additional Coverage Test will be used to determine (i) (during the
Reinvestment Period) whether interest may be paid on the Subordinated
Notes or instead must be used in part to purchase Additional Portfolio
Collateral and in part to redeem the Class F Notes, and (ii) (following the
Reinvestment Period) whether interest may be paid on the Subordinated
Notes or must instead be used to repay principal on the Notes, in each case
to the extent necessary to cause such Additional Coverage Test to be met.
Measurement of the degree of compliance with the Additional Coverage
Test will be required on each Measurement Date.
The Additional Coverage Test will be calculated on the same basis as the
Class F Coverage Test and will be satisfied (i) as at any Measurement Date
before the Payment Date falling in June 2013 if the Class F
Overcollateralisation Ratio is at least equal to 100.20 per cent. or (ii) as at
any Measurement Date on or after the Payment Date falling in June 2013, if
the Class F Overcollateralisation Ratio is at least equal to 100.35.
Final Maturity:
Interest Proceeds and
Principal Proceeds:
Priorities of Payment:
Security for the Notes:
The Notes will mature at their outstanding principal amount on the Payment
Date falling in December 2096 (the “Maturity Date”), in each case, unless
redeemed prior thereto. The average life of each of the Senior Notes is
expected to be shorter than the number of years until the Maturity Date. See
“Risk Factors”.
Interest Proceeds shall comprise, among other things, amounts received as
interest on the Portfolio Collateral and Principal Proceeds shall comprise,
among other things, principal repayments received on the Portfolio
Collateral.
Prior to enforcement of the security over the Collateral, Interest Proceeds
and Principal Proceeds received in respect of the Portfolio shall be applied
on each Payment Date from amounts standing to the credit of the Payment
Account on the Business Day prior to such date in accordance with
Condition 3(c)(i) (Application of Interest Proceeds) (the “Interest Proceeds
Priorities of Payment”) and Condition 3(c)(ii) (Application of Principal
Proceeds) (the “Principal Proceeds Priorities of Payment”), respectively.
The Notes will be secured by (inter alia):
(i)
a first fixed charge over and/or assignment by way of security of:
10

(a)
(b)
(c)
(d)
(e)
(f)
(g)
the Portfolio Collateral and any related security or
guarantee, including all moneys received in respect
thereof, all dividends and distributions paid or payable
thereon, all property paid, distributed or 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;
all rights of the Issuer in respect of the Accounts subject
to, in the case of the Counterparty Downgrade Collateral
Account, the rights of any Asset Swap Counterparty
pursuant to the terms of the related Asset Swap
Agreement;
all rights of the Issuer in respect of any Eligible
Investments;
the Issuer’s rights under the Agency Agreement;
the Issuer’s rights under any Asset Swap Agreement;
the Issuer’s rights under the Trust Deed, the Collateral
Acquisition Agreements, the Collateral Management
Agreement, the Collateral Administration Agreement and
each other Transaction Document; and
the Issuer’s rights in and to all money from time to time
held by the Principal Paying Agent or any other Agent for
the payment of principal or interest on the Notes; and
(ii)
a floating charge over the whole of the Issuer’s undertaking and
assets to the extent that such undertaking and assets are not subject
to any other security created by the Issuer above,
excluding, for the purpose of paragraphs (i) and (ii) above, (a) any and all
assets, property or rights which are located in, or governed by the laws of
The Netherlands (except for contractual rights or receivables (rechten of
vorderingen op naam), which are to be assigned or charged to the Trustee
pursuant to paragraphs (i) and (ii) above (or, if applicable, pledged to the
Trustee under the Pledge Agreement)), (b) any and all Dutch Ineligible
Securities, (c) the Issuer’s rights under the Management Agreement and (d)
any and all amounts standing to the credit of the Issuer Dutch Account ((i)
and (ii) together, the “Collateral”).
The Class S1 Combination Notes will be secured solely to the extent to
which the respective underlying Components comprising the Class S1
Combination Notes are secured.
Limited Recourse:
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. See Condition 3(c) (Priorities of
Payment) and Condition 11(b) (Enforcement). 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 any shortfall in such
proceeds, the Issuer will not be obliged to pay, and the other assets (if any)
of the Issuer (including the amounts standing to the credit of the Issuer
11

Dutch Account and the Issuer’s rights under the Management Agreement)
will not be available for payment of, any such shortfall, all claims in respect
of which shall be extinguished and shall not thereafter revive.
The Class S1 Combination Notes shall be limited recourse obligations of the
Issuer to the extent of their respective components.
Mandatory Redemption:
Redemption Upon Breach of Coverage Tests
If the Class C Coverage Test, the Class D Coverage Test or the Interest
Coverage Test is not met on any Measurement Date, on the Payment Date
following such Measurement 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 A Notes and, following
the redemption in whole thereof, to redeem the Class B Notes and, following
the redemption in whole thereof, to redeem the Class C Notes and, following
the redemption in whole thereof, to redeem the Class D Notes, until the
Class C Coverage Test, the Class D Coverage Test or the Interest Coverage
Test, as the case may be, is met if recalculated following such redemption.
If the Class E Coverage Test or the Class F Coverage Test is not met on any
Measurement Date, on the Payment Date following such Measurement 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 A Notes and, following the redemption in whole thereof, to
redeem the Class B Notes and, following the redemption in whole thereof, to
redeem the Class C Notes and, following the redemption in whole thereof, to
redeem the Class D Notes and, following redemption in whole thereof, to
redeem the Class E Notes and, following the redemption in whole thereof, to
redeem the Class F Notes until the Class E Coverage Test and the Class F
Coverage Test, respectively, is satisfied.
Redemption Upon Breach of Additional Coverage Test
Following the Reinvestment Period, if the Additional Coverage Test is not
satisfied on any Determination Date, on the Payment Date following such
Determination Date, (i) 35 per cent. of all remaining Interest Proceeds will
be used, subject to the Priorities of Payment, to the extent necessary and
available, to redeem the Class F Notes, and (ii) 65 per cent. will be used to
redeem the Class A Notes and, following the redemption in whole thereof,
to redeem the Class B Notes and, following the redemption in whole thereof,
to redeem the Class C Notes and, following the redemption in whole thereof,
to redeem the Class D Notes and, following the redemption in whole thereof
to redeem the Class E Notes and, following the redemption in whole thereof,
to redeem the Class F Notes, until the Additional Coverage Test is met.
Redemption upon Effective Date Rating Event
In the event of any of (i) the Effective Date Requirements not having been
satisfied as at the Effective Date; or (ii) the Initial Ratings of any of the
Notes being downgraded or withdrawn or (iii) either or both of the Rating
Agencies notifying the Collateral Manager, acting on behalf of the Issuer,
that such Rating Agency intends to reduce or withdraw any of its Initial
Ratings of the Notes, in the case of (ii) and (iii), upon request for
confirmation of the Initial Ratings by the Collateral Manager, acting on
behalf of the Issuer, following the Effective Date and 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 to be so confirmed or
12

einstated, all amounts standing to the credit of the Unused Proceeds
Account shall be applied as Principal Proceeds, together with, to the extent
required, Interest Proceeds and thereafter Principal Proceeds, in redemption
of the Notes in accordance with the Priorities of Payment on the next
following Payment Date and each subsequent Payment Date on which such
an Effective Date Rating Event is continuing, until Rating Agency
Confirmation is obtained.
In the event that the Effective Date Requirements are satisfied as at the
Effective Date, the amount remaining in the Unused Proceeds Account shall,
on the Business Day following the Effective Date, be transferred to the
Principal Collection Account.
Redemption upon Failure to Identify Additional Portfolio Collateral and
Substitute Portfolio Collateral during the Reinvestment Period
If the Collateral Manager determines during the Reinvestment Period that it
has been unable to identify suitable Additional Portfolio Collateral or
Substitute Portfolio Collateral in sufficient amounts to permit the investment
or reinvestment of all or a portion of any Sale Proceeds or other Principal
Proceeds received in respect of any Portfolio Collateral within two Payment
Periods (commencing with the Payment Period in which of such proceeds
were received), then such proceeds shall be applied in redemption of the
Notes in accordance with the Priorities of Payment on the Payment Date
immediately following the end of the second such Payment Period.
Optional Redemption:
Redemption at the Option of the Subordinated Noteholders
All (but not some only) of the Notes shall be redeemed, at their applicable
Redemption Prices, by the Issuer upon the occurrence of a Collateral Tax
Event or on any Payment Date falling on or after expiry of the Non-Call
Period in each case acting at the direction in writing of the holders of at least
66⅔ per cent. of the principal amount of Subordinated Notes Outstanding.
“Non-Call Period” means the period from the Closing Date to and
including the Payment Date falling in June 2011.
Redemption Prices upon Optional Redemption:
Class A Notes: 100 per cent. of the outstanding principal amount and any
accrued interest;
Class B Notes: 100 per cent. of the outstanding principal amount and any
accrued interest;
Class C Notes: 100 per cent. of the outstanding principal amount and any
accrued interest;
Class D Notes: 100 per cent. of the outstanding principal amount and any
accrued interest (including any outstanding Class D Deferred Interest);
Class E Notes: 100 per cent. of the outstanding principal amount and any
accrued interest (including any outstanding Class E Deferred Interest);
Class F Notes: 100 per cent. of the outstanding principal amount and any
accrued interest (including any outstanding Class F Deferred Interest); and
Subordinated Notes: in respect of each Subordinated Note, its pro rata
share (based on the proportion which the outstanding principal amount of
such Subordinated Note immediately prior to redemption thereof represents
13

the Aggregate Principal Amount of all Subordinated Notes Outstanding
immediately prior to such redemption) of the aggregate proceeds of
liquidation of the Collateral or realisation of the security thereover in such
circumstances remaining following redemption of each Class of Senior
Notes in full and final payment of all other amounts required to be paid in
priority thereto in accordance with the Priorities of Payment, in each case, in
accordance with the Priorities of Payment set out in Condition 11(b)
(Enforcement), together with interest accrued thereon to the date of
redemption. See Condition 7(b) (Optional Redemption).
Class S1 Combination Notes: The Class S1 Combination Notes will not be
separately redeemed and will only be redeemed to the extent their respective
Components are redeemed.
Each Component of the Class S1 Combination Notes will be redeemed by
allocation of payments in respect of the redemption of the Component to
which it relates.
On each Payment Date on which payments are made on the Class D Notes, a
portion of such payment will be allocated to the Class S1/D Component of
the Class S1 Combination Notes in the proportion that the principal amount
outstanding of the Class S1/D Component bears to the principal amount of
the Class D Notes Outstanding.
On each Payment Date on which payments are made on the Subordinated
Notes, a portion of such payment will be allocated to the Class
S1/Subordinated Component of the Class S1 Combination Notes in the
proportion that the principal amount outstanding of the Class
S1/Subordinated Component bears to the principal amount of the
Subordinated Notes Outstanding.
On each Payment Date on which any payments of principal are made in
respect of the Components that comprise the Class S1 Combination Notes,
the payment by the Issuer of such amounts will discharge the Issuer’s
obligation to make any payments under the Class S1 Combination Notes. No
other payments in respect of principal will be made on the Class S1
Combination Notes.
Principal Payment during the
Reinvestment Period:
Repayment after the
Reinvestment Period out of
Principal Proceeds:
Reinvestment Period:
Save in the circumstances referred to under Mandatory Redemption and
Optional Redemption above, principal will not be payable on the Notes
during the Reinvestment Period and Principal Proceeds will be used to
purchase Additional Portfolio Collateral and Substitute Portfolio Collateral
or will be held in the Principal Collection Account pending the acquisition
of such Additional Portfolio Collateral or Substitute Portfolio Collateral,
subject to the satisfaction of certain conditions. See “Description of the
Portfolio” below.
On each Payment Date following expiry of the Reinvestment Period, all
Principal Proceeds received in respect of the Portfolio Collateral, if any, will
be applied in redemption of the Class A Notes and, thereafter, in
redemption, of the Class B Notes and, thereafter, in redemption of the Class
C Notes and, thereafter, in redemption of the Class D Notes and, thereafter,
in redemption of the Class E Notes and, thereafter, in redemption of the
Class F Notes and, thereafter, in redemption of the Subordinated Notes
subject in each case to the Priorities of Payment and to the payment of all
prior ranking amounts. See Condition 7(f) (Redemption Following Expiry of
the Reinvestment Period).
The reinvestment period shall comprise the period from the Closing Date up
to and including the Payment Date falling in June 2013 (the “Reinvestment
14

Period”). During this period the Issuer shall be entitled to purchase (i)
Additional Portfolio Collateral from all Principal Proceeds received during
such period excluding Sale Proceeds and (ii) Substitute Portfolio Collateral
from Sale Proceeds during such period, subject to the satisfaction of certain
terms and conditions. Following the Reinvestment Period, Unscheduled
Principal Proceeds may be reinvested by the Collateral Manager (acting on
behalf of the Issuer) in Additional Portfolio Collateral, subject to satisfaction
of the Additional Reinvestment Criteria. See “Description of the Portfolio”
below.
Subordination:
Subject to the Priorities of Payment, both prior to and following
enforcement of the security over the Collateral:
• payments of interest on the Class B Notes, the Class C Notes, the
Class D Notes, the Class E Notes, the Class F Notes and the
Subordinated Notes are subordinated to interest payments in
respect of the Class A Notes;
• payments of interest on the Class C Notes, the Class D Notes, the
Class E Notes, the Class F Notes and the Subordinated Notes are
subordinated to interest payments in respect of the Class A Notes
and the Class B Notes;
• payments of interest on the Class D Notes, the Class E Notes, the
Class F Notes and the Subordinated Notes are subordinated to
interest payments in respect of the Class A Notes, the Class B
Notes and the Class C Notes;
• payments of interest on the Class E Notes, the Class F Notes and
the Subordinated Notes are subordinated to interest payments in
respect of the Class A Notes, the Class B Notes, the Class C Notes
and the Class D Notes;
• payments of interest on the Class F Notes and the Subordinated
Notes are subordinated to interest payments in respect of the Class
A Notes, the Class B Notes, the Class C Notes, the Class D Notes
and the Class E Notes;
• payments of interest on the Subordinated Notes are subordinated to
interest payments in respect of the Senior Notes;
• payments of principal on the Class B Notes, the Class C Notes, the
Class D Notes, the Class E Notes, the Class F Notes and the
Subordinated Notes are subordinated to principal payments in
respect of the Class A Notes;
• payments of principal on the Class C Notes, the Class D Notes, the
Class E Notes, the Class F Notes and the Subordinated Notes are
subordinated to principal payments in respect of the Class A Notes
and the Class B Notes;
• payments of principal on the Class D Notes, the Class E Notes, the
Class F Notes and the Subordinated Notes are subordinated to
principal payments in respect of the Class A Notes, the Class B
Notes and the Class C Notes;
• payments of principal on the Class E Notes, the Class F Notes and
the Subordinated Notes are subordinated to principal payments in
respect of the Class A Notes, the Class B Notes, the Class C Notes
15

and the Class D Notes;
• payments of principal on the Class F Notes and the Subordinated
Notes are subordinated to principal payments in respect of the
Class A Notes, the Class B Notes, the Class C Notes, the Class D
Notes and the Class E Notes; and
• payments of principal on the Subordinated Notes are subordinated
to principal payments in respect of the Senior Notes.
For the purposes of subordination, the Class S1 Combination Notes shall not
be treated as a separate Class of Notes, but rather the Components of the
Class S1 Combination Notes will be treated as Notes of the Classes to which
such Components relate and, therefore, the above description of
subordination will apply to each such Component.
Event of Default:
It will be an Event of Default under the Notes if any of the following events
occur:
• default for five Business Days or more in payment of interest when
due and payable on the Class A Notes or, following redemption in
full of the Class A Notes, on the Class B Notes or, following
redemption in full of the Class A Notes and the Class B Notes, on
the Class C Notes or, following redemption in full of the Class A
Notes, the Class B Notes and the Class C Notes, on the Class D
Notes or, following redemption in full of the Class A Notes, the
Class B Notes, the Class C Notes and the Class D Notes, on the
Class E Notes or, following redemption in full of the Class A
Notes, the Class B Notes, the Class C Notes, the Class D Notes and
the Class E Notes, on the Class F Notes;
• failure by the Issuer to disburse, out of available cash, any other
amount in accordance with the Priorities of Payment for five
Business Days or more;
• breach of other obligations of the Issuer under any Transaction
Document which continues for 30 Business Days after the Trustee
has been notified by the Issuer and the Trustee has given written
notice of it to the Issuer, certifying that the default is, in its opinion,
materially prejudicial to the interests of the Controlling Class at
such time;
• certain insolvency events relating to the Issuer;
• failure to pay any principal amount of the Notes when due and
payable; or
• illegality.
Eligible Investments:
Effective Date:
Amounts standing to the credit of the Accounts from time to time may be
invested by or on behalf of the Issuer in Eligible Investments (as defined in
Condition 1 (Definitions)).
24 December 2007 (or if such day is not a Business Day, the next following
Business Day), or in the event that the Collateral Manager, acting on behalf
of the Issuer, is able to purchase Portfolio Collateral the Aggregate Principal
Balance of which equals or exceeds the Required Portfolio Collateral
Balance prior to such date, the date the Collateral Manager declares that the
Effective Date has occurred, subject to certain conditions as set out in the
16

Collateral Management Agreement.
Ramp-Up Period:
Purchase of Portfolio
Collateral:
The period from the Closing Date to and including the Effective Date.
The Issuer will purchase a portfolio consisting of a diversified pool of Asset
Backed Securities and Synthetic Securities referenced to Asset Backed
Securities on, or prior to the Closing Date. The Issuer will purchase further
Asset Backed Securities and Synthetic Securities during the Ramp-Up
Period using amounts standing to the credit of the Unused Proceeds
Account. Subject to the terms and conditions described in this document and
the Collateral Management Agreement, the Issuer may also purchase
Additional Portfolio Collateral and Substitute Portfolio Collateral during the
Reinvestment Period. Following the Reinvestment Period, any Unscheduled
Principal Proceeds may be reinvested in Additional Portfolio Collateral,
subject to satisfaction of the Additional Reinvestment Criteria.
It is intended that the Aggregate Principal Balance of Original Portfolio
Collateral as at the end of the Ramp-Up Period will be €300,000,000.
The Portfolio Collateral purchased by or on behalf of the Issuer will be
required to satisfy the Eligibility Criteria and on the Effective Date, each of
the Coverage Tests, the Additional Coverage Test, the Portfolio Profile
Tests and the Collateral Quality Tests. The Portfolio Collateral purchased by
or on behalf of the Issuer during the Reinvestment Period will be required to
satisfy the Eligibility Criteria and may only be purchased if the
Reinvestment Criteria are complied with. These tests are required to be
satisfied (or, in certain cases, maintained or improved) on Measurement
Dates or Payment Dates after the Effective Date, to the extent applicable, as
otherwise described herein.
Management of Portfolio
Collateral:
The Collateral Manager will acquire the Portfolio Collateral (including all
Additional Portfolio Collateral and Substitute Portfolio Collateral) on behalf
of the Issuer and will monitor the performance and credit quality of the
Portfolio Collateral on an ongoing basis.
Sale of Portfolio Collateral: Subject to the terms of the Collateral
Management Agreement, the Collateral Manager, acting on behalf of the
Issuer, may (i) sell any Portfolio Collateral held by or on behalf of the Issuer
which is Defaulted Portfolio Collateral or Credit Risk Portfolio Collateral or
Appreciated Portfolio Collateral and (ii) provided that the Coverage Tests
are satisfied or maintained or improved as required by the Reinvestment
Criteria as at the immediately preceding Measurement Date, sell Portfolio
Collateral held by or on behalf of the Issuer, in addition to that referred to in
(i) above, provided that all such sales in any calendar year do not exceed 20
per cent. of the Aggregate Principal Balance of the Portfolio Collateral
during such calendar year, subject in each case to certain restrictions set out
in the Collateral Management Agreement. See “Description of the
Portfolio”.
Treatment of Sale Proceeds: The proceeds of any sale of Portfolio
Collateral in the circumstances provided above will be applied by the
Collateral Manager acting on behalf of the Issuer:
(a)
(b)
during the Reinvestment Period, in the acquisition of Substitute
Portfolio Collateral, subject to compliance with the Eligibility
Criteria, the Reinvestment Criteria and certain other conditions; and
following expiry of the Reinvestment Period, towards the
redemption of each Class of Notes in accordance with Priorities of
17

Payment, subject to payment of all prior ranking amounts.
Controlling Class:
Collateral Management:
Termination of the
Appointment of the
Collateral Manager:
The Controlling Class will be the Class A Noteholders; or, following
redemption and payment in full of the Class A Notes, the Class B
Noteholders; or, following redemption and payment in full of the Class B
Notes, the Class C Noteholders; or, following redemption and payment in
full of the Class C Notes, the Class D Noteholders; or, following redemption
and payment in full of the Class D Notes, the Class E Noteholders; or,
following redemption and payment in full of the Class E Notes, the Class F
Noteholders; or, following redemption and payment in full of the Class F
Notes, the Subordinated Noteholders; and, in each case, the Class S1
Combination Notes to the extent they include any Component representing
such Class of Notes.
The Collateral Manager will receive certain fees for its management
functions with respect to the Portfolio Collateral including, on each Payment
Date, a collateral management fee (the “Collateral Management Fee”)
calculated at a rate equal to 0.10 per cent. per annum of the Average
Collateral Balance on the basis of a 360 day year and the actual number of
days elapsed in the related Interest Accrual Period plus any applicable value
added tax payable thereon, subject always to the Priorities of Payment.
After the date falling 18 months from the Closing Date, the Collateral
Manager may be removed, without cause, subject to the appointment of a
successor collateral manager as described below, upon 90 days’ prior written
notice by the Issuer and the Trustee, either subject to the consent of, or
acting upon the direction of the holders of each Class of Notes, acting
independently as a Class of Noteholders, by way of Extraordinary
Resolution, excluding those Notes which the Trustee and/or the Collateral
Administrator is aware are held by the Collateral Manager or any of its
Affiliates. In circumstances where the Collateral Manager is removed
“without cause” then, for as long as Investec Principal Finance, a business
unit division of Investec Bank (UK) Ltd or one of its Affiliates is the
Collateral Manager, the Collateral Manager shall be entitled to the Collateral
Manager Termination Amount. See “Description of the Collateral
Management Agreement”.
The Collateral Manager may be removed, subject to the appointment of a
successor collateral manager as described below, for “cause” (as defined in
the Collateral Management Agreement) upon 10 days’ prior written notice
by the Issuer subject to the consent of or acting upon the direction of the
holders of the Controlling Class by way of Ordinary Resolution, excluding
those Notes which the Trustee and/or the Collateral Administrator is aware
are held by the Collateral Manager or any of its Affiliates) in the
circumstances described in the Collateral Management Agreement. See
“Description of the Collateral Management Agreement”.
The Collateral Manager may resign upon 90 days’ prior written notice to the
Issuer and the Trustee. No termination or resignation shall be effective
unless a successor has agreed in writing to assume all of the Collateral
Manager’s duties and obligations pursuant to the Collateral Management
Agreement and the Trustee has approved in writing such successor (subject
as provided in “Description of the Collateral Management Agreement”
below).
The Issuer will cause notice of any resignation or removal of the Collateral
Manager and the appointment of any successor to be given in accordance
with Condition 16 (Notices).
18

Under the terms of the Collateral Management Agreement, where Investec
Principal Finance, a business unit division of Investec Bank (UK) Ltd is the
Collateral Manager, in the event that four out of the six Key Persons cease
to be employed by the Collateral Manager or any of its Affiliates, the
Collateral Manager shall within 90 days following the occurrence of such
event hire a suitably qualified professional or professionals with experience
and expertise comparable to that of the relevant Key Persons. The failure by
the Collateral Manager to find a replacement or replacements for the Key
Persons who are no longer in the employment of the Collateral Manager or
any of its Affiliates after such 90 day period will constitute “cause” for
which the Collateral Manager may be removed. “Key Persons” means
Andy Clapham, Henrik Malmer, James Cuby, David Beadle, James Briggs
and Konstantine Pastras and any replacement from time to time and “Key
Person” means each or any of them (including any replacement). See
“Description of the Collateral Management Agreement”.
Asset Swaps and Non-Euro
Portfolio Collateral:
Tax Status:
Withholding Tax:
Eligible Purchasers:
Listing and Trading:
Governing Law and
Jurisdiction:
The Issuer may purchase Asset Backed Securities denominated in Sterling
and/or U.S. Dollars (each, an item of “Non-Euro Portfolio Collateral”)
provided that an Asset Swap Transaction is entered into in respect of each
item of Non-Euro Portfolio Collateral with one or more Asset Swap
Counterparties under which the currency risk arising from the receipt of cash
flows from the relevant Non-Euro Portfolio Collateral, including interest and
principal payments, is hedged. See “Description of the Portfolio – Non-
Euro Portfolio Collateral” and “Description of the Hedging Arrangements”.
See “Tax Considerations”.
All payments of principal and interest by the Issuer 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 The
Netherlands 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.
The Notes of each Class will be offered outside the United States to non-
U.S. Persons (as defined in Regulation S) in “offshore transactions” in
reliance on Regulation S.
Application has been made to the Irish Financial Services Regulatory
Authority, as competent authority under the Prospectus Directive for this
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. There is currently no market for such Notes and no
assurance can be given that such a market will develop.
The Notes and the Trust Deed will be governed by, and construed in
accordance with English law. The courts of England shall have jurisdiction
over any disputes or proceedings in connection with the Notes or the Trust
Deed.
19

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, 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 of the “Conditions of the Notes”.
1. GENERAL
1.1 General
It is intended that the Issuer will invest in Portfolio Collateral with certain risk characteristics as described below
and subject to the investment policies, restrictions and guidelines described in “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 Noteholders will receive the full amounts payable by the Issuer under the Notes or that they will receive
any payment in respect of their investment in the Notes. Prospective investors are therefore advised to review
this entire Prospectus carefully and should consider, among other things, the risk factors set out in this section
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 the position of such Class of Notes in the Priorities of Payment. See Condition 3(c)
(Priorities of Payment). In particular, payments in respect of the Class A Notes are higher in the Priorities of
Payment than those of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F
Notes and the Subordinated Notes. None of the Manager, the Trustee or the Collateral Administrator undertakes
to review the financial condition or affairs of the Issuer or the Collateral Manager 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 Manager, the Trustee or the Collateral Administrator which is not
included in 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 light of their
own circumstances and financial condition.
1.3 Limited Sources of Funds to Pay Expenses of the Issuer
The funds available to the Issuer to pay its expenses on any Payment Date are limited as provided in the
Priorities of Payment. If such funds are not sufficient to pay the expenses incurred by the Issuer, the ability of
the Issuer to operate effectively may be impaired, and it may not be able to defend or prosecute legal
proceedings brought against it or which it might otherwise bring to protect the interests of the Issuer or be able
to pay the expenses of legal proceedings against persons whom the Issuer has indemnified.
2. RELATING TO THE NOTES
2.1 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. Although the
Manager has advised the Issuer that it intends to make a market for the Notes, the Manager is not obliged to do
so, and any such market-making may be discontinued at any time without notice. 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 Noteholders with liquidity of investment or that it will continue for the life of such Notes.
Consequently, a purchaser must be prepared to hold such Notes for an indefinite period of time or until the
Maturity Date of such Notes. In addition, 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
20

transferees. See “Plan of Distribution” and “Transfer Restrictions”. Such restrictions on the transfer of the Notes
may further limit their liquidity.
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 the
Maturity Date of the Subordinated Notes.
2.2 Limited Recourse Obligations
The Notes are limited recourse obligations of the Issuer and are payable solely from amounts received in respect
of the Collateral securing the Notes. 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, or payable by,
the Issuer and to payment of principal and interest on prior ranking Classes of Notes. See Condition 4(c)
(Limited Recourse and Non-Petition). None of the Collateral Manager, the Noteholders of any Class, the
Manager, the Trustee, the Collateral Administrator, the Custodian, any Asset Swap Counterparty, any Agent or
any Affiliates of any of the foregoing or any other person or entity (other than the Issuer) will be obliged to
make payments on the Notes of any Class. Consequently, Noteholders must rely solely on distributions on the
Portfolio Collateral and other Collateral securing the Notes for the payment of principal, interest and premium,
if any, thereon. There can be no assurance that the distributions on the Portfolio Collateral and amounts received
under any Asset Swap Transactions or 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 certain other required
amounts to other creditors ranking senior to or pari passu with such Class pursuant to the Priorities of Payment.
If distributions on the Collateral are insufficient to make payments on the Notes, no other assets (and, in
particular, no assets of the Collateral Manager, the Noteholders, the Manager, the Trustee, the Collateral
Administrator, the Custodian, any Asset Swap Counterparty, any Agent or any Affiliates of any of the
foregoing) will be available for payment of the deficiency and following realisation of the Collateral and the
application of the proceeds thereof in accordance with the Priorities of Payment, the obligations of the Issuer to
pay such deficiency shall be extinguished. Such shortfall will be borne first by (a) the Subordinated
Noteholders, (b) thereafter, the Class F Noteholders, (c) thereafter, the Class E Noteholders, (d) thereafter, the
Class D Noteholders, (e) thereafter, the Class C Noteholders, (f) thereafter, the Class B Noteholders and finally
(g) the Class A Noteholders, in accordance with the Priorities of Payment.
In addition, at any time while the Notes are Outstanding, none of the Noteholders, the Trustee or any other
Transaction Creditors (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, reorganisation,
arrangement, insolvency, winding-up or liquidation proceedings or any proceedings for the appointment of a
liquidator or administrator or a similar bankruptcy 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 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 nor
shall any of them have a claim arising in respect of the issued share capital of the Issuer.
2.3 Subordination
No payments of interest will be made on the Class B Notes on any Payment Date until interest on the Class A
Notes has been paid. No payments of interest will be made on the Class C Notes on any Payment Date until
interest on the Class A Notes and the Class B Notes has been paid. No payments of interest will be made on the
Class D Notes on any Payment Date until interest on the Class A Notes, the Class B Notes and the Class C
Notes has been paid. No payments of interest will be made on the Class E Notes on any Payment Date until
interest on the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes has been paid. No
payments of interest will be made on the Class F Notes on any Payment Date until interest on the Class A Notes,
the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes has been paid. No payment of
Subordinated Fixed Rate of Interest will be made on the Subordinated Notes on any Payment Date until interest
on the Senior Notes has been paid. Subordinated Residual Interest is payable on an available funds basis and no
payment of Subordinated Residual Interest will be made until the payment of certain fees and expenses has been
made and until interest on the Senior Notes and the Subordinated Fixed Rate of Interest has been paid.
Other than in accordance with the redemption provisions of the Conditions and the Priorities of Payment, no
payment of principal on the Class B Notes will be made until the Class A Notes have been redeemed and repaid
in full; no payment of principal on the Class C Notes will be made until the Class A Notes and Class B Notes
21

have been redeemed and repaid in full; no payment of principal on the Class D Notes will be made until the
Class A Notes, the Class B Notes and the Class C Notes have been redeemed and repaid in full; no payment of
principal on the Class E Notes will be made until the Class A Notes, the Class B Notes, the Class C Notes and
the Class D Notes have been redeemed and repaid in full; no payment of principal on the Class F Notes will be
made until the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes
have been redeemed and repaid in full and no payment of principal on the Subordinated Notes will be made
until the Senior Notes have been redeemed and repaid in full.
Payments of principal and interest on the Notes are also subordinated to payment of certain expenses of the
Issuer and amounts payable to other Transaction Creditors as specified in the Priorities of Payment. 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, payments of interest on the Class D Notes, Class E
Notes, Class F Notes and Subordinated Notes may be deferred and interest will accrue on such amounts so
deferred to the extent there are insufficient Interest Proceeds and/or Principal Proceeds available to pay 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 more senior Classes of Notes remain Outstanding. Any such
deferral of interest will increase the effect of the subordination of the Subordinated Notes and of the Classes of
Notes in respect of which payment was deferred.
In the event of any redemption in full or acceleration of the Class A Notes, the other outstanding Classes of
Notes will also be subject to automatic redemption/acceleration and the Collateral will, in either case, be
liquidated. Liquidation of the Collateral at such time or remedies pursued by the Trustee upon enforcement of
the security over the Collateral could be adverse to the interests of the Class B Noteholders, the Class C
Noteholders, the Class D Noteholders, the Class E Noteholders, the Class F Noteholders and the Subordinated
Noteholders, as the case may be. To the extent that any losses are incurred by the Issuer in respect of any
Collateral, such losses will be borne first by the Subordinated Noteholders; then, by the Class F Noteholders,
then, by the Class E Noteholders; then, by the Class D Noteholders; then, by the Class C Noteholders; then, by
the Class B Noteholders; and, finally, by the Class A Noteholders. Remedies pursued by the Class A
Noteholders could be adverse to the interests of the Noteholders of each outstanding Class. Remedies pursued
by the Class B Noteholders could be adverse to the interests of the Class C Noteholders, the Class D
Noteholders, the Class E Noteholders, the Class F Noteholders and the Subordinated Noteholders. Remedies
pursued by the Class C Noteholders could be adverse to the interests of the Class D Noteholders, Class E
Noteholders, the Class F Noteholders and the Subordinated Noteholders. Remedies pursued by the Class D
Noteholders could be adverse to the interests of the Class E Noteholders, the Class F Noteholders and the
Subordinated Noteholders. Remedies pursued by the Class E Noteholders could be adverse to the interests of the
Class F Noteholders and the Subordinated Noteholders. Remedies pursued by the Class F Noteholders could be
adverse to the interests of the Subordinated Noteholders. The Subordinated Noteholders will not be able to
exercise any remedies following an Event of Default unless the Senior Notes have been redeemed and repaid in
full, nor will they receive any distribution until the Senior Notes and certain other amounts have been paid.
The Trust Deed provides that in the event of any conflict of interest any Class of Noteholders, the interests of
the Controlling Class will prevail. If the holders of the Controlling Class and one or more other Classes of Notes
do not have an interest in the outcome of the conflict, the Trustee shall give priority to the interests of the Class
A Noteholders over the Class B Noteholders, the Class B Noteholders over the interests of the Class C
Noteholders, the Class C Noteholders over the Class D Noteholders, the Class D Noteholders over the Class E
Noteholders, the Class E Noteholders over the Class F Noteholders, and the Class F Noteholders over the
interests of the Subordinated Noteholders, to the extent the holders of such Class are interested in the outcome
of such conflict. In the event that the Trustee shall receive conflicting or inconsistent requests from two or more
groups of the Controlling Class (or another Class given priority), the Trustee shall give priority to the group
which holds the greater amount of Notes Outstanding of such Class. The Trust Deed provides further that the
Trustee will act upon the directions of the Controlling Class (or any other Class given priority) in such
circumstances, and shall not be obliged to consider the interests of the holders of any other Class of Notes. See
Condition 14(d) (Entitlement of the Trustee and Conflicts of Interest).
Notwithstanding that the Notes of each Class at all times rank pari passu and without any preference among
themselves, should the Issuer exercise its right to purchase Notes in the open market pursuant to Condition 7(h)
(Purchase of Notes by the Issuer) the effect of such purchase by the Issuer will be that the holders of the Notes
22

eing so purchased will receive payment from the Issuer in priority to the holders of Notes of the same Class or
Classes of Notes who do not have their Notes purchased by the Issuer.
For the purposes of subordination, the Class S1 Combination Notes shall not be treated as a separate Class of
Notes, but rather the Components of the Class S1 Combination Notes will be treated as Notes of the Classes to
which such Components relate and, therefore, the above description of subordination will apply to each such
Component.
2.4 Amount and Timing of Payments
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 Portfolio Collateral 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 payments of the
principal and interest on the Portfolio Collateral will depend upon the detailed terms of the documentation
relating to each of the items of Portfolio Collateral and, in the case of a Synthetic Security, on whether or not
any Reference Entity thereunder defaults in its obligations.
There can be no assurance that the distributions on the Portfolio and other Collateral charged and assigned by
the Issuer to secure the Notes will be sufficient to enable the Issuer to make payments of interest and principal
on the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the
Subordinated Notes after making payments which rank senior to such payments pursuant to the Priorities of
Payment, including payments in respect of the Class A Notes (in the case of the Class B Notes, the Class C
Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Subordinated Notes), payments in
respect of the Class B Notes (in the case of the Class C Notes, the Class D Notes, the Class E Notes, the Class F
Notes and the Subordinated Notes), payments in respect of the Class C Notes (in the case of the Class D Notes,
the Class E Notes, the Class F Notes and the Subordinated Notes), payments in respect of the Class D Notes (in
the case of the Class E Notes, the Class F Notes and the Subordinated Notes), payments in respect of the Class E
Notes (in the case of the Class F Notes and the Subordinated Notes) and payments in respect of the Class F
Notes (in the case of the Subordinated Notes). The Issuer’s ability to make payments of interest and principal in
respect of the Class B Notes will be constrained by the terms of the Class A Notes and, in the case of the Class
C Notes, by the terms of the Class A Notes and the Class B Notes and, in the case of the Class D Notes, by the
terms of the Class A Notes, the Class B Notes and the Class C Notes and, in the case of the Class E Notes, by
the terms of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and, in the case of
the Class F Notes, by the terms of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes
and the Class E Notes and, in the case of the Subordinated Notes, by the terms of the Senior Notes, by the level
of distributions received in respect of the Portfolio Collateral and, in certain circumstances, by any interest rate
mismatch.
2.5 Prepayment upon Mandatory Redemption
If the Class C Coverage Test, the Class D Coverage Test and/or Interest Coverage Test is not satisfied on any
Measurement Date then, on the Payment Date following such Measurement 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 A Notes and, following redemption in full thereof, the Class B Notes, and,
following redemption in full thereof, the Class C Notes, and (in the case of the Class D Coverage Test),
following redemption in full thereof, the Class D Notes in each case on a pro rata basis until the Class C
Coverage Test, the Class D Coverage Test and Interest Coverage Test are each satisfied if recalculated
following such redemption. If the Class E Coverage Test is not satisfied on any Measurement Date then, on the
Payment Date following such Measurement 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 A Notes
and, following redemption in full thereof, the Class B Notes and, following redemption in full thereof, the Class
C Notes and, following redemption in full thereof, the Class D Notes and, following redemption in full thereof,
the Class E Notes, in each case on a pro rata basis until the Class E Coverage Test is met. If the Class F
Coverage Test is not satisfied on any Measurement Date then, on the Payment Date following such
Measurement 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 A Notes and, following redemption in full
thereof, the Class B Notes and, following redemption in full thereof, the Class C Notes and, following
redemption in full thereof, the Class D Notes and, following redemption in full thereof, the Class E Notes and,
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following redemption in full thereof, the Class F Notes, in each case on a pro rata basis until the Class F
Coverage Test is met.
If, during the Reinvestment Period, the Additional Coverage Test is not satisfied on any Determination Date
after the Effective Date, no interest will be paid on the Subordinated Notes and Interest Proceeds will be applied
in accordance with the Priorities of Payment in purchasing Additional Portfolio Collateral until the Additional
Coverage Test is met. If the Additional Coverage Test is not satisfied on any Determination Date after the
Reinvestment Period, no interest will be paid on the Subordinated Notes and a Mandatory Redemption event
will occur as described under Condition 7(c) (Redemption upon Breach of Coverage Tests and Additional
Coverage Test) and Interest Proceeds will be applied on the next Payment Date in redemption of the Notes in
accordance with the Priorities of Payment until the Additional Coverage Test is met.
Any such redemption of the Notes may result in a reduction in the amount of excess spread realisable in respect
of the Asset Backed Securities in the Portfolio which can be utilised to pay interest on the Notes in accordance
with the Priorities of Payment, which may result in the occurrence of an Event of Default, in the case of the
Class A Notes, the Class B Notes and the Class C Notes and/or the deferral of interest payable on each Payment
Date on the Class D Notes, the Class E Notes, the Class F Notes and the Subordinated Notes and/or a reduction
in the level of returns payable to the Subordinated Noteholders.
2.6 Optional Redemption and Market Volatility
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). 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 Portfolio Collateral may fluctuate, with,
among other things, changes in prevailing interest rates, foreign exchange rates, general economic conditions,
the conditions of financial markets, European and international political events, events in the home countries of
the obligors under the underlying assets on which the Portfolio Collateral is secured or as applicable any
Reference Entities or the countries in which their assets and operations are based, developments or trends in any
particular industry and the financial condition of such entities. A decrease in the market value of the Portfolio
Collateral would adversely affect the amount of proceeds which could be realised upon liquidation of the
Portfolio Collateral 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 Senior Notes and to the other creditors of the Issuer which rank in priority to the
holders of the Subordinated Notes pursuant to the Priorities of Payment.
2.7 Future Ratings of the Senior Notes Not Assured and Limited in Scope
A security rating is not a recommendation to buy, sell or hold securities 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 Senior Notes will remain for any given period of time or that a rating will not be lowered
or withdrawn entirely by a Rating Agency if, in its judgement, circumstances in the future so warrant. In the
event that a rating initially assigned to any of the Senior Notes is subsequently lowered for any reason, no
person or entity is required to provide any additional support or credit enhancement with respect to any such
Notes and the market value of such Notes is likely to be adversely affected.
2.8 Average Life and Prepayment Considerations
The Maturity Date of each Class of Notes is the Payment Date falling in December 2096 (subject to, in each
case, adjustment for Business Days); however, the principal of the Notes of each Class is expected to be paid in
full prior to their respective Maturity Dates. Average life refers to the average amount of time that will elapse
from the date of delivery 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 Portfolio Collateral (whether through sale, maturity, redemption, default or other
liquidation or disposition) which will be applied in redemption of the Notes following expiry of the
Reinvestment Period and whether any redemptions of the Notes occur following breach of any Coverage Test or
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the Additional Coverage Test, the occurrence of an Effective Date Rating Event or failure to identify Additional
or Substitute Portfolio Collateral during the Reinvestment Period (each as specified in Condition 7 (Redemption,
Purchase and Cancellation)). The actual average lives and actual maturities of the Notes will be affected by the
financial condition of the Reference Entities of the underlying Portfolio Collateral and the characteristics of such
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, the actual level of recoveries
on any Defaulted Portfolio Collateral and the timing of defaults and recoveries, and the frequency of tender or
exchange offers for such Portfolio Collateral. Any disposition of an item of Portfolio Collateral may change the
composition and characteristics of the Portfolio Collateral and the rate of payment thereon and, accordingly,
may affect the actual average lives of the Notes. The rate of and timing of future defaults and the amount and
timing of any cash realisation from Defaulted Portfolio Collateral also will affect the maturity and average lives
of the Notes as will the ability and discretion of the Collateral Manager (on behalf of the Issuer) to reinvest any
Principal Proceeds in the manner described under “The Portfolio - Management of the Portfolio” 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 their respective
Maturity Dates.
2.9 Volatility of the Subordinated Notes
The Subordinated Notes represent a leveraged investment in the underlying Portfolio Collateral. Accordingly, it
is expected that changes in the market value of the Subordinated Notes will be greater than changes in the
market value of the underlying items of Portfolio Collateral, which themselves are subject to credit, liquidity,
interest rate and other risks. Utilisation of leverage is a speculative investment technique and involves certain
risks to investors and will generally magnify the Subordinated Noteholders’ opportunities for gain and risk of
loss.
2.10 Net Proceeds less than Aggregate Principal 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 of the Notes. Consequently, it is
anticipated that on the Closing Date the proceeds of the liquidation of Collateral will be insufficient to redeem
the Notes upon the occurrence of an Event of Default on or about that date.
2.11 Withholding Tax on the Notes
Although no withholding tax is currently imposed on payments of interest on the Notes, there can be no
assurance that the law will not change. See “Tax Considerations”. If any withholding tax is imposed on
payments of interest on any Class of Notes, the Issuer will not “gross-up” payments to the holders of such Notes
and no Event of Default will occur as a result of any such withholding or deduction.
2.12 Resolutions, Amendments and Waivers
The Trust Deed includes provisions for the passing of Ordinary Resolutions and Extraordinary Resolutions of
the Noteholders in respect of (among any other matters) amendments to the Conditions of the Notes and/or the
Transaction Documents. Such provisions include, among other things, (i) quorum requirements for the holding
of Noteholders’ meetings and (ii) voting thresholds required to pass Ordinary Resolutions and Extraordinary
Resolutions at such meetings. The quorum required for a meeting of Noteholders of a Class (other than a
meeting previously adjourned through want of quorum) to pass an Ordinary Resolution or an Extraordinary
Resolution is two or more persons holding or representing, respectively, not less than 10 per cent. or more than
50 per cent. of the principal amount of the Notes of that Class Outstanding. In both cases, the quorum is less at a
meeting previously adjourned through want of quorum. The voting threshold at any Noteholders’ meeting in
respect of an Ordinary Resolution or an Extraordinary Resolution of all Noteholders is, respectively, 50 per cent.
or 66⅔ per cent. of the votes cast at the meeting. Accordingly, it is possible that, at any meeting of the
Noteholders, an Ordinary Resolution or an Extraordinary Resolution may be passed with less than 50 per cent.
or 66⅔ per cent. of all the Noteholders of each Class represented. See Condition 14 (Meetings of Noteholders,
Modification, Waiver and Substitution).
2.13 Enforcement Rights Following an Event of Default
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Following the occurrence of an Event of Default, the Trustee may, at its discretion, and shall, at the written
request of the Controlling Class of at least 66⅔ per cent. in Aggregate Principal Amount of the Notes of the
Controlling Class at such time or by Extraordinary Resolution of the Controlling Class, give notice to the Issuer
that all Notes are immediately due and payable following which the security over the Collateral shall become
enforceable and may be enforced either by the Trustee at its discretion or at the written request of the
Controlling Class of at least 66⅔ per cent. in Aggregate Principal Amount of the Notes of the Controlling Class
at such time or by Extraordinary Resolution of the Controlling Class.
This could result in the Controlling Class being able to procure enforcement of the security over the Collateral
in circumstances in which they desire such enforcement and in circumstances where the proceeds of liquidation
thereof would be insufficient to ensure payment in full of all the amounts due and payable in respect of the
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.
3. RELATING TO THE COLLATERAL
3.1 The Portfolio
The decision by any prospective holder of Notes to invest in such Notes should be based, among other things
(including, without limitation, the identity of the Collateral Manager), on the Eligibility Criteria which each item
of Portfolio Collateral is required to satisfy, as disclosed in this Prospectus and on the Portfolio Profile Tests,
Collateral Quality Tests, Coverage Tests and Additional Coverage Test that the Portfolio is required to satisfy as
at the Effective Date and thereafter. This Prospectus does not contain any information regarding the individual
items of Portfolio Collateral on which the Notes will be secured from time to time.
None of the Issuer or the Manager has made any investigation into the obligors of the Portfolio Collateral or
Reference Obligations under the Synthetic Securities. The value of the Portfolio Collateral may fluctuate from
time to time (as a result of substitution or otherwise) and none of the Issuer, the Trustee, the Manager, the
Custodian, the Collateral Manager, the Collateral Administrator, any Asset Swap Counterparty, any Agent or
any of their Affiliates is under any obligation to maintain the value of the Portfolio Collateral at any particular
level. None of the Issuer, the Trustee, the Custodian, the Collateral Manager, the Collateral Administrator, any
Asset Swap Counterparty, any Agent, the Manager 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 Portfolio Collateral 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 judgement and ability of the Collateral Manager in acquiring investments for purchase on
behalf of the Issuer over time. No assurance can be given that the Issuer will be successful in obtaining suitable
investments or that, if such investments are made, the objectives of the Issuer will be achieved.
3.2 Nature of Collateral
The Portfolio Collateral will consist primarily of Asset Backed Securities and Synthetic Securities the Reference
Obligations of which are Asset Backed Securities, which obligations are subject to credit, liquidity and interest
rate risk. To the extent that a default occurs with respect to any item of Portfolio Collateral, and the Collateral
Manager (on behalf of the Issuer) sells or otherwise disposes of such item of Portfolio Collateral, it is not likely
that the proceeds of such sale or disposition will be equal to the amount of principal and interest owing to the
Issuer in respect of such item of Portfolio Collateral.
Asset Backed Securities are securities that entitle the holders thereof to receive payments that depend primarily
on the cash flow from a specified pool of financial assets, either fixed or revolving, that by their terms convert
into cash within a finite time period, together with rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset Backed Securities.
The market value of the Portfolio Collateral generally will fluctuate with, among other things, the financial
condition of the obligors or issuers of the Portfolio Collateral and the underlying assets or, with respect to
Synthetic Securities, of the obligors or issuers of the Reference Obligations, general economic conditions, the
condition of certain financial markets, political events, developments or trends in any particular industry and
changes in prevailing interest rates.
26

Asset Backed Securities are often subject to extension and prepayment risks which may have a substantial
impact on the timing of their cashflows. The average life of each individual security may be affected by a large
number of factors such as structural features (including the existence and frequency of exercise of any optional
redemption, mandatory prepayment or sinking fund features), the prevailing level of interest rates, the actual
default rate of the underlying assets, the timing of recoveries and the level of rotation in the underlying assets.
As a result, no assurance can be made as to the exact timing of cashflows from the Portfolio Collateral or on the
Notes. This uncertainty may substantially affect the returns of each Class of Notes.
It is expected that substantially all of the Portfolio Collateral will consist of Asset Backed Securities that are
subordinate in right of payment and rank junior to other securities that are secured by or represent an ownership
interest in the same pool of assets. In addition, the underlying documentation for certain of such Asset Backed
Securities provides for the diversion of payments of interest and/or principal to more senior classes when the
delinquency or loss experience of the pool of assets underlying such Asset Backed Securities exceeds certain
levels or applicable overcollateralisation or interest coverage tests are not satisfied. In certain circumstances,
payments of interest on items of Portfolio Collateral may be reduced, deferred or eliminated for one or more
payment dates, which may adversely affect the ability of the Issuer to pay principal and interest in respect of the
Notes. As a result of the foregoing, such subordinated Asset Backed Securities have a higher risk of loss than
more senior classes of such securities. Additionally, as a result of the diversion of cash flow to more senior
classes, the average life of such subordinated Asset Backed Securities may lengthen. Subordinated Asset
Backed Securities generally do not have the right to trigger an event of default or vote on or direct remedies
following a default until the more senior securities are paid in full. As a result, a shortfall in payments to holders
of subordinated Asset Backed Securities will generally not result in a default being declared on the transaction
and the restructuring of the same. Finally, because subordinated Asset Backed Securities may represent a
relatively small percentage of the size of the asset pool being securitised, the impact of a relatively small loss on
the overall pool may be substantial on the individual Asset Backed Security.
A decrease in the market value of the Portfolio Collateral would adversely affect the Sale Proceeds that could be
obtained upon the sale of the Portfolio Collateral and could, ultimately, affect the ability of the Issuer to effect
an optional redemption of the Notes or pay the principal of the Notes upon a liquidation of the Portfolio
Collateral following the occurrence of an Event of Default.
3.3 Liquidity of Portfolio Collateral; Sale of Portfolio Collateral by Collateral Manager
The Collateral Manager, acting on behalf of the Issuer may, subject to satisfaction of certain conditions,
including the Reinvestment Criteria, sell Portfolio Collateral which is Credit Risk Portfolio Collateral, Defaulted
Portfolio Collateral and/or Appreciated Portfolio Collateral and, during the Reinvestment Period, other Portfolio
Collateral on a discretionary basis subject to a maximum amount (as further described in section 5.5
(Discretionary Sales) under “Description of the Portfolio” below) and, during the Reinvestment Period, may
reinvest the Sale Proceeds in Substitute Portfolio Collateral. Notwithstanding the conditions applicable to any
such sale and reinvestment set out in the Collateral Management Agreement, the exercise of such discretion by
the Collateral Manager will expose the Issuer to the market conditions prevailing at the time of such sale and/or
reinvestment which could, during periods of adverse market conditions, result in unfavourable changes in the
characteristics and quality of the Portfolio Collateral and may result in a decrease in the overall yield on the
Portfolio Collateral, adversely affecting the Issuer’s ability to make payments on the Notes. In addition, due to
the restrictions imposed by the Collateral Management Agreement on the Collateral Manager’s ability to sell
Portfolio Collateral and acquire Substitute Portfolio Collateral, the Collateral Manager may be unable to take
such action where it believes to do so would be in the best interests of the Issuer and the Noteholders. Some of
the Portfolio Collateral purchased by the Issuer may have no, or only a limited, trading market. The Issuer’s
investment in illiquid Portfolio Collateral would also restrict its ability to dispose of investments in a timely
fashion and for a fair price as well as its ability to take advantage of market opportunities. Illiquid Portfolio
Collateral may trade at a discount from comparable more liquid investments. In addition, the Issuer may invest
in privately placed Portfolio Collateral that may or may not be fully transferable under the laws of the applicable
jurisdiction or due to contractual restrictions on resale thereof.
3.4 Sale of Portfolio Collateral Upon Default of the Notes
A portion of the Portfolio Collateral will have interest rates that remain constant to maturity. Accordingly, their
market value will generally fluctuate with changes in market rates of interest. Such market value will also
generally fluctuate with, among other things, general economic conditions, world political events, developments
or trends in a particular industry related to the underlying obligations, the conditions of the financial markets
27

and the financial condition of the issuers, credit enhancers or underlying obligors with respect to the Portfolio
Collateral. Therefore, if an Event of Default occurs with respect to the Notes, there can be no assurance that the
proceeds of any sale by the Trustee of the Portfolio Collateral and other collateral securing the Notes will be
sufficient to pay in full the principal and interest on the Notes and amounts payable to the Trustee and other
parties.
3.5 Default and Recovery Rates on Portfolio Collateral
The subordination levels of each of the Classes of Notes will be established to withstand certain assumed
deficiencies in payment caused by defaults on the related Portfolio Collateral. There is no assurance that actual
losses will not exceed such assumed losses. If actual payment deficiencies exceed such assumed levels,
payments on the Notes could be adversely affected. Whether and by how much defaults on the Portfolio
Collateral 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 Portfolio Collateral is likely to be increased to the extent that the Portfolio Collateral 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. Subject to any confidentiality obligations binding on the
Issuer, Noteholders will receive notice from time to time of the identity of Portfolio Collateral which have
become Defaulted Portfolio Collateral.
To the extent that a default occurs with respect to any Portfolio Collateral and the Issuer or the Trustee (to the
extent it is permitted pursuant to the Transaction Documents) sells or otherwise disposes of such Portfolio
Collateral, 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 that it seeks recoveries upon the
default of any Portfolio Collateral. Even in the absence of a default with respect to any Portfolio Collateral, the
potential volatility and illiquidity of the markets for such Portfolio Collateral means that the current market
value of such Portfolio Collateral may be less than the market value of such Portfolio Collateral when initially
purchased and/or less than the current principal amount of such Portfolio Collateral. Accordingly, no assurance
can be given as to the amount of proceeds of any sale or disposition of such Portfolio Collateral 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.
There do not exist reliable sources of statistical information with respect to the default and recovery rates for the
type of securities represented by the Portfolio Collateral. The historical performance of a market is not
necessarily indicative of its future performance. Should increases in default rates or decreases in recovery rates
occur with respect to the type of assets underlying the Portfolio Collateral, the actual default or recovery rates of
the Portfolio Collateral may exceed (and may significantly exceed) or may be significantly less than, the
hypothetical default rates and recovery rates respectively.
PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSIDER AND DETERMINE FOR
THEMSELVES THE LIKELY LEVEL OF DEFAULTS AND THE LEVEL OF RECOVERIES ON THE
PORTFOLIO COLLATERAL DURING THE TERM OF THE TRANSACTION.
3.6 The Required Original Collateral Balance
The Issuer has entered into certain agreements to purchase a substantial portion of the Portfolio Collateral on or
prior to the Closing Date. The prices paid for such Portfolio Collateral will reflect the market value of such
Portfolio Collateral 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 entering
into a binding commitment to purchase, it is possible that such obligations may no longer satisfy such Eligibility
Criteria after entry into such binding commitment and therefore on 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 an item of Portfolio Collateral 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.
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3.7 Considerations Relating to the Ramp-up Period
During the Ramp-up Period, the Collateral Manager, acting on behalf of the Issuer, will seek to acquire Original
Portfolio Collateral in order to satisfy the Required Portfolio Collateral Balance and each of the Coverage Tests,
Collateral Quality Tests and Portfolio Profile Tests as at the Effective Date. See “The Portfolio”. The ability to
satisfy such tests and requirement will depend on a number of factors beyond the control of the Issuer and the
Collateral Manager, including the availability of obligations that satisfy the Eligibility Criteria and other
Portfolio related requirements in the Asset Backed Securities markets, the condition of the financial markets,
general economic conditions and international political events. Therefore, there can be no assurance that such
requirements will be met. In addition, the ability of the Issuer to enter into Asset Swap Transactions upon the
acquisition of Non-Euro Portfolio Collateral will also depend upon a number of factors outside the control of the
Issuer and the Collateral Manager, including its ability to identify a suitable Asset Swap Counterparty with
whom the Issuer may enter into Asset Swap Transactions. To the extent it is not possible to purchase such
Original Portfolio Collateral, the level of income receivable by the Issuer on the Collateral and therefore its
ability to meet its interest payment obligations under the Notes, together with the weighted average lives of the
Notes, may be adversely affected. Any failure by the Issuer to acquire such Original Portfolio Collateral or the
inability to enter into required additional Asset Swap Transactions could result in the non-confirmation,
downgrade or withdrawal by any Rating Agency of its Initial Rating of any Class of Notes. Such downgrade or
withdrawal may result in the redemption of the Notes and therefore reduce the leverage ratio of the
Subordinated Notes to the other Classes of Notes which could adversely affect the level of returns to the holders
of the Subordinated Notes. Any such redemption of the Notes may also adversely affect the risk profile of
Classes of Notes in addition to the Subordinated Notes to the extent that the amount of excess spread capable of
being generated in the transaction is reduced as the result of redemption of the most senior ranking Classes of
Notes in accordance with the Priorities of Payment which bear a lower rate of interest than the remaining
Classes of Senior Notes.
3.8 Synthetic Securities
In addition to the credit risks associated with Asset Backed Securities which are Reference Obligations under
Synthetic Securities, the Issuer will also be subject to the credit risk of the applicable Synthetic Security
Counterparty. The Issuer will usually have a contractual relationship with the relevant Synthetic Security
Counterparty only, and not with the Reference Entity of the Reference Obligation (in each case as defined in the
relevant Synthetic Security). The Issuer generally will have no right directly to enforce compliance by the
Reference Entity with the terms of the Reference Obligation nor any rights of set-off against the Reference
Entity, nor have any voting or other consensual rights of ownership with respect to the Reference Obligation.
The Issuer will not directly benefit from the 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. In addition,
in the event of the insolvency of the Synthetic Security Counterparty, the Issuer will be treated as a general
creditor of such Synthetic Security Counterparty, and will not have any claim with respect to the Reference
Obligation. Consequently, the Issuer will be subject to the credit risk of the Synthetic Security Counterparty as
well as that of the Reference Entity. As a result, concentrations of Synthetic Securities in any one Synthetic
Security Counterparty subject the Notes to an additional degree of risk with respect to defaults by such Synthetic
Security Counterparty as well as by the Reference Entity. Although the Collateral Manager will not perform
independent credit analyses of the Synthetic Counterparties on behalf of the Issuer, any such Synthetic Security
Counterparty, or an entity guaranteeing such Synthetic Security Counterparty, individually and in the aggregate
will be required to satisfy the applicable Required Ratings thereto. The Rating Agencies may downgrade any of
the Senior Notes if the Issuer is not in compliance with the Synthetic Security Counterparty Required Ratings
set forth herein. It is expected that the Manager and/or one or more of its Affiliates, with acceptable credit
support arrangements, if necessary, may act as Synthetic Security Counterparties with respect to all or a portion
of the Synthetic Securities, which may create certain conflicts of interest.
The Issuer expects that the returns on a Synthetic Security will generally reflect those of the related Reference
Obligation. However, as a result of the terms of the Synthetic Security and the assumption of the credit risk of
the applicable Synthetic Security Counterparty, a Synthetic Security may have a different expected 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 and credit exposures and non-credit related exposures to obligations of the issuer
other than the Reference Obligation relating thereto.
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Generally, upon the occurrence of certain specified credit events under a Synthetic Security relating to the credit
of the applicable Reference Entity, the relevant Synthetic Security will become repayable and its terms will
permit or require the Synthetic Security Counterparty to satisfy its repayment obligations under the Synthetic
Security in such circumstances by delivering to the Issuer a principal amount of Reference Obligations or other
Deliverable Obligations of the applicable Reference Entity in an amount equal to the original principal amount
of the applicable Synthetic Security. The market value of the Reference Obligations or other Deliverable
Obligations may be significantly less than the original principal amount of such Synthetic Security or, in certain
circumstances, equal zero. In such circumstances, the Issuer may be required upon a credit event to take delivery
of a non-Euro denominated obligation exposing the Issuer to exchange rate risk.
For the purposes of the above, “Deliverable Obligations” means an obligation referred to in a Synthetic
Security as the “Deliverable Obligation” which is deliverable upon termination prior to the scheduled maturity
thereof.
3.9 Counterparty Risk
Synthetic Securities and Asset Swap Transactions 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 counterparty in respect of any such
payments. Each such counterparty is required to have a rating of at least the applicable Required Ratings.
3.10 Concentration Risk
The Issuer will invest in Portfolio Collateral consisting, at the Closing Date, of Asset Backed Securities and
Synthetic Securities under which the Reference Obligations are Asset Backed Securities. The Portfolio Profile
Tests impose limits on the percentage of the Aggregate Collateral Balance that may consist of obligations of a
single issuer or obligations the assets under which are serviced or administered by the same entity.
Although no significant concentration with respect to any particular issuer, industry or country is expected to
exist at the Effective Date, the concentration of the Portfolio Collateral in any one issuer would subject the
Notes to a greater degree of risk with respect to defaults by such Reference Entity, and the concentration of the
Portfolio Collateral in any one industry or region could subject the Notes to a greater degree of risk with respect
to economic downturns relating to such industry or region.
3.11 Interest Rate Risk
Each Class of Senior Notes will bear interest at a floating rate based on three month EURIBOR described herein
(other than for the first Interest Accrual Period, which will be based on a rate determined through the use of
linear interpolation by reference to 6 month EURIBOR and 7 month EURIBOR). The Portfolio Collateral will
bear interest at floating rates of interest in amounts which will not necessarily correspond to the basis on which
interest is payable on the Senior Notes outstanding at any time. In addition, any payments of principal or interest
received in respect of Portfolio Collateral and not otherwise reinvested in Portfolio Collateral will generally be
invested in Eligible Investments until shortly before the next Payment 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.
3.12. Currency Risk
It is anticipated that on the Effective Date a portion of the Aggregate Principal Balance of Portfolio Collateral
will comprise Non-Euro Portfolio Collateral. The percentage of the Portfolio that is comprised of these types of
securities may increase or decrease over the life of the Notes. Notwithstanding that each item of Non-Euro
Portfolio Collateral is required to have an associated Asset 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 under any such Asset 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, notwithstanding that any sale proceeds
received will be converted at the Asset Swap Transaction Exchange Rate, such amounts may be reduced by any
termination payments payable by the Issuer in such circumstances. The Collateral Manager may also be limited
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at the time of reinvestment in its choice of Portfolio Collateral because of the cost of entry into such Asset Swap
Transactions and due to restrictions in the Collateral Management Agreement with respect thereto.
The Issuer’s ongoing payment obligations under such Asset Swap Transactions (including termination
payments) may be significant. The payments associated with such hedging arrangements generally rank senior
to payments on the Notes.
3.13 Insolvency Considerations relating to the Portfolio Collateral
The Portfolio Collateral and the assets securing the Portfolio Collateral may be subject to various laws enacted
for the protection of creditors in the jurisdictions of incorporation of the issuers or obligors thereunder (as the
case may be) and, if different, the jurisdictions from which the issuers, obligors or guarantors thereof conduct
their business and in which they hold their assets which may adversely affect the abilities of such issuers,
obligors or guarantors to make payment on a full or timely basis. These insolvency considerations will differ
depending on the country in which each issuer, obligor or guarantor or its assets is located.
3.14 Changes in Tax Law
Following acquisition of the Portfolio Collateral by the Issuer, payments of interest on the Portfolio Collateral
will be adversely affected if such payments are or become subject to any withholding tax imposed by the
relevant obligor, save to the extent that such obligor is obliged to make gross-up payments to the Issuer that
cover the full amount of such withholding tax or where such payments can be excluded from such withholding
tax by any operation of any applicable tax treaty and/or completion of any procedural formalities. There can be
no assurance that, as a result of any change in any applicable law, treaty, rule or regulation or interpretation
thereof, the payments on the Portfolio Collateral might not in the future become subject to withholding tax or
increased withholding rates in respect of which the relevant issuer 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 a double taxation
treaty between The Netherlands and the jurisdiction from which the relevant payment is made or any option to
redeem or terminate the relevant item of Portfolio Collateral in such circumstances. In the event that the Issuer
receives any interest payments on any Portfolio Collateral net of any applicable withholding tax, the Coverage
Tests will be determined by reference to such net receipts. Such tax would also reduce the amounts available to
make payments on the Notes. There can be no assurance that remaining payments on the Portfolio Collateral
would be sufficient to make timely payments of interest, principal on the respective Maturity Dates and other
amounts payable in respect of the Notes of each Class.
3.15 Collateral Manager
The Collateral Manager is given authority in the Collateral Management Agreement to act as collateral manager
to the Issuer in respect of the Portfolio pursuant to and 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 Manager in relation to the Portfolio include
acting on behalf of the Issuer in relation to (a) the acquisition of Collateral during the Reinvestment Period; and
(b) the sale of Collateral subject to certain limits or, at any time, upon the occurrence of certain events
(including Collateral becoming Defaulted Portfolio Collateral, Appreciated Portfolio Collateral or Credit Risk
Portfolio Collateral) in accordance with the provisions of the Collateral Management Agreement. Any analysis
by the Collateral Manager (on behalf of the Issuer) of items of Collateral which it is intending to purchase or
which are held by the Issuer from time to time, and the obligors thereunder, will be limited to a review of readily
available public information.
The performance of any investment in the Notes will be dependent in part on the ability of the Collateral
Manager to monitor the Portfolio and to manage the sale and acquisition of Collateral and on the performance of
the Collateral Manager of its obligations under the Collateral Management Agreement. The loss by the
Collateral Manager of key individuals could have a material adverse effect on the ability of the Collateral
Manager to perform its obligations under the Collateral Management Agreement.
Prior investment results and returns achieved for accounts managed by Investec Principal Finance, a business
unit division of Investec Bank (UK) Ltd are not necessarily indicative of the Issuer’s investment results. In
addition, the nature of, and risks associated with, the Collateral to be acquired by the Issuer may differ
materially from those investments and strategies undertaken historically by Investec Principal Finance, a
business unit division of Investec Bank (UK) Ltd, including by reason of the diversity and other parameters
31

equired by the Collateral Management Agreement. There can be no assurance that the Issuer’s investments will
perform in the same manner as the past investments for such accounts.
3.16 Projections, Forecasts and Estimates
Estimates of the weighted average lives of the Notes included herein, together with any projections, forecasts
and estimates provided to prospective purchasers of the Notes, are forward looking statements. Projections are
necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the
projections will not materialise or will vary significantly from actual results. Accordingly, the projections are
only an estimate. Actual results may vary from projections and the variations may be material.
Some important factors that could cause actual results to differ from those in any forward looking statements
include changes in interest rates, market, financial or legal uncertainties, the timing of acquisitions of the
Portfolio Collateral, differences in the actual allocation of the Portfolio Collateral among asset categories from
those assumed, mismatches between the timing of accrual and receipt of Interest Proceeds from the Portfolio
Collateral.
None of the Issuer, the Manager, the Collateral Manager, the Collateral Administrator, the Trustee, any Asset
Swap Counterparty, any Agent, the Account Bank or any of their respective Affiliates 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.
3.17 Custody of and Security over Portfolio Collateral
Portfolio Collateral held in Clearing Systems The Custodian will hold certain of the securities (a) through its
accounts with Euroclear or Clearstream, Luxembourg, as appropriate; and (b) through its sub-custodians who
will in turn hold items of Portfolio Collateral which are securities both directly and through DTC or any other
appropriate clearing system. Those securities held in clearing systems 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. See “Sub-custodian” below. A
first fixed charge over such Portfolio Collateral 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.
The items of Portfolio Collateral which are securities held by the Custodian on behalf of the Issuer through its
account with Euroclear will also be the subject of a commercial pledge under Belgian law created by the Issuer
pursuant to the 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 pledged account on behalf of the Trustee. The Pledge
Agreement will not entitle the Trustee to require delivery of the relevant securities from the depository or
depositories that have physical custody of such securities or allow the Trustee to rehypothecate such securities.
However, the charge created pursuant to the Trust Deed and the security created by the Pledge Agreement may
be insufficient or ineffective to secure the items of Portfolio Collateral which are securities for the benefit of
Noteholders, particularly in the event of any insolvency or liquidation of the Custodian or any sub-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. 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
Manager, the Collateral Manager, the Collateral Administrator or any other party.
In addition, custody and clearance risks may be associated with items of Portfolio Collateral 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.
Fixed Security Although the security constituted by the Trust Deed over the Portfolio Collateral and Eligible
Investments held from time to time, including the security over the Accounts is expressed to take effect as fixed
security, it may (as a result of the substitutions of Portfolio Collateral 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
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fixed security interest. However, the Issuer has covenanted not to create any such subsequent security interests
without the consent of the Trustee.
Governing law of Portfolio Collateral The Trust Deed is governed by English law. Some of the Portfolio
Collateral may be obligations governed by laws of jurisdictions other than England and which may require
different and/or additional procedures and/or documentation to create or perfect any security interest.
Sub-custodian The Custodian may appoint a sub-custodian (the “Sub-Custodian”) and delegate to the Sub-
Custodian such duties and powers as are, in the opinion of the Custodian, necessary or desirable for the Sub-
Custodian to fulfil some or all of the obligations and functions of the Custodian under the Agency Agreement.
Any Sub-Custodian appointed under the Agency Agreement shall be entitled to hold the Custodial Assets (as
defined in the Agency Agreement) in an omnibus account in the name of the Custodian. Such omnibus account
may contain (to the extent permitted by any applicable law, regulation and market practice) any other securities
held by the Sub-Custodian on behalf of the Custodian (irrespective of the ultimate beneficiary).
By the appointment of, and delegation of any of its duties and powers to, a Sub-Custodian, the Custodian shall
not be released or discharged from, and remains responsible for, the performance of such duties and powers by
any Sub-Custodian and any breach in the performance of such duties or powers by a Sub-Custodian shall be
treated as a breach by the Custodian.
3.18 Recent Developments in the United States Residential Mortgage Market May Adversely Affect
the Market Value of the Notes
The Collateral Manager may acquire Asset Backed Securities which include Sub-Prime Residential Mortgage
Securities. Recently, delinquencies, defaults and losses on residential mortgage loans in the United States have
increased and may continue to increase, which may affect the performance of Sub-Prime Residential Mortgage
Securities which are backed by sub-prime mortgage loans.
Sub-prime mortgage loans are generally made to borrowers with lower credit scores. Accordingly, the subprime
mortgage loans backing Sub-Prime Residential Mortgage Securities are more sensitive to economic
factors that could affect the ability of borrowers to pay their obligations under such underlying sub-prime
mortgage loans. Market interest rates have been increasing and accordingly, with respect to adjustable rate
mortgage loans and hybrid mortgage loans that have or will enter their adjustable-rate period, borrowers are
likely to experience increases in their monthly payments and become increasingly likely to default on their
payment obligations. Such risks may result in further increases in default rates by sub-prime borrowers as it
becomes more difficult for them to obtain refinancing. As sub-prime mortgage loans generally have higher
loan-to-value ratios, recoveries on defaulted mortgage loans are likely to deteriorate, resulting in higher net
losses than would have been the case had property values remained the same or increased.
In addition, structural features of Sub-Prime Residential Mortgage Securities may contribute to the impact of
increased delinquencies and defaults and lower recoveries on the underlying mortgage pool. For instance, the
amount of interest payable under Sub-Prime Residential Mortgage Securities which are structured to limit the
interest payable to investors under a weighted average coupon cap, might be reduced with the increased risk of
defaults and delinquencies in the underlying sub-prime mortgage pool. Furthermore, Sub-Prime Residential
Mortgage Securities may not be structured with significant or any overcollateralisation and, accordingly, will be
more sensitive to delays or reductions in payments, thereby affecting the level of recoveries for Sub-Prime
Residential Mortgage Securities, particularly in the case of subordinated tranches of such Sub-Prime Residential
Mortgage Securities.
These adverse changes in market conditions may reduce the cash-flow which the Issuer receives from Sub-
Prime Residential Mortgage Securities held by the Issuer (or Synthetic Securities that reference Sub-Prime
Residential Mortgage Securities), decrease the market value of such Sub-Prime Residential Mortgage Securities
and increase the incidence and severity of credit events under the related Synthetic Securities.
4. CERTAIN CONFLICTS OF INTEREST
The activities of the Collateral Manager, the Manager and their respective Affiliates may result in certain
conflicts of interest. The following briefing summarises some of these conflicts, but is not intended to be an
exhaustive list of all such potential conflicts.
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4.1 Conflicts of Interest Involving the Collateral Manager
Various potential and actual conflicts of interest may arise from the overall investment activities of the
Collateral Manager and its Affiliates. The Collateral Manager and its Affiliates may invest for their own
account, or for the account of others in debt obligations that would be appropriate as security for the Notes and
have no duty in making such investments to act in a way that is favourable to the Issuer or the holders of the
Notes. Such investments may be different from those made on behalf of the Issuer. Conflicts may arise
regarding the allocation of investment opportunities amongst the accounts of the Collateral Manager and its
Affiliates. Situations may occur where the Issuer could be disadvantaged because of the other investment
activities conducted by the Collateral Manager and its Affiliates. The Collateral Manager and its Affiliates and
their clients may have economic interests in or other relationships with issuers in whose obligations or securities
the Issuer may invest. In particular, such persons may make and/or hold an investment in an issuer’s securities
that may be pari passu, senior or junior in ranking to an investment in such issuer’s securities made and/or held
by the Issuer or in which partners, security holders, officers, directors, agents or employees of such persons
serve on boards of directors or otherwise have ongoing relationships. Each of such ownership and other
relationships may result in securities laws restrictions on transactions in such securities by the Issuer and
otherwise create conflicts of interest for the Issuer. In such instances, the Collateral Manager and its Affiliates
may in their discretion make investment recommendations and decisions that may be the same as or different
from those made with respect to the Issuer’s investments.
Although the principals and employees of the Collateral Manager will devote as much time to the Issuer as the
Collateral Manager deems appropriate, the principals and employees may have conflicts in allocating their time
and services among the Issuer and the Collateral Manager’s and its Affiliates’ other accounts. In addition, the
Collateral Manager and its Affiliates, in connection with their other business activities, may acquire material
non-public confidential information that may restrict the Collateral Manager from purchasing securities or
selling securities for itself or its clients (including the Issuer) or otherwise using such information for the benefit
of its clients (including the Issuer) or itself.
The Collateral Management Agreement places significant restrictions on the Collateral Manager. Accordingly,
during certain periods or in certain specified circumstances, the Collateral Manager may be unable to take
actions which it might consider to be in the best interests of the Issuer, as a result of the restrictions set out in the
Collateral Management Agreement.
As at the date of this Prospectus, the Collateral Manager and its Affiliates serve, and may in the future serve, as
a manager or adviser of corporations, limited partnerships and other companies organised to issue portfolio
collateralised debt obligations secured by any combination of Asset Backed Securities or other obligations or
securities. The Collateral Manager or any of its Affiliates may from time to time simultaneously seek to
purchase investments for the Issuer and any similar entity for which it serves as manager, or for its clients or
Affiliates. In addition, the Collateral Manager may purchase securities for the Issuer that are issued by persons
for which the Collateral Manager or its Affiliates act as investment adviser or manager.
Amounts payable to the Collateral Manager and/or any Hedge 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 (other
than any fees and expenses payable to the Collateral Manager on the Closing Date, as described under “Use of
Proceeds”), in each case as specified in the Conditions. In certain circumstances, such payment arrangements
could create a conflict of interest between the Collateral Manager and the holders of one or more Classes of
Notes.
On the Closing Date, Investec Bank (UK) Limited (“Investec”) and/or one or more of its Affiliates will acquire
49 per cent. of the principal amount of the Subordinated Notes. Investec and/or any fund, partnership, trust,
company or any entity with respect to which it acts as investment manager will not acquire or hold at any time,
directly or indirectly, more than 49 per cent. of the Principal Amount Outstanding of the Subordinated Notes. It
is the intention of Investec either to hold, directly or indirectly, or to have a fund, partnership, trust, company or
other entity with respect to which it acts as investment manager hold, a minimum average of 19.5 per cent. of
the Principal Amount Outstanding of the Subordinated Notes in any five year period until maturity or earlier
redemption, so long as Investec is the Collateral Manager. The interests of the holders of Subordinated Notes,
including the Collateral Manager, its Affiliates or accounts managed by the Collateral Manager, may be adverse
to the interests of the holders of the Senior Notes.
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4.2 Conflicts of Interest Involving the Manager
Certain of the items of Portfolio Collateral acquired by the Issuer on or after the Closing Date may consist of
obligations of issuers or obligors, or obligations sponsored or serviced by companies, for which the Manager or
an affiliate of the Manager has acted as underwriter, agent, placement agent or dealer or for which an affiliate of
the Manager has acted as lender or provided other commercial or investment banking services. The Manager or
one or more of its Affiliates may also act as counterparty with respect to one or more Synthetic Securities. In
addition, an Affiliate of the Manager may act as Asset Swap Counterparty under Asset Swap Transactions.
4.3 Purchase of Asset Backed Securities from the Collateral Manager or the Manager
Some of the Asset Backed Securities purchased by the Issuer on the Closing Date from the Collateral Manager
may have been originally acquired by the Collateral Manager in connection with the underwriting or placement
thereof. The Issuer will purchase Asset Backed Securities from the Manager or the Collateral Manager, in each
case, only to the extent the Collateral Manager determines that such purchases are consistent with the
investment guidelines and objectives of the Issuer, the restrictions contained in the Transaction Documents and
applicable law. In any event, all purchases of Portfolio Collateral from such entities will be on an arm’s length
basis.
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CONDITIONS OF THE NOTES
The following are the conditions (subject to amendment and completion) of each of the Class A Notes, the Class
B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Subordinated Notes
and the Class S1 Combination Notes, substantially in the form in which they will be endorsed on such Notes if
issued in definitive form and will be incorporated by reference into the Global Notes of each Class representing
the Notes subject to the provisions of such Global Notes, some of which will modify the effect of these
Conditions. See “Form of the Notes and Clearance Procedures - Amendments to Conditions”.
The issue of €220,000,000 Class A Floating Rate Notes due 2096 (the “Class A Notes”), €16,000,000 Class B
Floating Rate Notes due 2096 (the “Class B Notes”), €18,000,000 Class C Floating Rate Notes due 2096 (the
“Class C Notes”), €22,000,000 Class D Deferrable Floating Rate Notes due 2096 (the “Class D Notes”),
€16,000,000 Class E Deferrable Floating Rate Notes due 2096 (the “Class E Notes”), €5,000,000 Class F
Deferrable Floating Rate Notes due 2096 (the “Class F Notes” and, together with the Class A Notes, the Class
B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the “Senior Notes”), €12,200,000
Subordinated Notes due 2096 (the “Subordinated Notes”) and €5,000,000 Class S1 Combination Notes due
2096 (the “Class S1 Combination Notes” and, together with the Senior Notes and the Subordinated Notes, the
“Notes”) was authorised by a resolution of board of the Managing Directors of the Issuer on or around the date
of this Prospectus. The Notes are constituted by a trust deed (together with any other security document entered
into in respect of the Notes (including the Pledge Agreement), the “Trust Deed”) (expected to be dated on or
about 23 March 2007 (the “Closing Date”)) between, among others, the Issuer and The Law Debenture Trust
Corporation p.l.c., 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).
The initial principal amount outstanding of the Class S1 Combination Notes will consist of €4,000,000 of the
Class D Notes (the “Class S1/D Component”) and €1,000,000 of the Subordinated Notes (the “Class
S1/Subordinated Component”). Each of the Class S1/D Component and the Class S1/Subordinated
Component are collectively referred to as the “Components” and the initial principal amount of such
Components are included in the related Classes of Notes to which such Components relate and do not represent
additional obligations of the Issuer. Unless the context otherwise requires, all references to the Class D Notes
and the Subordinated Notes shall include the relevant Components comprised in the Class S1 Combination
Notes.
For the purposes of these Conditions and the Trust Deed, each Component of a Class S1 Combination Note shall
be deemed to be issued and remain outstanding whilst comprised in such Class S1 Combination Note, but
without any double counting of the principal amount of the Class S1 Combination Notes Outstanding in
determining the principal amount of the related Classes of Notes Outstanding.
These Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed (which
includes the forms of the Notes). The following agreements, among others, have been entered into in relation to
the Notes:
(a)
(b)
an agency agreement dated on or about 22 March 2007 (the “Agency Agreement”) between, inter
alios, the Issuer, HSBC Bank plc as principal paying agent (the “Principal Paying Agent”, which term
shall include any successor principal paying agent appointed pursuant to the terms of the Agency
Agreement), HSBC Bank plc as custodian (the “Custodian”, which term shall include any successor or
substitute Custodian approved pursuant to the terms of the Agency Agreement), HSBC Bank plc as
account bank (the “Account Bank”, which term shall include any successor or substitute Account
Bank approved pursuant to the terms of the Agency Agreement), HSBC Bank plc as agent bank (the
“Agent Bank”, which term shall include any successor Agent Bank approved pursuant to the terms of
the Agency Agreement), HSBC Institutional Trust Services (Ireland) Limited as paying agent in
Ireland (the “Irish Paying Agent”, which term shall include any successor or additional Irish paying
agent appointed pursuant to the terms of the Agency Agreement) and the Trustee;
a collateral management agreement dated on or about the Closing Date (the “Collateral Management
Agreement”) between Investec Principal Finance, a business unit division of Investec Bank (UK) Ltd
(the “Collateral Manager”, which term shall include any successor collateral manager appointed
pursuant to the terms of the Collateral Management Agreement) as Collateral Manager in respect of the
Portfolio (as defined in Condition 1 (Definitions)), the Issuer and the Trustee;
36

(c)
(d)
(e)
(f)
a collateral administration agreement dated on or about the Closing Date (the “Collateral
Administration Agreement”) between the Issuer, the Collateral Manager and Law Debenture Asset
Backed Solutions Limited as collateral administrator (the “Collateral Administrator”, which term
shall include any successor collateral administrator appointed pursuant to the terms of the Collateral
Administration Agreement) in respect of the Portfolio and the Trustee;
a management agreement dated on or about the Closing Date (the “Management Agreement”)
between Mrs Maria Chr. van der Sluijs-Plantz, Mrs Theresia F.C. Wijnen and Mr Hubertus P.C.
Mourits in their capacity as managing directors of the Issuer (the “Managing Directors”, which term
shall include any successor or substitute managing director appointed pursuant to the terms of the
Management Agreement) and the Issuer;
a subscription agreement entered into on or prior to the Closing Date (the “Subscription Agreement”)
between Bear, Stearns International Limited (the “Manager”) and the Issuer under which the Manager
has agreed to subscribe for the Notes; and
two collateral acquisition agreements entered into on or prior to the Closing Date (each, a “Collateral
Acquisition Agreement” and, together, the “Collateral Acquisition Agreements”) between,
respectively, (i) Investec Principal Finance, a business unit division of Investec Bank (UK) Ltd and the
Issuer and (ii) Bear, Stearns International Limited and the Issuer.
Copies of the Trust Deed, the Agency Agreement, the Collateral Management Agreement, the Collateral
Administration Agreement, the Management Agreement, the Subscription Agreement, any Asset Swap
Agreement and the Collateral Acquisition Agreements are available for inspection during usual business hours
at the registered office of the Issuer and the Principal Paying Agent. 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 Collateral Administration
Agreement and the Collateral Management Agreement applicable to them.
1. Definitions
The following definitions apply throughout these Conditions unless the context requires otherwise.
“Accounts” means the Interest Collection Account, the Principal Collection Account, the Unused Proceeds
Account, the Expense Reimbursement Account, the Issuer Dutch Account, the Payment Account, the Hedge
Termination Account, the Non-Euro Currency Account, the Custody Account, the Counterparty Downgrade
Collateral Account, the Semi Annual Interest Smoothing Account and “Account” means any of them.
“Account Bank” means HSBC Bank plc acting through its office at 8 Canada Square, London E14 5HQ or such
Person appointed as Account Bank under the Agency Agreement.
“Accruing PIK Security” means any PIK Security with respect to which rated interest has been deferred or
capitalised (either in part or in whole) for its last two payment dates, provided that any such PIK Security shall
remain an Accruing PIK Security only until such time as payment of rated interest on such PIK Security has
resumed and all deferred or capitalised interest has been paid in accordance with the terms of such PIK Security.
“Additional Coverage Test” means a test which is determined in the same manner as the Class F Coverage
Test and which will be satisfied (i) as at any Measurement Date before the Payment Date falling in June 2013 if
the Class F Overcollateralisation Ratio is at least equal to 100.2 per cent. or (ii) as at any Measurement Date on
or after the Payment Date falling in June 2013, if the Class F Overcollateralisation Ratio is at least equal to
100.35.
“Additional Portfolio Collateral” means any Portfolio Collateral purchased with amounts representing
Principal Proceeds, other than Sale Proceeds, and/or Interest Proceeds, as applicable, in accordance with the
terms of the Collateral Management Agreement.
“Administrative Expenses” means amounts due and payable by the Issuer to:
(a)
the independent accountants, agents and counsel of the Issuer, including amounts payable to the Agents
pursuant to the Agency Agreement;
37

(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
the Rating Agencies which may from time to time be requested to assign a rating to each of the Senior
Notes or a confidential credit estimate to any of the Portfolio Collateral, for fees and expenses in
connection with any such rating or confidential credit estimate, including any surveillance fees;
the Collateral Manager pursuant to the Collateral Management Agreement excluding any Collateral
Management Fee;
the Collateral Administrator pursuant to the Collateral Administration Agreement and Investec
Principal Finance, a business unit division of Investec Bank (UK) Ltd and Bear, Stearns International
Limited pursuant to each of the Collateral Acquisition Agreements;
the Managing Directors pursuant to the Management Agreement;
the Irish Stock Exchange or such other stock exchange or exchanges upon which any of the Notes are
listed from time to time;
any other Person in respect of any governmental fee or charge (but excluding any taxes payable to any
tax authority);
any other Person in respect of any fees, expenses or other amounts payable in connection with the
Notes or the sale thereof or following repayment of the Notes and/or the liquidation of the Issuer; and
the payment of any unpaid applicable value added tax required to be paid by the Issuer in respect of
any of the foregoing,
provided however, that “Administrative Expenses” shall not include any Trustee Fees and Expenses or
amounts due or accrued with respect to the actions taken on or in connection with the Closing Date which are
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 (a) above. For the purposes of this definition, control of a Person shall mean the
power, direct or indirect, whether by contract or otherwise (A) to vote more than 50 per cent. of the share capital
or similar rights of ownership or control of such Person; or (B) to direct or cause the direction of the
management and policies of such Person.
“Agents” means each of the Principal Paying Agent, the Irish Paying Agent, the Account Bank, the Agent Bank
and the Custodian and each of their permitted successors or assigns.
“Agent Bank” means HSBC Bank plc acting through its office at 8 Canada Square, London E14 5HQ or any
Person appointed as agent bank under the Agency Agreement.
“Aggregate Collateral Balance” means as at any Measurement Date, the aggregate of the following amounts,
as at such Measurement Date:
(a)
(b)
the Aggregate Principal Balance of all Portfolio Collateral, excluding Defaulted Portfolio Collateral
(save that, for the purpose of the Collateral Quality Test entitled “S&P CDO Rating Test”, the
Principal Balance of Defaulted Portfolio Collateral shall be included); and
the Balances standing to the credit of the Principal Collection Account, the Unused Proceeds Account
and the Non-Euro Currency Account (converted into euro at the applicable Asset Swap Transaction
Exchange Rate).
“Aggregate Principal Amount” means, when used with respect to any Class of Notes, as of any date of
determination, the original principal amount of such Class of Notes as reduced by all prior payments, if any,
made with respect to principal of such Notes; and when used with respect to the Notes in the aggregate, the sum
of the Aggregate Principal Amount of each Class of Notes, exclusive of Deferred Interest, save for the purposes
of interest accrual thereon pursuant to Condition 6(c) (Deferral of Interest).
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“Aggregate Principal Balance” means the aggregate of the Principal Balances of the Portfolio Collateral and,
when used with respect to one portion of the Portfolio Collateral, means the aggregate of the Principal Balances
of the specified items of Portfolio Collateral, in each case, as at the date of determination.
“Appreciated Portfolio Collateral” means any item of Portfolio Collateral which, in the Collateral Manager’s
reasonable commercial judgement, has significantly improved in credit quality, provided that a Synthetic
Security shall constitute an Appreciated Portfolio Collateral Security in the event that the Reference Obligation
to which such Synthetic Security is linked would constitute an Appreciated Portfolio Collateral if it were itself
an item of Portfolio Collateral.
“Asset Backed Security” means any asset backed security, which typically entitles the holder thereof to receive
payments that depend primarily on the cash flow from a specified pool of financial assets, either fixed or
revolving, that by their terms convert into cash within a finite time period, together with rights or other assets
designed to assure the servicing or timely distribution of proceeds to holders of such asset backed security.
“Asset Swap Agreement” means each 1992 ISDA Master Agreement (Multicurrency-Cross Border) or 2002
ISDA Master Agreement (or such other ISDA proforma Master Agreement as may be published by ISDA from
time to time), the schedule relating thereto entered into between the Issuer and an Asset Swap Counterparty,
including any guarantee thereof and any credit support annex entered into pursuant to the terms thereof (as
amended or supplemented from time to time) together with each confirmation setting out the terms of each
Asset Swap Transaction entered into thereunder from time to time (including any Replacement Asset Swap
Agreement).
“Asset Swap Counterparty” means any financial institution and any successor or permitted assignee thereto
which enters into an Asset Swap Transaction with the Issuer and which satisfies the applicable Required Ratings
and has the Dutch regulatory capacity to enter into derivatives transactions with residents of The Netherlands.
“Asset Swap Counterparty Principal Exchange Amount” means each interim and final principal exchange
amount scheduled to be paid to the Issuer by an Asset Swap Counterparty pursuant to the terms of an Asset
Swap Transaction, excluding any Scheduled Periodic Asset Swap Counterparty Payments.
“Asset Swap Counterparty Termination Payment” means any amount payable by an Asset Swap
Counterparty to the Issuer upon termination of an Asset Swap Transaction.
“Asset Swap Issuer Principal Exchange Amount” means each interim and final principal or exchange amount
paid by the Issuer to an Asset Swap Counterparty pursuant to the terms of an Asset Swap Transaction, excluding
any Scheduled Periodic Asset Swap Issuer Payments.
“Asset Swap Issuer Termination Payment” means any amount payable to an Asset Swap Counterparty by the
Issuer upon termination of an Asset Swap Transaction.
“Asset Swap Obligation” means an item of Non-Euro Portfolio Collateral and the related Asset Swap
Transaction.
“Asset Swap Replacement Payment” means any amount payable to an Asset Swap Counterparty by the Issuer
upon entry into a Replacement Asset Swap Agreement (or transaction thereunder) which is replacing an Asset
Swap Agreement (or transaction thereunder) which was terminated.
“Asset Swap Replacement Receipt” means any amount payable to the Issuer by an Asset Swap Counterparty
upon entry into a Replacement Asset Swap Agreement (or transaction thereunder) which is replacing an Asset
Swap Agreement (or transaction thereunder) which was terminated.
“Asset Swap Transaction” means, in respect of each Non-Euro Portfolio Collateral, each asset swap
transaction entered into in respect thereof on the terms described in the Collateral Management Agreement
under an Asset Swap Agreement (including any Replacement Asset Swap Transaction).
“Asset Swap Transaction Exchange Rate” means the exchange rate specified in each Asset Swap Transaction.
39

“Average Collateral Balance” means with respect to any Payment Date, the average of (i) the Aggregate
Collateral Balance on the first day of the Payment Period preceding such Payment Date; and (ii) the Aggregate
Collateral Balance on the Determination Date immediately preceding such Payment Date.
“B Grade Portfolio Collateral” means any item of Portfolio Collateral which has a public rating from Fitch of
“B+”, “B” or “B-” and which is not appended with a “DR”, or which has a public rating from S&P of “B+”, “B”
or “B-”, and which is not Low Grade Portfolio Collateral.
“BB Grade Portfolio Collateral” means any item of Portfolio Collateral which has a public rating from Fitch
of “BB+”, “BB” or “BB-” and which is not appended with a “DR”, or a public rating from S&P of “BB+”,
“BB” or “BB-” and is not B Grade Portfolio Collateral or Low Grade Portfolio Collateral.
“Balance” means on any date, with respect to each Account and any Eligible Investment therein, the aggregate
of:
(a)
(b)
(c)
(d)
the current balance of cash, demand deposits, time deposits, certificates of deposit, federal funds and
commercial bank money market accounts;
the outstanding principal amount of interest-bearing corporate and government securities, money
market accounts and repurchase obligations;
the current purchase price (but not greater than the face amount) of non-interest-bearing government
and corporate securities, commercial paper and certificates of deposit; and
the purchase price of repurchase obligations.
“Business Day” means (save to the extent otherwise defined):
(a)
(b)
a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System
(or any successor thereto) is operating credit or transfer instructions in respect of payments in euro; and
a day on which commercial banks and foreign exchange markets settle payments in London (other than
a Saturday or a Sunday or a public holiday).
“Class” or “Class of Notes” means each of the classes of Notes being: (a) the Class A Notes; (b) the Class B
Notes; (c) the Class C Notes; (d) the Class D Notes; (e) the Class E Notes; (f) the Class F Notes, (g) the
Subordinated Notes and (h) the Class S1 Combination Notes and “Class of Noteholders”, “Classes of Notes”
and “Classes of Noteholders” shall be construed accordingly.
“Class A Noteholders” means the holders of Class A Notes from time to time.
“Class A Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Class A Margin” has the meaning given thereto in Condition 6 (Interest).
“Class A Noteholders” means the holders of the Class A Notes from time to time.
“Class B Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Class B Margin” has the meaning given thereto in Condition 6 (Interest).
“Class B Noteholders” means the holders of Class B Notes from time to time.
“Class C Coverage Test” will be satisfied if, as at any Measurement Date, the Class C Overcollateralisation
Ratio is at least equal to 110 per cent.
“Class C Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Class C Noteholders” means the holders of the Class C Notes from time to time.
40

“Class C Overcollateralisation Ratio” means the ratio (expressed as a percentage) obtained by dividing (a) the
Net Portfolio Collateral Balance by (b) the sum of the Aggregate Principal Amount of the Class A Notes, the
Class B Notes and the Class C Notes Outstanding.
“Class D Coverage Test” will be satisfied if, as at any Measurement Date, the Class D Overcollateralisation
Ratio is at least equal to 105 per cent.
“Class D Deferred Interest” has the meaning given thereto in Condition 6(c) (Deferral of Interest).
“Class D Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Class D Margin” has the meaning given thereto in Condition 6 (Interest).
“Class D Noteholders” means the holders of the Class D Notes from time to time.
“Class D Overcollateralisation Ratio” means the ratio (expressed as a percentage) obtained by dividing (a) the
Net Portfolio Collateral Balance by (b) the sum of the Aggregate Principal Amount of the Class A Notes, the
Class B Notes, the Class C Notes and the Class D Notes Outstanding and any outstanding Class D Deferred
Interest.
“Class E Coverage Test” will be satisfied if, as at any Measurement Date, the Class E Overcollateralisation
Ratio is at least equal to 100.5 per cent.
“Class E Deferred Interest” has the meaning given thereto in Condition 6(c) (Deferral of Interest).
“Class E Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Class E Margin” has the meaning given thereto in Condition 6 (Interest).
“Class E Noteholders” means the holders of the Class E Notes from time to time.
“Class E Overcollateralisation Ratio” means the ratio (expressed as a percentage) obtained by dividing (a) the
Net Portfolio Collateral Balance by (b) the sum of the Aggregate Principal Amount of the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes Outstanding and any outstanding
Class D Deferred Interest and Class E Deferred Interest.
“Class F Coverage Test” will be satisfied if, as at any Measurement Date, the Class F Overcollateralisation
Ratio is at least equal to 100.01 per cent.
“Class F Deferred Interest” has the meaning given thereto in Condition 6(c) (Deferral of Interest).
“Class F Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Class F Margin” has the meaning given thereto in Condition 6 (Interest).
“Class F Noteholders” means the holders of the Class F Notes from time to time.
“Class F Overcollateralisation Ratio” means the ratio (expressed as a percentage) obtained by dividing (a) the
Net Portfolio Collateral Balance by (b) the sum of the Aggregate Principal Amount of the Senior Notes
Outstanding and any outstanding Class D Deferred Interest, Class E Deferred Interest and Class F Deferred
Interest.
“Class S1 Combination Notes” means the €5,000,000 Class S1 Combination Notes due 2096 to be issued by
the Issuer and consisting of a Class S1/D Component and a Class S1/Subordinated Component and, unless
expressly stated to the contrary, all references to the Class S1 Combination Notes shall be a reference to such
Class S1 Combination Notes whether in global form or definitive form.
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“Class S1/D Component” means, in respect of the Class S1 Combination Notes, a component thereof, the terms
and conditions applicable to which are the same as €4,000,000 in original principal amount of the Class D
Notes.
“Class S1 Noteholders” means the holders of the Class S1 Combination Notes from time to time.
“Class S1/Subordinated Component” means, in respect of the Class S1 Combination Notes, a component
thereof, the terms and conditions applicable to which are the same as €1,000,000 in original principal amount of
the Subordinated Notes.
“Clearing Systems” means Euroclear and Clearstream, Luxembourg.
“Clearstream, Luxembourg” means Clearstream Banking, société anonyme.
“Closing Date” means the date on which the Notes are issued pursuant to the terms of the Trust Deed or such
later date as may be agreed between the Issuer and the Manager and notified to the Noteholders in accordance
with Condition 16 (Notices).
“Collateral” means the property, assets, interests and benefits described in Condition 4(a) (Security) which are
charged and/or assigned to the Trustee from time to time for the benefit of the Secured Parties pursuant to the
Trust Deed or the Pledge Agreement.
“Collateral Administrator” means Law Debenture Asset Backed Solutions Limited acting through its office at
Fifth Floor, 100 Wood Street, London EC2V 7EX, or such Person appointed as Collateral Administrator under
the Collateral Administration Agreement.
“Collateral Management Fee” means with respect to any Payment Date the fee payable to the Collateral
Manager in an amount equal to 0.10 per cent. per annum of the Average Collateral Balance relating to such
Payment Date, calculated on the basis of a 360 day year and the actual number of days elapsed in the related
Interest Accrual Period.
“Collateral Manager” means Investec Principal Finance, a business unit division of Investec Bank (UK) Ltd.
“Collateral Manager Termination Amount” means the amount, determined pursuant to the Collateral
Management Agreement, payable to the Collateral Manager in respect of the termination of its services under
the Collateral Management Agreement without cause (together with any applicable value added tax thereon
whether payable to the Collateral Manager or directly to the relevant taxing authority).
“Collateral Quality Tests” means:
(a)
so long as any Notes rated by Fitch are Outstanding:
(i)
(ii)
the Fitch Weighted Average Rating Factor Test; and
the Fitch Weighted Average Recovery Rate Test;
(b)
so long as any Notes rated by S&P are Outstanding:
(i)
(ii)
as of the Effective Date and until the end of the Reinvestment Period, the S&P CDO Rating
Test; and
the S&P Weighted Average Recovery Rate Test; and
(c)
so long as any Notes are Outstanding:
(i)
(ii)
the Weighted Average Life Test;
the Weighted Average Spread Test; and
42

(iii)
the Bivariate Risk Test,
each as defined in the Collateral Administration Agreement.
“Collateral Tax Event” has the meaning given thereto in Condition 7(b)(i)(Redemption at the Option of the
Subordinated Noteholders).
“Component” means any of the Class S1/D Component and/or the Class S1/Subordinated Component in
respect of the Class S1 Combination Notes and “Components” means all of them.
“Conditions” means these terms and conditions, being the terms and conditions of the Senior Notes and the
Subordinated Notes.
“Controlling Class” means the holders of the Class A Notes; or, following redemption and payment in full of
the Class A Notes, the holders of the Class B Notes; or, following redemption and payment in full of the Class A
Notes and the Class B Notes, the holders of the Class C Notes; or, following redemption and payment in full of
the Class A Notes, the Class B Notes and the Class C Notes, the holders of the Class D Notes; or, following
redemption and payment in full of the Class A Notes, the Class B Notes, the Class C Notes and the Class D
Notes, the holders of the Class E Notes; or, following redemption and payment in full of the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the holders of the Class F Notes; or,
following redemption and payment in full of the Senior Notes, the holders of the Subordinated Notes; and, in
each case, the Class S1 Combination Notes to the extent they include any Component representing such Class of
Notes.
“Counterparty Downgrade Collateral” means any cash and/or securities delivered to the Issuer as collateral
for the obligations of any Asset Swap Counterparty under an Asset Swap Agreement.
“Counterparty Downgrade Collateral Account” means one or more interest-bearing accounts of the Issuer
with the Custodian or the Account Bank, as the case may be, into which all Counterparty Downgrade Collateral
is to be deposited.
“Coverage Tests” means the Class C Coverage Test, the Class D Coverage Test, the Class E Coverage Test, the
Class F Coverage Test and the Interest Coverage Test.
“Credit Risk Portfolio Collateral” means any Portfolio Collateral (excluding Defaulted Portfolio Collateral)
which, in the Collateral Manager’s reasonable commercial judgement, has a significant risk of declining in
credit quality or price unrelated to general market conditions provided that, a Synthetic Security shall constitute
Credit Risk Portfolio Collateral in the event that the Reference Obligation to which such Synthetic Security is
linked would constitute Credit Risk Portfolio Collateral if it were itself an item of Portfolio Collateral.
“Custodian” means HSBC Bank plc acting through its office at 8 Canada Square, London E14 5HQ or such
Person appointed as Custodian under the Agency Agreement.
“Custody Account” means the custody account or accounts established on the books of the Custodian in
accordance with the provisions of the Agency Agreement and maintained and operated outside The Netherlands,
which term shall include each cash account relating to each such custody account (if any).
“Defaulted Amount” means, in respect of any Defaulted Portfolio Collateral or Accruing PIK Security, the
product of (i) the lesser of (A) its Fitch Recovery Rate; (B) its S&P Recovery Rate; and (C) the then current
Market Value of such Defaulted Portfolio Collateral or Accruing PIK Security and (ii) the Aggregate Principal
Balance thereof.
“Defaulted Asset Swap Termination Payment” means any amount payable by the Issuer to an Asset Swap
Counterparty upon termination of any Asset Swap Agreement in whole following the occurrence of an “Event
of Default” or “Termination Event other than “Illegality” or a “Tax Event” (as such terms are defined in such
Asset Swap Agreement) thereunder in respect of which the applicable Asset Swap Counterparty was the
“Defaulting Party” or sole “Affected Party” (as such terms are defined in such Asset Swap Agreement).
“Defaulted Portfolio Collateral” means any item of Portfolio Collateral:
43

(a)
(b)
(c)
as to which pursuant to its Underlying Instruments, there has occurred any default or event of default
which entitles the holders thereof, or a certain minimum proportion thereof, by direction (of a trustee or
otherwise), with notice or passage of time or both, to accelerate the maturity (whether by mandatory
prepayment, mandatory redemption or otherwise) of all or a portion of the outstanding principal
amount of such security, unless (x) in the case of a default or event of default consisting of a failure of
the obligor on such security to make required interest payments, such security has resumed current
payments of interest in cash (whether or not any waiver or restructuring has been effected) and all such
delinquent required payments have been paid in full in cash or (y) in the case of any other default or
event of default, such default or event of default is no longer continuing; or
as to which the issuer of such security has defaulted in the payment of principal or interest when due
and payable pursuant to its terms (disregarding any applicable grace or notice period) with respect to
such Portfolio Collateral, unless, in the case of a failure of the obligor on such security to make
required interest payments, such Portfolio Collateral has resumed current payments of interest and been
brought current in cash (whether or not any waiver or restructuring has been effected) and all such
delinquent required payments have been paid in full in cash; provided that a security shall be
considered “Defaulted Portfolio Collateral” pursuant to this paragraph (b) only if in the good faith
judgement of the Collateral Manager, in accordance with its customary practices, such item of Portfolio
Collateral is an item of “Defaulted Portfolio Collateral” and either (A) such default or event of
default results in the withdrawal of the then current rating by the Rating Agencies of such security or
such Portfolio Collateral or the reduction of any such rating (i) to “CC” or below by Fitch and which is
appended with a “DR” or, if such security or Portfolio Collateral is not rated by Fitch, (ii) to “Ca” or
“C” or below by Moody’s or (iii) to “D” or “SD” or below by S&P, or (B) the Collateral Manager,
based upon due inquiry, to the extent practicable from sources of information normally available to it
acting in accordance with the Collateral Management Agreement, has obtained knowledge of such
default or event of default and any characterisation by the Collateral Manager of such security other
than as “Defaulted Portfolio Collateral” would result in the reduction or withdrawal of the rating of
any Class of Notes (and the Collateral Manager shall promptly give notice of any such determination to
the Rating Agencies); or
in the event that any bankruptcy, insolvency or receivership proceedings have been initiated against the
Underlying Obligor thereunder and not discharged or an Offer or debt restructuring has been effected
or proposed in respect of such item of Portfolio Collateral pursuant to which the Underlying Obligor
thereunder has offered holders of obligations of the same class as such item of Portfolio Collateral a
new instrument or package of instruments which in the reasonable judgement of the Collateral
Manager, either:
(i)
(ii)
amounts to a diminished financial obligation; or
has the purpose of enabling the Underlying Obligor thereunder to avoid a default under such
item of Portfolio Collateral, howsoever described; or
(d)
(e)
in respect of which a portion or all of the principal amount thereof has been permanently written down
pursuant to its Underlying Instruments in relation to the non-payment of amounts otherwise due on
such Portfolio Collateral or as a result of aggregated losses on the underlying pool of collateral; or
the credit quality of the obligor under which has, in the Collateral Manager’s reasonable judgement,
significantly deteriorated such that the Collateral Manager has a reasonable expectation that a payment
default will occur on the next scheduled payment date thereunder,
provided that a Synthetic Security shall constitute Defaulted Portfolio Collateral in the event that the Reference
Obligation to which such Synthetic Security is linked would constitute Defaulted Portfolio Collateral if it were
itself an item of Portfolio Collateral.
Any such item of Portfolio Collateral shall continue to be an item of Defaulted Portfolio Collateral only until
such time as the circumstances specified in each of the paragraphs above has been cured, subject to such
security satisfying all the Eligibility Criteria at such time.
“Deferred Interest” means Class D Deferred Interest, Class E Deferred Interest, Class F Deferred Interest and
Subordinated Deferred Interest (as applicable).
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“Determination Date” means, in relation to a Payment Period, the Business Day immediately following the last
Business Day of such Payment Period, or in the event of any acceleration of the Notes pursuant to Condition 10
(Events of Default), the day on which the Notes become due and payable.
“Discount Obligation” means any item of Portfolio Collateral (except for Defaulted Portfolio Collateral, Low
Grade Portfolio Collateral, Accruing PIK Securities or B Grade Portfolio Collateral) acquired by, or on behalf
of, the Issuer for a purchase price (excluding accrued interest thereon) of less than 80 per cent. of the principal
amount of such item of Portfolio Collateral, provided that such item of Portfolio Collateral shall cease to be a
Discount Obligation where the Market Value thereof for any period of 45 consecutive Business Days (excluding
any period in which the Market Value of such item of Portfolio Collateral cannot be determined pursuant to
paragraphs (i) or (ii) of the definition of “Market Value”) equals or exceeds 90 per cent. of the principal amount
of such item (as certified by the Collateral Manager to the Issuer, Trustee and Collateral Administrator).
“Discounted Amount” means, in respect of any Discount Obligation, the original purchase price (expressed as
a percentage) paid therefor by or on behalf of the Issuer (exclusive of accrued unpaid interest) multiplied by the
outstanding principal amount thereof (including any capitalised interest).
“Dutch Ineligible Securities” means any and all:
(a)
(b)
(c)
securities or interest in securities which are bearer instruments (effecten aan toonder) physically
located in The Netherlands or registered shares (aandelen op naam) in a Netherlands corporate entity
where the Issuer owns such bearer instruments or registered shares directly and in its own name; or
securities or interest in securities the purchase or acquisition of which by or on behalf of the Issuer
would cause the breach of applicable selling or transfer restrictions or of applicable Dutch laws relating
to the offering of securities or of collective investment schemes; or
instruments or obligations that are convertible into or exchangeable for securities as referred to under
(a) above.
“Effective Date” means 24 December 2007 (or if such day is not a Business Day, the next following Business
Day), or, such earlier date as is designated as such 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 as at such date.
“Effective Date Rating Event” means:
(a)
(b)
any of (i) the Effective Date Requirements not having been satisfied as at the Effective Date; or (ii) the
Initial Ratings of any of the Notes being downgraded or withdrawn; or (iii) 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 Notes, in the case of (ii) and (iii), upon request for
confirmation of the Initial Ratings by the Collateral Manager, acting on behalf of the Issuer, following
the Effective Date; and
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 Rating Confirmation 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 to be so confirmed or reinstated,
provided that any downgrade or withdrawal of any of the Initial Ratings of the Notes 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.
“Effective Date Requirements” means each of the Portfolio Profile Tests, the Collateral Quality Tests and the
Coverage Tests being satisfied as at the Effective Date and the Issuer having entered into binding commitments
to acquire Collateral, the Aggregate Principal Balance of which equals or exceeds the Required Portfolio
Collateral Balance by such date.
“Eligibility Criteria” means the eligibility criteria specified in the Collateral Management Agreement.
45

“Eligible Investments” means:
(a)
(b)
(c)
any euro denominated securities that are an obligation of a company, financial institution or a trust
company which at the time of such purchase has: (i) a long term unsecured, unguaranteed and
unsubordinated rating of at least “AAA” by S&P and “AAA” by Fitch respectively; and/or (ii) a short
term unsecured, unguaranteed and unsubordinated rating of at least “A-1+” by S&P and “F1+” by Fitch
respectively;
any bank account, deposit (including, for the avoidance of doubt, time deposits) or other debt
instruments issued by, or fully and unconditionally guaranteed on an unsecured and unsubordinated
basis by, or, if a bank account or deposit, held or made with any financial institution the short term
unsecured and unsubordinated debt obligation of which are rated at least “A-1+” by S&P and “F1+” by
Fitch and the long term unsecured and unsubordinated debt obligations of which are rated at least
“AA-” by S&P and “AA-” by Fitch; or
commercial paper or money market funds which are rated in the highest rating category by each Rating
Agency and which permit daily liquidation of investments,
and, in each case, with a Stated Maturity (being, with respect to paragraph (c) above only, the date on which a
demand is made for the repayment of such Eligible Investment) not falling less than two Business Days prior to
the next following Payment Date, provided, however, that Eligible Investments shall not include Dutch
Ineligible Securities.
“EURIBOR” means the rate determined in accordance with Condition 6(e) as applicable to three month euro
deposits (or, in the case of the first Interest Accrual Period, the linear interpolation of 6 month euro deposits and
7 month euro deposits).
“Euro”, “euro” or “€” means the currency introduced at the start of the third stage of the European Economic
and Monetary Union pursuant to the Treaty establishing the European Community, as amended.
“Euroclear” means Euroclear Bank S.A./N.V. as operator of the Euroclear System.
“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, as amended by the Treaty on
European Union and the Treaty of Amsterdam.
“Event of Default” means each of the events defined as such in Condition 10(a) (Events of Default).
“Excess Accruing PIK Security Portfolio Collateral” means the amount, if any, by which the Aggregate
Principal Balance of Accruing PIK Security exceeds 10 per cent. of the Aggregate Principal Balance.
“Excess B Grade Amount” means (a) the Excess B Grade Portfolio Collateral multiplied by (b) 80 per cent.
“Excess B Grade Portfolio Collateral” means, in the event that the par amount outstanding of either (A) all
Non-Investment Grade Portfolio Collateral exceeds 25 per cent. of the Aggregate Principal Balance or (B) all B
Grade Portfolio Collateral exceeds 10 per cent. of the Aggregate Principal Balance, the higher of (a) B Grade
Portfolio Collateral minus the amount representing 10 per cent. of the Aggregate Principal Balance and (b) the
lesser of the par amount of (i) B Grade Portfolio Collateral and (ii) such Non-Investment Grade Portfolio
Collateral minus the amount representing 25 per cent. of the Aggregate Principal Balance.
“Excess BB Grade Amount” means (a) the Excess BB Grade Portfolio Collateral multiplied by (b) 90 per cent.
“Excess BB Grade Portfolio Collateral” means, the amount, if any, by which the par amount outstanding of all
Non-Investment Grade Portfolio Collateral minus the Excess B Grade Portfolio Collateral exceeds 25 per cent.
of the Aggregate Principal Balance.
“Expense Reimbursement Account” means the account in the name of the Issuer held with the Account Bank
into which an initial deposit of €70,000 shall be made on the Closing Date and into which Interest Proceeds
shall be applied on each Payment Date in accordance with Condition 3(c)(i) (Application of Interest Proceeds)
46

and out of which Trustee Fees and Expenses and Administrative Expenses which become payable during any
Payment 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 66⅔ per cent. of the votes cast.
“Fitch” means Fitch, Inc., Fitch Ratings Limited and their subsidiaries including Derivative Fitch Inc. and
Derivative Fitch Ltd, and any successor or successors thereof.
“Fixed Rate Portfolio Collateral” means any unhedged Portfolio Collateral that bears a fixed annual rate of
interest.
“Floating Rate of Interest” has the meaning given thereto in Condition 6 (Interest).
“Form-Approved Asset Swap” means an Asset Swap Agreement or an Asset Swap Transaction the
documentation for and structure of which conforms (save for the amount and timing of periodic payments, the
name and economics of the related Non-Euro Portfolio Collateral, the notional amount, the Effective Date, the
termination date and other consequential changes flowing therefrom and immaterial changes) to a form
previously presented to the Rating Agencies and in respect of which Rating Agency Confirmation has been
received, provided that Rating Agency Confirmation shall be deemed to have been so received in respect of any
such form approved by the Rating Agencies prior to the Closing Date.
“Foundation” means Stichting Pangaea ABS 2007-1.
“FSMA” means the Financial Services and Markets Act 2000.
“Hedge Counterparty Termination Payments” means Asset Swap Counterparty Termination Payments.
“Hedge Issuer Termination Payments” means Asset Swap Issuer Termination Payments.
“Hedge Replacement Payments” means Asset Swap Replacement Payments.
“Hedge Replacement Receipts” means Asset Swap Replacement Receipts.
“Hedge Termination Account” means the interest-bearing account of the Issuer with the Account Bank into
which all Asset Swap Counterparty Termination Payments will be deposited.
“Initial Portfolio Collateral” means the Portfolio Collateral satisfying the Eligibility Criteria purchased or
identified by the Issuer on or about the Closing Date pursuant to the Collateral Acquisition Agreements.
“Initial Ratings” means each of the ratings assigned to the Notes by the Rating Agencies as at the Closing Date.
“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 of the Notes of any Class indicated, for any Interest Accrual Period being:
(a)
(b)
in the case of the Senior Notes, the amount calculated by the Agent Bank as soon as practicable after
11:00 am (Brussels time) on the relevant Interest Determination Date (as defined in Condition 6(e)(i)
(Rate of Interest)) in accordance with Condition 6(e)(ii) (Determination of Floating Rate of Interest
and Calculation of Interest Amount) (excluding any Class D Deferred Interest payable in respect of the
Class D Notes, any Class E Deferred Interest payable in respect of the Class E Notes and any Class F
Deferred Interest payable in respect of the Class F Notes); and
in the case of the Subordinated Notes the amount calculated as provided in Condition 6(f) (Interest on
the Subordinated Notes).
47

“Interest Collection Account” means the interest bearing account of the Issuer with the Account Bank into
which the Issuer will procure amounts are deposited pursuant to Condition 3(i)(ii) (Interest Collection Account).
“Interest Coverage Ratio” means, the ratio (expressed as a percentage) obtained by:
dividing
(a)
the amount which, on the relevant Measurement Date, is equal to the sum of the following:
(i)
(ii)
(iii)
(iv)
the Balances standing to the credit of the Interest Collection Account and the Expense
Reimbursement Account on such Measurement Date (and, for the avoidance of doubt, for the
purpose of calculating the Interest Coverage Ratio to determine whether the Interest Coverage
Test would be satisfied after giving effect to a proposed purchase, such Balances shall be
calculated as if such purchase had been made);
any Scheduled Periodic Asset Swap Counterparty Payments under any Asset Swap
Transaction payable on or before the Payment Date following the relevant Measurement Date
(to the extent not already taken into account in paragraph (i) above);
projected interest payments not yet received on the Portfolio Collateral in respect of the full
Payment Period in which such Measurement Date occurs, excluding (in relation to such
Payment Period): (A) interest on any Defaulted Portfolio Collateral to be accrued and as yet
unpaid; (B) interest on any Accruing PIK Security to be accrued and as yet unpaid; (C) any
amounts expected to be withheld at source or otherwise deducted in respect of taxes; and (D)
all accrued interest which the Collateral Manager, acting on behalf of the Issuer, is aware that
the Issuer will not, or in the Collateral Manager’s reasonable commercial judgement does not
expect the Issuer to, receive; and
the projected interest on the Balances standing to the credit of the Principal Collection
Account, the Interest Collection Account, the Unused Proceeds Account, the Semi Annual
Interest Smoothing Account and the Expense Reimbursement Account (including any portion
of principal payments on any Eligible Investments purchased at a discount which represents
interest) to the extent not already taken into account in paragraph (i) above, to be received in
the full Payment Period in which such Measurement Date occurs,
minus
(v)
the sum for the related Payment Period of amounts due and payable pursuant to paragraphs
(A) to (F) inclusive of Condition 3(c)(i) (Application of Interest Proceeds)
by
(b)
the aggregate of the Interest Amount on the Class A Notes, the Class B Notes and the Class C Notes
falling due for payment on the following Payment Date.
For the purposes of calculating the Interest Coverage Ratio, the expected or scheduled interest income on any
item of Portfolio Collateral and Eligible Investments and the expected or scheduled interest payable on any
Class of Notes and on any relevant Account shall be calculated using then current interest rates applicable
thereto.
“Interest Coverage Test” will be satisfied at any Measurement Date following, and including, the Effective
Date if the Interest Coverage Ratio is at least equal to 101 per cent.
“Interest Determination Date” means the second Business Day before the beginning of each Interest Accrual
Period.
“Interest Proceeds” means all amounts paid into the Interest Collection Account from time to time by or on
behalf of the Issuer and (without double counting) any other amounts transferred to the Payment Account from
any other Account which are to be disbursed as Interest Proceeds on each Payment Date pursuant to Condition
3(c)(i) (Application of Interest Proceeds).
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“Investment Gains” means, in respect of any item of Portfolio Collateral which is repaid, prepaid, redeemed or
sold, the excess (if any) of (a) the Scheduled Principal Proceeds, Unscheduled Principal Proceeds or Sale
Proceeds (as applicable) received in respect thereof, over (b) the principal amount thereof, in each case net of (i)
any expenses in connection with any repayment, prepayment, redemption or sale thereof, and (ii) in the case of a
sale of such item of Portfolio Collateral, any interest accrued but not paid thereon which has not been capitalised
as principal and included in the sale price thereof.
“Investment Gains Ratio” means the ratio (expressed as a percentage) obtained by dividing (a) the Net
Portfolio Collateral Balance by (b) the sum of the Aggregate Principal Amount of the Class A Notes, Class B
Notes, Class C Notes, Class D Notes, Class E Notes and the initial principal balance of the Class F Notes
(€5,000,000) and any outstanding Class D Deferred Interest, Class E Deferred Interest and Class F Deferred
Interest.
“Irish Stock Exchange” means the Irish Stock Exchange Limited.
“Issuer” means Pangaea ABS 2007-1 B.V., a private company with limited liability (besloten vennootschap met
beperkte aansprakelijkheid) incorporated under the laws of The Netherlands, which term shall include any
successor or substitute of the Issuer appointed pursuant to the terms of the Trust Deed.
“Issuer Dutch Account” means the bank account in the name of the Issuer with F. van Lanschot Bankiers N.V.
at its Rotterdam Branch, The Netherlands into which, inter alia, the €20,000 issued and paid-up share capital of
the Issuer has been paid.
“Key Person” means each of Andy Clapham, Henrik Malmer, James Cuby, David Beadle, James Briggs and
Konstantine Pastras (together the “Key Persons”).
“Low Grade Amount” means the product of (i) the lowest of (A) the Fitch Recovery Rate of the Low Grade
Portfolio Collateral; (B) its S&P Recovery Rate; and (C) the then current Market Value of Low Grade Portfolio
Collateral; and (ii) the Aggregate Principal Balance thereof.
“Low Grade Portfolio Collateral” means any item of Portfolio Collateral with either a rating by Fitch of
“CCC+” or below or which is appended with a “DR”, or a rating by S&P of “CCC+” or below, or which at any
time has a rating from any Rating Agency that is appended with a “DR”.
“Manager” means Bear, Stearns International Limited.
“Management Agreement” means the management agreement relating to the Issuer dated on or about the
Closing Date between the Issuer and the Managing Directors.
“Managing Directors” means Mrs Maria Chr. van der Sluijs-Plantz, Mrs Theresia F.C. Wijnen and Mr
Hubertus P.C. Mourits or such other person(s) who may be appointed as Managing Director(s) of the Issuer
from time to time.
“Margin” means in respect of the Senior Notes all or any of the following: the Class A Margin, the Class B
Margin, the Class C Margin, the Class D Margin, the Class E Margin and the Class F Margin.
“Market Value” means with respect to an item of Portfolio Collateral, on any date and in the following order of
determination:
(i)
(ii)
(iii)
the price supplied by any independent, internationally recognised pricing service (provided that the
Issuer shall have received confirmation from Fitch and S&P with respect to the identity of such pricing
service); or
the average of three bid-side market values of such item of Portfolio Collateral obtained from
independent nationally recognised brokers/dealers; or
the lower of two bid-side market values of such item of Portfolio Collateral obtained from independent
nationally recognised brokers/dealers; or
49

(iv)
(v)
the bid-side market value of such item of Portfolio Collateral obtained from one independent,
internationally recognised broker/dealer; or
the higher of (a) 70% of the par amount of such item of Portfolio Collateral and (b) the value assigned
to such item of Portfolio Collateral by S&P, unless the Collateral Manager in its discretion, acting
reasonably, believes that such item of Portfolio Collateral should be valued at a lower rate,
in each case expressed as a percentage of par (unless otherwise indicated), and, in each of cases (i), (ii) and (iii),
as certified by the Collateral Manager and, in the case of any Non-Euro Portfolio Collateral, shall be determined
by multiplying such percentage by the principal amount of such Non-Euro Portfolio Collateral and converting
the resulting amount into Euro at the relevant Asset Swap Transaction Exchange Rate or, to the extent that none
is applicable to any portion of the principal amount thereof, at the prevailing spot rate of exchange, as
determined by the Collateral Administrator at the direction of the Collateral Manager and dividing the resulting
amount by the principal amount of such Non-Euro Portfolio Collateral converted into Euro using the relevant
Asset Swap Transaction Exchange Rate or, to the extent that none is applicable to any portion of the principal
amount thereof, at the prevailing spot rate of exchange determined as aforesaid.
“Maturity Date” means, in respect of each Class of Notes, the Payment Date falling in December 2096.
“Measurement Date” means:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(in respect of the Class C Coverage Test, the Class D Coverage Test, the Class E Coverage Test, the
Class F Coverage Test and the Additional Coverage Test only) the Closing Date;
the Effective Date;
each Determination Date falling after the Effective Date;
after the Effective Date, any day on which the purchase of an Additional Portfolio Collateral or a
Substitute Portfolio Collateral occurs;
after the Effective Date, any day on which the sale, default or prepayment of Portfolio Collateral
occurs;
the date as of which any Report to Noteholders is prepared; and
any day, upon request (by at least five Business Days’ notice), by the Rating Agencies or by the
Trustee at its discretion or at the direction of the holders of at least 66⅔ per cent. of the Aggregate
Principal Amount Outstanding of any Class of Notes.
“Monthly Report” means the monthly report defined as such in the Collateral Administration Agreement which
is prepared by the Collateral Administrator on behalf of the Issuer and in consultation with the Collateral
Manager and deliverable to the Issuer, the Trustee, the Collateral Manager, any Asset Swap Counterparty, the
Manager and the Rating Agencies and, upon request therefor in accordance with Condition 4(f) (Information
Regarding the Portfolio), to any Noteholder, which shall contain the information set out in Schedule 3
(Description of the Reports) to the Collateral Administration Agreement with respect to the Portfolio Collateral.
“Net Portfolio Collateral Balance” means, on any Measurement Date, the aggregate of:
(a)
(b)
(c)
the Principal Balances of all Portfolio Collateral (excluding Defaulted Portfolio Collateral, Discount
Obligations, Excess BB Grade Portfolio Collateral, Excess B Grade Portfolio Collateral, Low Grade
Portfolio Collateral and Excess Accruing PIK Security Portfolio Collateral) as at the relevant
Measurement Date;
the Balances standing to the credit of each of the Principal Collection Account, Unused Proceeds
Account and the Non-Euro Currency Account (converted into euro at the applicable Asset Swap
Transaction Exchange Rates) as at the relevant Measurement Date;
in the case of any Defaulted Portfolio Collateral or Accruing PIK Security, their respective Defaulted
Amount;
50

(d)
(e)
(f)
(g)
(h)
in the case of any Discount Obligations, the Discounted Amount;
in the case of any Excess BB Grade Portfolio Collateral, the Excess BB Grade Amount;
in the case of any Excess B Grade Portfolio Collateral, the Excess B Grade Amount;
in the case of any Low Grade Portfolio Collateral, the Low Grade Amount; and
in the case of any Excess Accruing PIK Security Portfolio Collateral, the Excess Accruing PIK
Security Portfolio Collateral multiplied by the sum of the Defaulted Amount for each Accruing PIK
Security and divided by the sum of the Aggregate Principal Balance of each Accruing PIK Security.
“Non-Call Period” means the period from the Closing Date to but including the Payment Date falling in June
2011.
“Non-Euro Currency Account” means the interest bearing account of the Issuer with the Account Bank into
which the Issuer will procure amounts are deposited pursuant to Condition 3(i)(vii) (Non-Euro Currency
Account).
“Non-Euro Portfolio Collateral” means any item of Portfolio Collateral which is not denominated in Euro but
is denominated in Sterling and/or U.S. Dollars and satisfies the Eligibility Criteria.
“Non-Investment Grade Portfolio Collateral” means the aggregate of B Grade Portfolio Collateral and BB
Grade Portfolio Collateral.
“Non-U.S. Person” has the meaning given in Regulation S.
“Note Valuation Report” means the accounting report prepared by the Collateral Administrator, on behalf of
the Issuer, as of each Determination Date.
“Noteholders” means the Class A Noteholders, the Class B Noteholders, the Class C Noteholders, the Class D
Noteholders, the Class E Noteholders, the Class F Noteholders, the Subordinated Noteholders and the Class S1
Noteholders.
“Offer” means, with respect to any item of Portfolio Collateral (a) any offer by the Underlying Obligor under
such obligation or by any other person made to all of the creditors of such Underlying Obligor in relation to
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 Underlying Obligor 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 more than 50
per cent. of the votes cast.
“Original Portfolio Collateral” means the Portfolio Collateral purchased by the Issuer on or before the
Effective Date, including the Initial Portfolio Collateral.
“Outstanding” means in relation to the Notes of a Class as of any date of determination, all of the Notes of such
Class issued, as further defined in the Trust Deed.
“Paying Agents” means each of the Principal Paying Agent, the Irish Paying Agent and any additional paying
agent appointed pursuant to the terms of the Agency Agreement and each of their permitted successors or
assigns.
“Payment Account” means the account in the name of the Issuer held with the Account Bank to which amounts
shall be transferred by the Collateral Administrator (on behalf of the Issuer) on the Business Day prior to each
51

Payment Date out of certain of the Accounts in accordance with Condition 3(i) (Accounts) and out of which the
amounts required to be paid on each Payment Date pursuant the Priorities of Payment shall be paid.
“Payment Date” means the 28th day of March, June, September and December in each year (commencing on
28 September 2007), as well as the Maturity Date of each of the Notes 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.
“Payment Default” means the occurrence of an Event of Default under paragraph (i) (Non-Payment of Interest)
or (ii) (Non-Payment of Principal) of Condition 10(a) (Events of Default).
“Payment Period” means, with respect to any Payment Date, the period commencing on the day immediately
following the eighth Business Day prior to the preceding Payment Date (or on the Closing Date, in the case of
the Payment Period relating to the first Payment Date) and ending on the eighth Business Day prior to such
Payment Date (or, in the case of the Payment Period applicable to the Payment Date which is the Maturity Date
of any Note or is a Redemption Date, ending on the day preceding such Payment Date) both inclusive.
“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.
“PIK Security” means a debt security whose Underlying Instruments permit the deferral of the payment of
interest in cash thereon, including, without limitation, by providing for the payment of interest through the
issuance of additional debt securities identical to such debt security or through additions to the principal amount
thereof for a specified period in the future or for the remainder of its life or by capitalising interest due on such
debt security as principal.
“Pledge Agreement” means a Euroclear Pledge Agreement under Belgian law entered into on or about the
Closing Date between the Issuer, the Trustee and the Custodian.
“Portfolio” means the Portfolio Collateral and Eligible Investments held by or on behalf of the Issuer from time
to time.
“Portfolio Collateral” means a portfolio or diversified pool of Asset Backed Securities or, as the case may be,
Synthetic Securities purchased by the Issuer (or on its behalf) on the Closing Date and from time to time
thereafter.
“Portfolio Profile Tests” has the meaning ascribed to it in the Collateral Administration 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.
“Principal Amount Outstanding” means in relation to any Class of Notes and at any time, the Aggregate
Principal Amount outstanding under such Class of Notes at that time.
“Principal Balance” means, with respect to any Portfolio Collateral and/or Eligible Investment, as of any date
of determination, the outstanding principal amount thereof (subject, in the case of Eligible Investments, to the
definition of Balance (as defined in the Conditions)), including any capitalised interest, save that (i) the
Principal Balance of any Portfolio Collateral that is a Synthetic Security shall be deemed to be the principal or
notional amount of such Synthetic Security, unless the Collateral Manager determines otherwise and a Rating
Agency Confirmation has been received in respect of such determination; and (ii) the Principal Balance of any
Non-Euro Portfolio Collateral shall be the outstanding notional amount in euro of any Asset Swap Transaction
entered into in respect thereof.
“Principal Collection Account” means the interest bearing account of the Issuer with the Account Bank into
which the Issuer will procure amounts are deposited pursuant to Condition 3(i)(i) (Principal Collection
Account).
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“Principal Paying Agent” means HSBC Bank plc acting through its office at 8 Canada Square, London E14
5HQ or any person appointed as principal paying agent under the Agency Agreement.
“Principal Proceeds” means all amounts paid into the Principal Collection Account from time to time by or on
behalf of the Issuer and (without double counting) any other amounts transferred to the Payment Account from
any other Account which are to be disbursed as Principal Proceeds on each Payment Date pursuant to Condition
3(c)(ii) (Application of Principal Proceeds).
“Priorities of Payment” means:
(a)
(b)
save for following any redemption of the Notes pursuant to Condition 7(b) (Optional Redemption) or
enforcement of the security over the Collateral in accordance with Condition 11 (Enforcement), 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)
(Applications of Principal Proceeds); and
in the event of any redemption of the Notes pursuant to Condition 7(b) (Optional Redemption) and
following enforcement of the security over the Collateral in accordance with Condition 11
(Enforcement), the priorities of payment set out in Condition 11 (Enforcement).
“Purchased Accrued Interest” means with respect to any Payment Period, all payments of interest received
during such Payment Period on the Portfolio Collateral to the extent such payments constitute proceeds from
accrued interest purchased with Principal Proceeds.
“Ramp-Up Period” means the period beginning on, and including, the Closing Date and ending on, and
including, the Effective Date.
“Rated Balance” means, on any date, the principal amount of the Class S1 Combination Notes Outstanding on
the Closing Date minus the aggregate of all payments made from the Closing Date to such date, either through
interest or principal payments on the Class S1 Combination Notes.
“Rating Agencies” means Fitch and S&P or, if at any time either Fitch or S&P ceases to provide rating services,
any other internationally recognised credit rating agency selected by the Issuer and reasonably satisfactory to the
Trustee. In the event that at any time the Rating Agencies are not Fitch or S&P, references to rating categories
of such rating agency, in these Conditions, the Trust Deed and the Transaction Documents shall be deemed
instead to be references to the equivalent categories of such other 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 alternative
rating agency is used. “Rating Agency” means each and any of Fitch and S&P.
“Rating Agency Confirmation” means with respect to any specified action or determination, receipt of written
confirmation from the Rating Agencies, for so long as the Senior Notes are Outstanding and rated by either
Fitch and/or S&P, that such specified action or determination will not result in the reduction or withdrawal of
their then-current ratings on such Notes.
“Rating Confirmation Plan” means a plan provided by the Collateral Manager (acting on behalf of the Issuer)
to the Rating Agencies setting forth the timing and manner of acquisition of additional Portfolio Collateral
and/or any other intended action which will cause confirmation of the Initial Ratings, as further described and as
defined in the Collateral Management Agreement.
“Record Date” means the fifteenth day before the relevant due date for payment of principal and interest in
respect of a Note.
“Redemption Date” means each date specified for a redemption of the Notes of a Class pursuant to Condition 7
(Redemption, Purchase and Cancellation) or the date on which the Notes of such Class become due and payable
pursuant to Condition 10 (Events of Default) or, 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).
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“Redemption Notice” means a redemption notice in the form available from any Paying Agent which has been
duly completed by a Noteholder and which specifies, inter alia, the applicable Redemption Date.
“Redemption Price” means, when used with respect to:
(a)
any Senior Note to be redeemed pursuant to Conditions 7(a)-(f) (inclusive) or Condition 10 (Events of
Default), 100 per cent. of the Outstanding principal amount of the relevant Note to be redeemed,
together with interest (including any Deferred Interest, in the case of any Class D Note or Class E Note
or Class F Note) accrued thereon to the date of redemption or in the case of a partial redemption, 100
per cent. of the Outstanding principal amount of the relevant portion of the relevant Note to be
redeemed together with interest accrued thereon to the date of redemption; and
(b) any Subordinated Note to be redeemed pursuant to Conditions 7(a)-(f) (inclusive) or Condition 10
(Events of Default), such Subordinated Note’s pro rata share (based on the proportion which the
Outstanding principal amount of such Subordinated Note bears to the Aggregate Principal Amount of
all Subordinated Notes Outstanding immediately prior to such redemption) 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 or in the case of a partial
redemption, 100 per cent. of the Outstanding principal amount of the relevant portion of the
Subordinated Note to be redeemed,
provided that, in the event that the Notes become subject to redemption in whole (but not in part) pursuant to
more than one of Conditions 7(b) (Optional Redemption) 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 and provided further that the redemption price if
any Class S1 Combination Notes shall be the redemption price of the relevant Component comprised in such
Class S1 Combination Note.
“Redemption Threshold Amount” has the meaning ascribed to it in Condition 7(b)(ii) (Conditions to Optional
Redemption).
“Reference Entity” means the obligor of a Reference Obligation.
“Reference Obligation” means the debt security relating to an existing Portfolio Collateral to which a Synthetic
Security is linked that satisfies the Eligibility Criteria to the extent required to do so pursuant to the definition
thereof.
“Regulation S” means Regulation S under 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 the Payment
Date falling in June 2013.
“Reinvestment Redemption Amount” has the meaning given thereto in Condition 7(e) (Redemption Upon
Failure to Identify Additional Portfolio Collateral and Substitute Portfolio Collateral during the Reinvestment
Period).
“Replacement Asset Swap Agreement” means any Asset Swap Agreement entered into by the Issuer in
accordance with the provisions of the Collateral Management Agreement upon termination of an existing Asset
Swap Agreement in full on substantially the same terms as the original Asset Swap Agreement that preserves for
the Issuer the economic equivalent of such terminated Asset Swap Agreement outstanding thereunder subject to
such amendment thereto as may be agreed by the Collateral Manager and in respect of which Rating Agency
Confirmation is obtained unless such Replacement Asset Swap Agreement is a Form-Approved Asset Swap.
“Replacement Asset Swap Transaction” means an asset swap transaction entered into under a Replacement
Asset Swap Agreement.
“Report” means each of the Monthly Report and the Note Valuation Report.
54

“Required Portfolio Collateral Balance” means €300,000,000.
“Required Ratings” means:
(a)
(b)
(c)
(d)
in the case of the Account Bank, senior unsecured long term debt ratings of at least “A” by Fitch and
“AA-” by S&P and short term unsecured debt ratings of at least “F1” by Fitch and “A-1+” by S&P;
in the case of the Custodian and any sub-custodian, senior unsecured long term debt ratings of at least
“A” by Fitch and “A” by S&P and short term unsecured debt ratings of at least “F1” by Fitch and “A-
1+” by S&P;
in the case of any Synthetic Security Counterparty, long term unsecured, unguaranteed and
unsubordinated debt ratings of at least “A” by Fitch and “A” by S&P; and
in the case of any Asset Swap Counterparty or any entity unconditionally guaranteeing the obligations
of such Asset Swap Counterparty, short term unsecured, unguaranteed and unsubordinated debt ratings
of at least “F1” by Fitch and “A-1+” by S&P and a long term unsecured, unguaranteed and
unsubordinated debt rating of at least “A+” by Fitch,
or, in each case, the rating of any entity in respect of which Rating Agency Confirmation has been received, in
each case, for so long as the relevant Rating Agency has assigned any rating to the Senior Notes Outstanding.
“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. and includes
any successors to its rating business.
“Sale Proceeds” means:
(a)
(b)
all proceeds received upon the sale of any Portfolio Collateral (excluding Non-Euro Portfolio
Collateral) (including any fees received in connection with such sale) excluding accrued interest
included therein which is designated as Interest Proceeds by the Collateral Manager and is to be paid
into the Interest Collection Account (provided that no such designation may be made in respect of
Purchased Accrued Interest); and
in the case of any Non-Euro Portfolio Collateral, all amounts in Euro (or other currencies if applicable)
payable to the Issuer by the applicable Asset Swap Counterparty in exchange for payment by the Issuer
of the sale proceeds of any Portfolio Collateral, under the related Asset Swap Transaction (for the
avoidance of doubt after reducing such amount by any Asset Swap Issuer Termination Payment
payable by the Issuer in such circumstances), together with any such amounts which are not payable to
such Asset Swap Counterparty pursuant to the terms of such Asset Swap Transaction,
in each case, net of any amounts expended by or payable by the Collateral Manager or the Collateral
Administrator (on behalf of the Issuer) in connection with such sale or other disposition (including the
termination of the relevant Asset Swap Transaction).
“Scheduled Periodic Asset Swap Counterparty Payment” means, with respect to any Asset Swap
Transaction, the periodic amounts in the nature of coupon (but not the principal) scheduled to be paid to the
Issuer by the applicable Asset Swap Counterparty pursuant to the terms of such Asset Swap Transaction,
excluding any Asset Swap Counterparty Termination Payments and any Asset Swap Counterparty Principal
Exchange Amounts.
“Scheduled Periodic Asset Swap Issuer Payment” means, with respect to any Asset Swap Transaction, the
periodic amounts in the nature of coupon (and not principal) scheduled to be paid by the Issuer to the applicable
Asset Swap Counterparty pursuant to the terms of such Asset Swap Transaction, excluding any Asset Swap
Issuer Termination Payment and any Asset Swap Issuer Principal Exchange Amounts.
“Scheduled Principal Proceeds” means, with respect to any Portfolio Collateral (excluding any Non-Euro
Portfolio Collateral), scheduled principal repayments and any scheduled amortisation payments received by the
Issuer, together with any amounts payable into the Principal Collection Account pursuant to Condition 3(i)(i)
(Principal Collection Account) and, in the case of any Non-Euro Portfolio Collateral, scheduled final and
55

interim payments in the nature of principal exchanges paid to the Issuer by the applicable Asset Swap
Counterparty under the related Asset Swap Transaction.
“Secured Party” means each of the Noteholders, the Collateral Manager, the Collateral Administrator, the
Trustee, the Agents, the Managing Directors and any Asset Swap Counterparty and “Secured Parties” means
all of the above.
“Securities Act” means the United States Securities Act of 1933, as amended.
“Semi Annual Interest Received” has the meaning given thereto in Condition 3(i)(viii) (Semi Annual Interest
Smoothing Account).
“Semi Annual Interest Smoothing Account” means the interest bearing account of the Issuer with the Account
Bank into which the Issuer will procure amounts are deposited pursuant to Condition 3(i)(viii) (Semi-Annual
Interest Smoothing Account).
“Semi Annual Percentage” has the meaning given thereto in Condition 3(i)(viii) (Semi Annual Interest
Smoothing Account).
“Semi Annual Portfolio Collateral” has the meaning given thereto in Condition 3(i)(viii) (Semi Annual
Interest Smoothing Account).
“Semi Annual Proportion” has the meaning given thereto in Condition 3(i)(viii) (Semi Annual Interest
Smoothing Account).
“Semi Annual Proportion Threshold Excess” has the meaning given thereto in Condition 3(i)(viii) (Semi
Annual Interest Smoothing Account).
“Senior Notes” means the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E
Notes and the Class F Notes.
“Stated Maturity” means, with respect to any Portfolio Collateral 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.
“Stated Principal Balance” means, with respect to the Class S1 Combination Notes, €5,000,000, as the same
may be reduced in accordance with Condition 17(b) (Stated Principal Balance of the Class S1 Combination
Notes).
“Sterling” or “£” means the lawful currency for the time being of the United Kingdom.
“Subordinated Deferred Interest” has the meaning given thereto in Condition 6(c) (Deferral of Interest).
“Subordinated Fixed Rate of Interest” means the fixed rate of interest to be paid in respect of the
Subordinated Notes, being 7.5 per cent. per annum.
“Subordinated Interest Amount” has the meaning given thereto in Condition 6(a)(iv) (Subordinated Notes).
“Subordinated Noteholders” means the holders of the Subordinated Notes from time to time.
“Subordinated Residual Interest” means the additional interest in respect of the Subordinated Notes payable
on an available funds basis, out of Interest Proceeds as the last item of the Priorities of Payment for Interest
Proceeds.
“Substitute Portfolio Collateral” means any Portfolio Collateral purchased with amounts representing Sale
Proceeds.
“Synthetic Security” means any euro-denominated structured bond investment or other investment which is not
a credit default swap purchased from, or entered into by, the Issuer with a Synthetic Security Counterparty the
56

eturns on which (as determined by the Collateral Manager) are linked to the credit performance of a Reference
Obligation, but which may provide for a different maturity (but not later than the Payment Date falling in
December 2095), interest rate, currency or other non-credit characteristics than such Reference Obligation;
provided that:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
such Synthetic Security satisfies the Eligibility Criteria to the extent required to do so pursuant to the
definition thereof;
such Synthetic Security will not require the Issuer to make any payment to the Synthetic Security
Counterparty after the initial purchase thereof by the Issuer;
the ownership of such Synthetic Security will not subject the Issuer to net income tax;
Rating Agency Confirmation has been received in respect of such Synthetic Security;
such Synthetic Security must permit the Issuer to charge and assign its rights thereunder to the Trustee;
such Synthetic Security must permit settlement by physical delivery and in no circumstances to be
settled in cash and (if the Reference Obligation is not denominated in euro) may only be physically
settled if the currency risk is covered in a manner which satisfies the Rating Agencies; and
such Synthetic Security and such Reference Obligation will not be a Dutch Ineligible Security.
“Synthetic Security Counterparty” means any counterparty required to make payments to the Issuer under a
Synthetic Security pursuant to the terms of such Synthetic Security or any guarantor of any such entity, provided
that such counterparty satisfies the applicable Required Ratings and, in case of a Synthetic Security which is a
derivatives transaction, has the regulatory capacity as a matter of Dutch law to enter into derivatives transactions
with residents of The Netherlands.
“Transaction Creditors” means each of the Secured Parties and any other Person to whom the Issuer owes any
obligations under any Transaction Document from time to time.
“Transaction Documents” means the Trust Deed, the Pledge Agreement, the Collateral Management
Agreement, the Collateral Administration Agreement, the Agency Agreement, the Subscription Agreement, any
Asset Swap Agreement, the Management Agreement and the Collateral Acquisition Agreements.
“Trustee Fees and Expenses” means the fees and expenses and other amounts payable to the Trustee pursuant
to the Trust Deed from time to time.
“U.S.” or “U.S.A.” means the United States of America.
“U.S. Dollars” or “$” means the lawful currency for the time being of the United States of America.
“U.S. Person” has the meaning given in Regulation S.
“Underlying Instrument” means with respect to any item of Portfolio Collateral, any indenture, pooling and
servicing agreement, trust agreement, instrument, or other agreement pursuant to which such item of Portfolio
Collateral has been created or issued or of which the holders of such item of Portfolio Collateral are the
beneficiaries, and any instrument evidencing or constituting such item of Portfolio Collateral (in the case of
Portfolio Collateral evidenced by or in the form of instruments).
“Underlying Obligor” means each of the borrowers and/or guarantors under or in respect of an Underlying
Instrument or, as the case may be, the borrowers who have the underlying obligations to repay the amount
borrowed under the relevant Underlying Instrument.
“Unscheduled Principal Proceeds” means with respect to any item of Portfolio Collateral (excluding any Non-
Euro Portfolio Collateral) principal repayments prior to the Stated Maturity thereof received as a result either of
optional redemptions or the exercise of any clean-up call, regulatory call or tax call in respect thereof
(excluding, for the avoidance of doubt, any principal repayments received in accordance with any amortisation
57

schedule relating thereto) and, in the case of any Non-Euro Portfolio Collateral, any Asset Swap Counterparty
Principal Exchange Amount payable to the Issuer in exchange for payment by the Issuer of any unscheduled
principal proceeds as described above pursuant to the related Asset Swap Transaction, together with any such
amounts that are not payable to such Asset Swap Counterparty pursuant to the terms of such Asset Swap
Transaction, where such amounts are converted into euro at the applicable spot rate.
“Unused Proceeds Account” means the Issuer’s account with the Account Bank into which the net proceeds of
issue of the Notes remaining after payment of (i) certain fees, expenses and other amounts by the Issuer on the
Closing Date; (ii) the payment of €70,000 into the Expense Reimbursement Account; and (iii) all amounts
payable in connection with the Initial Portfolio Collateral, shall be paid.
“Western Europe” means Austria, Belgium, the Channel Islands, Denmark, Finland, France, Germany, Greece,
Republic of Ireland, Italy, Liechtenstein, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, the United Kingdom and any other countries in respect of which Rating Agency Confirmation has
been obtained.
2. Form, Title, Transfer and Denomination
(a)
Form of Denomination
The Notes of each Class (other than the Class S1 Combination Notes) are each serially numbered, in
bearer form, in denominations of €100,000, with, if appropriate, interest coupons and talons for further
interest coupons attached. The Class S1 Combination Notes are each serially numbered, in bearer
form, in denominations of €500,000, with, if appropriate, interest coupons and talons for further
interest coupons attached. Interest coupons and talons for further interest coupons may not be detached
and traded separately from the Notes to which they relate.
(b)
Title and Transfer
Title to the Notes (together with interest coupons and talons for further interest coupons attached
thereto, if any) passes upon delivery. The holder of any Note, interest coupon and talon for further
interest coupons attached to such Note shall 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.
(c)
Exchange of Class S1 Combination Notes
A Class S1 Combination Note may be exchanged for the respective Components thereof subject to the
provisions therein. So long as a Class S1 Combination Note remains Outstanding, exchanges of a
Class S1 Combination Note, in whole or in part, for a Note or Notes (as the case may be) of each of the
Classes represented by its Components may be made, and shall only be made, as follows:
(i)
(ii)
A holder of a beneficial interest in a Class S1 Combination Note may exchange such interest
for interests in each of the Classes represented by Components of such Class S1 Combination
Note (each an “Exchange Class”) by delivering to any Paying Agent (with a copy to the
Issuer) instructions to so exchange the interest. Upon receipt by the Issuer and the Paying
Agent of exchange instructions in a certificate in the form specified in the Agency Agreement
given by the holder of such beneficial interest, the relevant Paying Agent shall cause the
principal amount of the Class S1 Combination Note and its respective Components to be
reduced by the principal amount exchanged (and the holder’s Euroclear or Clearstream,
Luxembourg account to be debited accordingly) and each Class D Note or Subordinated Note
(as the case may be) representing an 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 Class S1 Combination Note represented by a definitive Note may exchange such
Note in whole (but not in part) for an interest in the related Exchange Classes by delivering to
any Paying Agent; (A) such holder’s definitive Note properly endorsed for such exchange and
(B) exchange instructions in a certificate in the form specified in the Agency Agreement (the
form of which certificate is available at the office of any Paying Agent) given by the holder of
58

3. Status
such definitive Note. Upon receipt thereof, the Paying Agent shall (A) cancel such definitive
Note, (B) authenticate and deliver a definitive Note of each Exchange Class in the same
principal amount as the relevant Component of such Class S1 Combination Note associated
with each such Exchange Class, registered in the same name as the definitive Note
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 Class S1 Combination Notes (and its respective Components) in the
name of such holder to be reduced by the principal amount exchanged; and (D) cause the
principal amount of each Exchange Class in the name of such holder to be increased by the
same principal amount as the Components of such Class S1 Combination Note exchanged.
Once interests in a Class S1 Combination Note have been exchanged for interests in the Exchanged
Classes, it may not then be exchanged from interests in the Exchanged Classes to interests in a Class S1
Combination Note.
(a)
(b)
Status: The Notes of each Class constitute direct, secured, unconditional obligations of the Issuer,
recourse in respect of which is limited in the manner described in Condition 4(c) (Limited Recourse
and Non-Petition). 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.
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. Subject to the Priorities of Payment
and except as described below, the Class B Notes are fully subordinated to the Class A Notes, the Class
C Notes are fully subordinated to the Class A Notes and the Class B Notes, the Class D Notes are fully
subordinated to the Class A Notes, the Class B Notes and the Class C Notes, the Class E Notes are
fully subordinated to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes,
the Class F Notes are fully subordinated to the Class A Notes, the Class B Notes, the Class C Notes, the
Class D Notes and the Class E Notes and the Subordinated Notes are fully subordinated to the Senior
Notes. No payments of interest will be made on the Class B Notes on any Payment Date until interest
on the Class A Notes has been paid. No payments of interest will be made on the Class C Notes on any
Payment Date until interest on the Class A Notes and the Class B Notes has been paid. No payments of
interest will be made on the Class D Notes on any payment Date until interest on the Class A Notes, the
Class B Notes and the Class C Notes has been paid. No payments of interest will be made on the Class
E Notes on any Payment Date until interest on the Class A Notes, the Class B Notes, the Class C Notes
and the Class D Notes has been paid. No payments of interest will be made on the Class F Notes on
any Payment Date until interest on the Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes and the Class E Notes has been paid. No payments of Subordinated Fixed Rate of Interest will
be made on the Subordinated Notes until interest on the Senior Notes has been paid. Subordinated
Residual Interest is payable on an available funds basis and no payment of Subordinated Residual
Interest will be made until the payment of certain fees and expenses has been made and until interest on
the Senior Notes and the Subordinated Fixed Rate of Interest has been paid.
Other than in accordance with Condition 7 (Redemption, Purchase and Cancellation) or as allowed
pursuant to the Priorities of Payment, no amount of principal in respect of the Class B Notes shall
become due and payable until redemption or payment in full of the Class A Notes, no amount of
principal in respect of the Class C Notes shall become due and payable until redemption or payment in
full of the Class A Notes and the Class B Notes, no amount of principal in respect of the Class D Notes
(for the avoidance of doubt, excluding Class D Deferred Interest) shall become due and payable until
redemption or payment in full of the Class A Notes, the Class B Notes and the Class C Notes, no
amount of principal (for the avoidance of doubt, excluding Class E Deferred Interest) in respect of the
Class E Notes shall become due and payable until redemption or payment in full of the Class A Notes,
the Class B Notes, the Class C Notes and the Class D Notes, no amount of principal (for the avoidance
of doubt, excluding Class F Deferred Interest) in respect of the Class F Notes shall become due and
payable until redemption or payment in full of the Class A Notes, the Class B Notes, the Class C Notes,
the Class D Notes and the Class E Notes, and no amount of principal (excluding, for the avoidance of
doubt, Subordinated Deferred Interest) 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.
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For the purposes of subordination and the Priorities of Payment, the Class S1 Combination Notes shall
not be treated as a separate Class of Notes but the Class S1/D Component of the Class S1 Combination
Notes will be treated as Class D Notes and the Class S1/Subordinated Component of the Subordinated
Notes will be treated as Subordinated Notes.
(c)
Priorities of Payment: The Collateral Administrator shall, on behalf of the Issuer, on each Payment
Date disburse Interest Proceeds and Principal Proceeds transferred to the Payment Account on the
Business Day prior thereto in accordance with Condition 3(i) (Accounts), in accordance with the
following Priorities of Payment as calculated by the Collateral Administrator pursuant to the terms of
the Collateral Administration Agreement on each Determination Date:
(i)
Application of Interest Proceeds: Interest Proceeds shall be applied as follows (the “Interest
Proceeds Priorities of Payment”):
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
to the payment of amounts equal to the minimum profit to be retained by the Issuer
for Dutch tax purposes for deposit into the Issuer Dutch Account from time to time;
for the payment of accrued and unpaid Trustee Fees and Expenses together with any
applicable value added tax thereon up to an amount equal to €50,000;
to the payment, on a pari passu and pro rata basis (i) of accrued and unpaid
Administrative Expenses to an amount equal to €90,000, less any amounts paid
pursuant to paragraph (B) above; (ii) taxes owing by the Issuer to the Dutch tax
authority accrued and unpaid in respect of the related Payment Period, if any (other
than any Dutch corporate income tax in relation to the amounts equal to the minimum
profit referred to in paragraph (A) above); and (iii) to the Expense Reimbursement
Account of such amount which will bring the Expense Reimbursement Account to a
credit balance of €70,000, provided that payments made pursuant to paragraph (B)
above and this paragraph (C) shall not exceed the sum of €62,500 and an amount
equal to 0.01% of the Aggregate Principal Balance at the beginning of the related
Payment Period;
to the payment of the Collateral Management Fee (if any) due and payable on such
Payment Date (including any amounts accrued and not paid on any prior Payment
Dates (including any interest payable thereon)) and any value added tax in respect
thereof (whether payable to the Collateral Manager or directly to the relevant tax
authority) to the Collateral Manager under the terms of the Collateral Management
Agreement;
to the payment on a pari passu and pro rata basis of (i) any Scheduled Periodic Asset
Swap Issuer Payments due and payable under any Asset Swap Transaction to the
extent not paid from funds available in the account applicable to the related Asset
Swap Transaction within the Non-Euro Currency Account;
to the payment, on a pari passu and pro rata basis, of any Asset Swap Issuer
Termination Payments due and payable to any Asset Swap Counterparty to the extent
not paid from funds available in the Hedge Termination Account, save for any
Defaulted Asset Swap Termination Payments;
to the payment of interest due and payable (including any accrued and unpaid
interest) in respect of the Class A Notes;
to the payment of interest due and payable (including any accrued and unpaid
interest) in respect of the Class B Notes;
to the payment of interest due and payable (including any accrued and unpaid
interest) in respect of the Class C Notes;
in the event of an early redemption by reason of a breach of the Class C Coverage
Test and/or the Interest Coverage Test, to redeem pari passu and pro rata the Class A
60

Notes, and after the Class A Notes have been redeemed in full, to redeem pari passu
and pro rata the Class B Notes, and after the Class B Notes have been redeemed in
full, to redeem pari passu and pro rata the Class C Notes, to the extent necessary to
cause both the Class C Coverage Test and the Interest Coverage Test to be met;
(K)
(L)
(M)
(N)
(O)
(P)
(Q)
(R)
(S)
(T)
to the payment of interest due and payable (including any interest on the Class D
Deferred Interest) in respect of the Class D Notes;
in the event of an early redemption by reason of a breach of the Class D Coverage
Test, to redeem pari passu and pro rata the Class A Notes, and after the Class A
Notes have been redeemed in full, to redeem pari passu and pro rata the Class B
Notes, and after the Class B Notes have been redeemed in full, to redeem pari passu
and pro rata the Class C Notes, and after the Class C Notes have been redeemed in
full, to redeem pari passu and pro rata the Class D Notes, to the extent necessary to
cause the Class D Coverage Test to be met;
to the payment of that element of the principal amount of the Class D Notes that
represents the Class D Deferred Interest which has been capitalised in accordance
with Condition 6(c) (Deferral of Interest);
to the payment of interest due and payable (including any interest on the Class E
Deferred Interest) in respect of the Class E Notes;
in the event of an early redemption by reason of a breach of the Class E Coverage
Test, to redeem pari passu and pro rata the Class A Notes and, after the Class A
Notes have been redeemed in full, to redeem pari passu and pro rata the Class B
Notes and, after the Class B Notes have been redeemed in full, to redeem pari passu
and pro rata the Class C Notes and, after the Class C Notes have been redeemed in
full, to redeem pari passu and pro rata the Class D Notes and, after the Class D
Notes have been redeemed in full, to redeem pari passu and pro rata the Class E
Notes, to the extent necessary to cause the Class E Coverage Test to be met;
to the payment of that element of the principal amount of the Class E Notes that
represents the Class E Deferred Interest which has been capitalised in accordance
with Condition 6(c) (Deferral of Interest);
to the payment of interest due and payable (including any interest on the Class F
Deferred Interest) in respect of the Class F Notes;
in the event of an early redemption by reason of a breach of the Class F Coverage
Test, to redeem pari passu and pro rata the Class A Notes and, after the Class A
Notes have been redeemed in full, to redeem pari passu and pro rata the Class B
Notes and, after the Class B Notes have been redeemed in full, to redeem pari passu
and pro rata the Class C Notes and, after the Class C Notes have been redeemed in
full, to redeem pari passu and pro rata the Class D Notes and, after the Class D
Notes have been redeemed in full, to redeem pari passu and pro rata the Class E
Notes and, after the Class E Notes have been redeemed in full, to redeem pari passu
and pro rata the Class F Notes, to the extent necessary to cause the Class F Coverage
Test to be met;
to the payment of that element of the principal amount of the Class F Notes that
represents the Class F Deferred Interest which has been capitalised in accordance
with Condition 6(c) (Deferral of Interest);
on the Payment Date following the Effective Date and each Payment Date thereafter
to the extent required, in the event of the occurrence of an Effective Date Rating
Event which is continuing on the second Business Day prior to such Payment Date,
to redeem pari passu and pro rata, the Class A Notes and, after the Class A Notes
have been redeemed in full, to redeem pari passu and pro rata the Class B Notes and,
after the Class B Notes have been redeemed in full, to redeem pari passu and pro
61

ata the Class C Notes and, after the Class C Notes have been redeemed in full, to
redeem pari passu and pro rata the Class D Notes and after the Class D Notes have
been redeemed in full, to redeem pari passu and pro rata the Class E Notes and, after
the Class E Notes have been redeemed in full, to redeem pari passu and pro rata the
Class F Notes, in each case, to the extent required to cause the Initial Ratings of the
Notes to be confirmed by the Rating Agencies;
(U)
(V)
(W)
(X)
(Y)
(Z)
(AA)
(BB)
(CC)
in the event of any breach of the Additional Coverage Test, (i) during the
Reinvestment Period, to use 65 per cent. of all remaining Interest Proceeds to
purchase additional Portfolio Collateral (by payment into the Principal Collection
Account) and 35 per cent. of all remaining Interest Proceeds to redeem pari passu
and pro rata, the Class F Notes; and (ii) after the Reinvestment Period, to use 35 per
cent. of all remaining Interest Proceeds to redeem pari passu and pro rata, the Class
F Notes and 65 per cent. of all remaining proceeds to redeem pari passu and pro rata
the Class A Notes and, after the Class A Notes have been redeemed in full, to redeem
pari passu and pro rata the Class B Notes and, after the Class B Notes have been
redeemed in full, to redeem pari passu and pro rata the Class C Notes and, after the
Class C Notes have been redeemed in full, to redeem pari passu and pro rata the
Class D Notes and, after the Class D Notes have been redeemed in full, to redeem
pari passu and pro rata the Class E Notes, and after the Class E Notes have been
redeemed in full, to redeem pari passu and pro rata the Class F Notes, in each case
to the extent necessary to cause the Additional Coverage Test to be met;
to the payment of Trustee Fees and Expenses (if any) together with any applicable
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;
to the payment on a pari passu and pro rata basis of any amounts due and payable to
any Asset Swap Counterparty on or prior to such Payment Date in connection with
the entry into a Replacement Asset Swap Agreement to the extent that such amounts
exceed amounts received by the Issuer upon an Asset Swap Agreement being
replaced;
to the payment on a pari passu and pro rata basis of any (i) Defaulted Asset Swap
Termination Payments due to any Asset Swap Counterparty;
pari passu and pro rata, to the payment of the Subordinated Interest Amount payable
on such Payment Date;
pari passu and pro rata, to the payment of any Subordinated Deferred Interest
(together with any interest on Subordinated Deferred Interest) payable on such
Payment Date;
to the payment of any Collateral Manager Termination Amount; and
pari passu and pro rata, to the payment of all remaining amounts as interest on the
Subordinated Notes (“Subordinated Residual Interest”).
(ii)
Application of Principal Proceeds: Principal Proceeds shall be applied as follows (the
“Principal Proceeds Priorities of Payment”):
(A)
(B)
to the payment of the amounts referred to above in paragraphs (A) to (I) (inclusive)
of the Interest Proceeds Priorities of Payment only to the extent not paid in full
thereunder;
on the Payment Date following the Effective Date and each Payment Date thereafter
to the extent required, in the event of the occurrence of an Effective Date Rating
Event which is continuing on the second Business Day prior to such Payment Date,
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to redeem pari passu and pro rata the Class A Notes and, thereafter, pari passu and
pro rata the Class B Notes and, thereafter, pari passu and pro rata the Class C Notes
and, thereafter, pari passu and pro rata the Class D Notes and, thereafter, pari passu
and pro rata the Class E Notes and, thereafter, pari passu and pro rata the Class F
Notes, in each case, until redeemed in full or, if earlier, until the Rating Agencies
confirm the Initial Ratings of the Notes;
(C)
(D)
(E)
(F)
(G)
(H)
to the payment of an amount equal to the aggregate of the Reinvestment Redemption
Amounts not reinvested by the Collateral Manager in the immediately preceding
three Payment Periods (including the Payment Period in which such Reinvestment
Redemption Amount was received), to redeem pari passu and pro rata the Class A
Notes and, thereafter, pari passu and pro rata the Class B Notes and, thereafter, pari
passu and pro rata the Class C Notes and, thereafter, pari passu and pro rata the
Class D Notes and, thereafter, pari passu and pro rata the Class E Notes and,
thereafter, pari passu and pro rata the Class F Notes, in each case until fully
redeemed or, if earlier, until the Reinvestment Redemption Amounts not reinvested
have been reduced to zero;
in the event of an early redemption by reason of a breach of the Class C Coverage
Test and/or the Interest Coverage Test, to redeem pari passu and pro rata the Class A
Notes and, after the Class A Notes have been redeemed in full, pari passu and pro
rata the Class B Notes and, after the Class B Notes have been redeemed in full, pari
passu and pro rata the Class C Notes, in each case, to the extent necessary such that
both the Class C Coverage Test and the Interest Coverage Test are satisfied if
recalculated following such redemption;
in the event of an early redemption by reason of a breach of the Class D Coverage
Test, to redeem pari passu and pro rata the Class A Notes and, after the Class A
Notes have been redeemed in full, pari passu and pro rata the Class B Notes and,
after the Class B Notes have been redeemed in full, pari passu and pro rata the Class
C Notes and, after the Class C Notes have been redeemed in full, pari passu and pro
rata the Class D Notes in each case, to the extent necessary such that the Class D
Coverage Test is satisfied if recalculated following such redemption;
in the event of an early redemption by reason of a breach of the Class E Coverage
Test, to redeem pari passu and pro rata the Class A Notes and, after the Class A
Notes have been redeemed in full, pari passu and pro rata the Class B Notes and,
after the Class B Notes have been redeemed in full, pari passu and pro rata the Class
C Notes and, after the Class C Notes have been redeemed in full, pari passu and pro
rata the Class D Notes and, after the Class D Notes have been redeemed in full pari
passu and pro rata the Class E Notes, in each case to the extent necessary such that
the Class E Coverage Test is satisfied if recalculated following such redemption;
in the event of an early redemption by reason of a breach of the Class F Coverage
Test, to redeem pari passu and pro rata the Class A Notes and, after the Class A
Notes have been redeemed in full, pari passu and pro rata the Class B Notes and,
after the Class B Notes have been redeemed in full, pari passu and pro rata the Class
C Notes and, after the Class C Notes have been redeemed in full, pari passu and pro
rata the Class D Notes and, after the Class D Notes have been redeemed in full, pari
passu and pro rata the Class E Notes, and after the Class E Notes have been
redeemed in full, pari passu and pro rata the Class F Notes in each case, to the extent
necessary such that the Class F Coverage Test is satisfied if recalculated following
such redemption;
during the Reinvestment Period, all remaining Principal Proceeds shall be applied
either in the acquisition of further Portfolio Collateral or in payment into the
Principal Collection Account pending investment in such Portfolio Collateral at a
later date;
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(I)
(J)
(K)
(L)
(M)
(N)
(O)
(P)
after the Reinvestment Period, to redeem pari passu and pro rata the Class A Notes
and, thereafter, pari passu and pro rata the Class B Notes and, thereafter, pari passu
and pro rata the Class C Notes and, thereafter, pari passu and pro rata the Class D
Notes and, thereafter, pari passu and pro rata the Class E Notes and, thereafter, pari
passu and pro rata the Class F Notes, in each case until redeemed in full;
to the payment of any Trustee Fees and Expenses together with any applicable value
added tax thereon to the extent not paid pursuant to paragraph (A) above;
to the payment of any Administrative Expenses to be to the extent not paid pursuant
to paragraph (A) above;
to the payment of the amounts referred to above in paragraphs (X) and (Y) of the
Interest Proceeds Priorities of Payment (in the same order) to the extent not paid in
full thereunder;
pari passu and pro rata, to the payment of the Subordinated Interest Amount on the
Subordinated Notes to the extent not paid pursuant to paragraph (Z) of the Interest
Proceeds Priorities of Payment above;
pari passu and pro rata, to the payment of the Subordinated Deferred Interest
(together with any interest on such Subordinated Deferred Interest) to the extent not
paid pursuant to paragraph (AA) of the Interest Proceeds Priorities of Payment
above;
to the payment of any Collateral Manager Termination Amount to the extent not
already paid pursuant to item (BB) of the Interest Proceeds Priorities of Payment; and
at any time following the expiry of the Reinvestment Period to redeem pari passu
and pro rata the Subordinated Notes in full and thereafter, the balance if any, in
payment to the holders of the Subordinated Notes as Subordinated Residual Interest.
Following any enforcement of the security over the Collateral and in the event of any redemption of the
Notes pursuant to Condition 7(b) (Optional Redemption) prior to the enforcement of the security over
the Collateral and following enforcement of the security over the Collateral, Interest Proceeds and
Principal Proceeds shall be applied in accordance with the Priorities of Payment specified in Condition
11(b) (Enforcement).
(d)
Non-payment of Amounts: Save in the case of the payment of interest on the Class A Notes, pursuant
to Condition 3(c)(i)(G); or (following redemption and payment in full of the Class A Notes) payment
of interest on the Class B Notes pursuant to Condition 3(c)(i)(H); or (following redemption and
payment in full of the Class B Notes) payment of interest on the Class C Notes pursuant to Condition
3(c)(i)(I); or (following redemption and payment in full of the Class C Notes) payments of interest on
the Class D Notes pursuant to Condition 3(c)(i)(K); or (following redemption and payment in full of
the Class D Notes) payments of interest on the Class E Notes pursuant to Condition 3(c)(i)(N); or
(following redemption and payment in full of the Class E Notes), payments of interest on the Class F
Notes pursuant to Condition 3(c)(i)(Q); or (following redemption and payment in full of the Class F
Notes), non-payment in full of the principal amount of any Class of Notes on any Redemption Date;
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, 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 D Notes, the Class E
Notes and the Class F 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 Condition 3(c) (Priorities of Payment) on any Payment Date
(including any Class D Deferred Interest payable in respect of the Class D Notes, any Class E Deferred
Interest payable in respect of the Class E Notes, any Class F Deferred Interest in respect of the Class F
Notes and any Subordinated Deferred Interest payable in respect of the Subordinated Notes), such
64

amounts shall remain due and shall be payable on each subsequent Payment Date in the order of
priority provided for in Condition 3(c) (Priorities of Payment), save to the extent payable on an
available funds basis only. References to the amounts referred to in Conditions 3(c)(i) (Application of
Interest Proceeds) and 3(c)(ii) (Application of Principal Proceeds) shall include any amounts thereof
not paid when due in accordance with Condition 3(c) (Priorities of Payment) on any preceding
Payment Date, save to the extent payable on an available funds basis only.
(e)
(f)
(g)
(h)
(i)
Determination and Payment of Amounts: The Collateral Administrator will, on each Determination
Date (other than in the case of a Determination Date following acceleration of the Notes pursuant to
Condition 10 (Events of Default)) 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) and will notify the Trustee and the Paying Agents of such amounts. The Collateral
Administrator shall on behalf of the Issuer not later than close of normal banking business (London
time) on the Business Day preceding each Payment Date cause amounts standing to the credit of the
Accounts which are required to be transferred to the Payment Account in accordance with Condition
3(i) (Accounts) to be transferred to the Payment Account on such Payment Date, 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.
De Minimis Amounts: The Collateral Administrator may, in its absolute discretion, adjust the amounts
required to be applied in payment of principal on the Notes from time to time pursuant to the Priorities
of Payment so that the amount to be so applied in respect of each Class of 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 to be 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 second 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 Payment 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 or proven error) be binding on the Issuer, the
Collateral Manager, the Trustee, the Principal Paying Agent and all Noteholders and the other Secured
Parties 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.
Accounts: The Issuer shall, prior to the Closing Date, establish the following accounts with the
Account Bank:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
the Principal Collection Account;
the Interest Collection Account;
the Unused Proceeds Account;
the Expense Reimbursement Account;
the Payment Account;
the Hedge Termination Account;
the Non-Euro Currency Account; and
the Semi Annual Interest Smoothing Account.
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The Custody Account shall be established by the Issuer on the Closing Date with the Custodian. The
Counterparty Downgrade Collateral Account comprises one or more accounts established by the Issuer
from time to time with the Custodian or the Account Bank, as the case may be. Each of the Account
Bank and the Custodian shall at all times be a financial institution which satisfies the applicable
Required Ratings and which is not resident in The Netherlands but which has the necessary regulatory
capacity to perform the services required of the Account Bank or the Custodian, as the case may be, in
The Netherlands. In the event that any of the ratings of the Account Bank or the Custodian, as the case
may be, are downgraded below the Required Ratings, the Issuer, shall procure that a replacement
Account Bank or the Custodian, as the case may be, is appointed within 30 days, which is acceptable to
the Trustee and which satisfies the Required Ratings in accordance with the provisions of the Agency
Agreement.
Amounts standing to the credit of each of the Accounts (other than the Counterparty Downgrade
Collateral Account) may from time to time be invested by the Collateral Administrator 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.
In addition, the Issuer has prior to the Closing Date established the Issuer Dutch Account, into which,
inter alia, the amount of €20,000 has been deposited representing the Issuer’s issued and paid-up share
capital. The Issuer will procure that payments are made from the Issuer Dutch Account to satisfy its
liabilities due in respect of Dutch corporate income tax in relation to the amounts equal to the minimum
profit as required to be retained by the Issuer under the Dutch tax agreement with the Dutch tax
authorities.
All interest accrued on any of the Accounts (other than the Counterparty Downgrade Collateral
Account) from time to time shall be paid into the Interest Collection Account. All principal amounts
received in respect of Eligible Investments standing to the credit of any Account from time to time
shall be credited to that Account upon maturity. All interest accrued on such Eligible Investments
(including capitalised interest received upon the sale, maturity or termination of any such investment)
shall be paid to the Interest Collection Account as, and to the extent provided, above.
To the extent that any amounts required to be paid into any Account pursuant to the provisions of this
Condition are denominated in a currency which is not that in which the Account is denominated, the
Collateral Manager, acting on behalf of the Issuer, may convert such amounts into the currency of the
Account at the spot rate of exchange as determined by the Agent Bank at the direction of the Collateral
Manager.
Notwithstanding any other provisions of this Condition, all amounts standing to the credit of each of
the Accounts (other than (i) the Interest Collection Account, (ii) the Payment Account, and (iii) all
interest accrued on the Accounts and (iv) all amounts standing to the credit of the Non-Euro Currency
Account representing amounts that would constitute Interest Proceeds if denominated in Euro) shall be
transferred to the Payment Account and shall constitute Principal Proceeds on the second Business Day
prior to any redemption of the Notes in full, and all amounts standing to the credit of the Interest
Collection Account, together with the other amounts not payable into the Principal Collection Account,
as described above, shall be transferred to the Payment Account as Interest Proceeds on the second
Business Day prior to any redemption of the Notes in full, save in the case of amounts standing to the
credit of the Counterparty Downgrade Collateral Account, to the extent payable to any Hedge
Counterparty.
(i)
Principal Collection Account
The Issuer will procure that the following amounts are paid into the Principal Collection
Account promptly upon receipt thereof:
(A)
all principal payments received during the related Payment Period in respect of any
Portfolio Collateral (save for any Non-Euro Portfolio Collateral) including, without
limitation:
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(1) amounts received in respect of any maturity, scheduled amortisation,
mandatory prepayment or mandatory sinking fund payment on a Portfolio
Collateral;
(2) Unscheduled Principal Proceeds;
(3) recoveries on Defaulted Portfolio Collateral to the extent not included in
Sale Proceeds; and
(4) any other principal payments with respect to Portfolio Collateral (to the
extent not included in the Sale Proceeds),
but, for the avoidance of doubt, in each case, excluding any such amounts received in
respect of any Non-Euro Portfolio Collateral;
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
all amendment and waiver fees, all commitment fees and all other fees and
commissions received in connection with any Portfolio Collateral;
Sale Proceeds received in respect of any Portfolio Collateral and all amounts
recovered in respect of Defaulted Portfolio Collateral;
Purchased Accrued Interest other than Purchased Accrued Interest in respect of the
Initial Portfolio Collateral;
amounts transferred from the Unused Proceeds Account;
any Asset Swap Counterparty Principal Exchange Amount under any Asset Swap
Transaction;
any amount payable into the Principal Collection Account from the Hedge
Termination Account pursuant to Condition 3(i)(iv) (Hedge Termination Account);
all amounts payable to the Issuer from the Counterparty Downgrade Collateral
Account upon termination of an Asset Swap Agreement or following an event of
default thereunder; and
any other amounts received in respect of the Portfolio which are not required to be
paid into another Account.
The Issuer shall procure payment of the following amounts (and shall ensure that payment of
no other amount is made, save to the extent otherwise provided above) out of the Principal
Collection Account:
(1) on the Business Day prior to each Payment Date, all Principal Proceeds standing to
the credit of the Principal Collection Account to the Payment Account to the extent
required for disbursement save for amounts deposited after the end of the related
Payment Period and amounts which are permitted to be and have been designated for
reinvestment pursuant to the Collateral Management Agreement for a period
extending beyond such Payment Date and provided that no such transfer shall be
made to the extent that such amounts are not required to be distributed pursuant to
Condition 3(c)(ii) (Application of Principal Proceeds) on such Payment Date;
(2) at any time in accordance with the terms of, and to the extent permitted under, the
Collateral Management Agreement and these Conditions, in the acquisition of
Additional Portfolio Collateral or Substitute Portfolio Collateral or the acquisition of
any Synthetic Securities or payments to an Asset Swap Counterparty in respect of the
initial principal exchange amounts pursuant to an Asset Swap Transaction by the
Collateral Manager, acting on behalf of the Issuer;
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(3) at any time, any Asset Swap Issuer Termination Payment payable by the Issuer
(excluding any Defaulted Asset Swap Termination Payment), to the extent required
to be paid pursuant to an Asset Swap Transaction and to the extent not paid out of
Sale Proceeds received in respect of the related Non-Euro Portfolio Collateral and to
the extent not already paid out of the Hedge Termination Account; and
(4) in the event that the Collateral Manager, acting on behalf of the Issuer, fails to
purchase on or prior to the Effective Date, Original Portfolio Collateral such that the
Aggregate Principal Balance of Original Portfolio Collateral is equal to at least the
Required Portfolio Collateral Balance and fails to obtain a Rating Agency
Confirmation in relation to such failure, all amounts standing to the credit of the
Principal Collection Account shall, on the Business Day prior to each Payment Date
following the Effective Date be transferred to the Payment Account whereupon the
Principal Proceeds will be applied in redemption of the Notes in accordance with the
Priorities of Payment on such Payment Date, until a Rating Agency Confirmation is
obtained.
(ii)
Interest Collection Account
The Issuer will procure that the following amounts are paid into the Interest Collection
Account promptly upon receipt thereof:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
all cash payments of interest (excluding Purchased Accrued Interest, save as provided
in (d) below), in respect of the Portfolio Collateral (save for Non-Euro Portfolio
Collateral) and all periodic payments (excluding for the avoidance of doubt any
termination payments) received in respect of any Synthetic Security;
all amendment and waiver fees, late payment fees, commitment fees and other fees
and commission received in connection with any Portfolio Collateral other than
Defaulted Portfolio Collateral, which the Collateral Manager designates as Interest
Proceeds pursuant to the Collateral Management Agreement;
all proceeds of sale received in respect of any Portfolio Collateral representing
accrued interest that is designated by the Collateral Manager as Interest Proceeds
pursuant to the Collateral Management Agreement, provided that no such designation
may be made in respect of Purchased Accrued Interest other than Purchased Accrued
Interest in respect of the Initial Portfolio Collateral;
all proceeds of sale received in respect of any Defaulted Portfolio Collateral
exceeding 100 per cent. of the Principal Balance of such Defaulted Portfolio
Collateral, which the Collateral Manager determines shall be paid into the Interest
Collection Account;
in respect of any Investment Gains that are realised on any Portfolio Collateral (to the
extent designated as such by the Collateral Manager, acting on behalf of the Issuer)
and after giving effect to the reinvestment of the applicable Sale Proceeds in
accordance with the terms of the Collateral Management Agreement, for so long as
the Investment Gains Ratio at the time such Investment Gains are realised on any
Portfolio Collateral is equal to or greater than the Class F Overcollateralisation Ratio
as at the Effective Date, in each case, immediately prior to and after the application
of funds, all such Investment Gains shall be deposited into the Interest Collection
Account (and not the Principal Collection Account);
Purchased Accrued Interest in respect of the Initial Portfolio Collateral;
all Scheduled Periodic Asset Swap Counterparty Payments received by the Issuer
under any Asset Swap Transaction;
cash amounts (representing any excess standing to the credit of the Non-Euro
Currency Account after provisioning by the Collateral Manager for any amounts due
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to be paid to any Asset Swap Counterparty pursuant to any Asset Swap Transaction)
transferred from the Non-Euro Currency Account, converted into Euro at the
prevailing spot rate of exchange as determined by the Collateral Administrator at the
direction of the Collateral Manager;
(i)
(j)
amounts transferred from the Semi Annual Interest Smoothing Account on the
Business Day following each Payment Date; and
amounts transferred from the Unused Proceeds Account on the Business Day
following the Effective Date.
The Issuer shall procure payment of the following amounts (and shall ensure that payment of
no other amount is made, save to the extent otherwise provided above) out of the Interest
Collection Account:
(1) on the Business Day prior to each Payment Date, all Interest Proceeds standing to the
credit of the Interest Collection 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 Payment Period and
amounts due to be transferred to the Semi Annual Interest Smoothing Account; and
(2) in accordance with the provisions of Condition 3(i)(viii) (Semi Annual Interest
Account), to the extent required, amounts to be transferred on the Business Day
following each Determination Date to the Semi Annual Interest Smoothing Account.
(iii)
Unused Proceeds Account
The Issuer will procure that on the Closing Date an amount equal to the net proceeds of the
issue of the Notes remaining after the payment of (i) all fees, expenses and other amounts
payable by the Issuer on the Closing Date; (ii) the payment of €70,000 into the Expense
Reimbursement Account; and (iii) all amounts payable in connection with the acquisition of
the Initial Portfolio Collateral and any Asset Swap Obligation, shall be paid into the Unused
Proceeds Account.
The Issuer shall procure payment of the following amounts (and shall ensure that payment of
no other amount is made, save to the extent otherwise provided above) out of the Unused
Proceeds Account:
(1) amounts to be used at any time up to and including the last day of the Ramp-Up
Period in accordance with the terms of, and to the extent permitted under, the
Collateral Management Agreement and these Conditions, in the acquisition of the
Original Portfolio Collateral, including any payment to an Asset Swap Counterparty
in respect of the initial principal amounts for Non-Euro Portfolio Collateral, forming
part of the Portfolio;
(2) in the event of the occurrence of an Effective Date Rating Event, the Balance
standing to the credit of the Unused Proceeds Account, on the Business Day prior to
the Payment Date falling immediately after the Effective Date, to the extent required,
to the Payment Account for application as Principal Proceeds in accordance with the
Priorities of Payment, in redemption (on a pro rata basis) of the Notes or, if earlier,
until the Rating Agencies confirm that the Initial Ratings of each of the Notes has
been reinstated; and
(3) in the event that, on the Effective Date, the Aggregate Principal Balance of Original
Portfolio Collateral is equal to or greater than the Required Portfolio Collateral
Balance, the amount remaining in the Unused Proceeds Account shall, on the
Business Day following the Effective Date, (i) be transferred to the Principal
Collection Account for reinvestment in Substitute Portfolio Collateral or, (ii) at the
Collateral Manager’s discretion (acting on behalf of the Issuer) and subject to (a)
Rating Agency Confirmation and (b) a maximum amount equal to 1 per cent. of the
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Required Portfolio Collateral Balance, be transferred to the Interest Collection
Account.
(iv)
Expense Reimbursement Account
The Issuer will procure that the following amounts are paid into the Expense Reimbursement
Account:
(a)
(b)
on the Closing Date, €70,000; and
on each Payment Date (other than the date on which the Subordinated Notes are to be
redeemed and paid in full following such Payment Date) in accordance with subparagraph
(C)(iii) of Condition 3(c)(i) (Application of Interest Proceeds), Interest
Proceeds in an amount equal to such amount which will bring the Expense
Reimbursement Account to a credit balance of €70,000.
The Issuer shall procure payment of the following amounts (and shall ensure that payment of
no other amount is made, save to the extent otherwise provided above) out of the Expense
Reimbursement Account:
(1) on the Business Day prior to each Payment Date, all amounts standing to the credit of
the Expense Reimbursement Account to the Payment Account for disbursement as
Interest Proceeds in accordance with Condition 3(c)(i) (Application of Interest
Proceeds); and
(2) at any time, in payment on behalf of the Issuer of any Trustee Fees and Expenses
(together with any applicable value added tax) 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.
(v)
Payment Account
The Issuer will procure that on the Business Day prior to each Payment Date all Interest
Proceeds standing to the credit of the Interest Collection Account and all Principal Proceeds
standing to the credit of the Principal Collection Account, together with all amounts standing
to the credit of the Expense Reimbursement Account and, if applicable, the Unused Proceeds
Account which are required to be transferred to the Payment Account pursuant to paragraphs
(i) to (iv) (inclusive) 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 (and not disbursed in accordance with the
foregoing sentence) shall be credited to the Interest Collection Account.
(vi)
Hedge Termination Account
The Issuer will procure that each Hedge Counterparty Termination Payment and each Hedge
Replacement Receipt is paid into a segregated sub-account within the Hedge Termination
Account which is opened and maintained in respect of the related hedge transaction promptly
upon receipt thereof.
The Issuer will procure payment of the following amounts (and shall ensure that payment of
no other amount is made, save to the extent otherwise permitted above) out of the Hedge
Termination Account:
(1) at any time, any Hedge Replacement Payment and Hedge Issuer Termination
Payment payable by the Issuer to any Asset Swap Counterparty upon replacement or
termination (as applicable) of an Asset Swap Transaction to which the applicable
sub-account relates up to an amount equal to the Hedge Counterparty Termination
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Payment or Hedge Replacement Receipts received by the Issuer in respect thereof;
and
(2) to the extent that any Hedge Counterparty Termination Payment or Hedge
Replacement Receipt received by the Issuer exceeds any Hedge Replacement
Payment or Hedge Issuer Termination Payment payable upon termination of the
related Asset Swap Transaction or an Asset Swap Transaction replacing the original
Asset Swap Transaction, as applicable, the balance of the related Hedge Counterparty
Termination Payment or Hedge Replacement Receipt standing to the credit of the
applicable sub-account of the Hedge Termination Account shall be transferred to the
Principal Collection Account and, in respect of such balance of the related Hedge
Counterparty Termination Payment, shall be deemed to be Unscheduled Principal
Proceeds.
(vii)
Non-Euro Currency Account
The Issuer will procure that all amounts due to the Issuer in respect of each item of Non-Euro
Portfolio Collateral (including any payments from an Asset Swap Counterparty in respect of
initial principal exchange amounts pursuant to an Asset Swap Transaction but excluding any
Asset Swap Counterparty Principal Exchange Amount or Asset Swap Replacement Receipts)
shall, on receipt, be deposited in a segregated sub-account within the Non-Euro Currency
Account in respect of, and maintained in the currency of each such individual item of Non-
Euro Portfolio Collateral.
The Issuer will procure payment of the following amounts (and shall ensure that payment of
no other amount is made, save to the extent otherwise permitted above) out of the relevant
sub-account of the Non-Euro Currency Account:
(1) at any time, to the extent of any initial principal exchange amount deposited into the
Non-Euro Currency Account in accordance with the terms of, and to the extent
permitted under the Collateral Management Agreement, in the acquisition of Non-
Euro Portfolio Collateral;
(2) Scheduled Periodic Asset Swap Issuer Payments due to each Asset Swap
Counterparty pursuant to each Asset Swap Transaction;
(3) Asset Swap Issuer Principal Exchange Amounts due to each Asset Swap
Counterparty pursuant to each Asset Swap Transaction; and
(4) cash amounts (representing any excess standing to the credit of the Non-Euro
Currency Account after provisioning for any amounts to be paid to any Asset Swap
Counterparty pursuant to any Asset Swap Transaction) to the Interest Collection
Account or the Principal Collection Account after conversion thereof into Euro at the
prevailing spot rate of exchange as determined by the Collateral Administrator at the
direction of the Collateral Manager.
(viii)
Semi Annual Interest Smoothing Account
On each Determination Date (save for: (i) the Determination Date preceding the first Payment
Date, (ii) the Determination Date following the occurrence of an Event of Default and (iii) the
last Determination Date immediately prior to any redemption of the Notes in full) the
Collateral Administrator, on behalf of the Issuer, will calculate and determine the Semi
Annual Proportion, the applicable Semi Annual Proportion Threshold (as defined in the table
below), the Semi Annual Proportion Threshold Excess and, on such date, in accordance with
the table below, will transfer an amount equal to: (i) the relevant Semi Annual Proportion
Threshold Excess, multiplied by (ii) the total amount of interest received by the Issuer during
such Payment Period in respect of the Semi Annual Portfolio Collateral (the “Semi Annual
Interest Received”), from the Interest Collection Account to the Semi Annual Interest
Smoothing Account on the Business Day after such Determination Date. For the purposes of
calculating the Semi Annual Interest Received, the interest received under an item of Semi
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Annual Portfolio Collateral which is Non-Euro Portfolio Collateral shall be the relevant
interest received by the Issuer under any Asset Swap Transaction entered into in relation to
such item of Semi Annual Portfolio Collateral.
“Semi Annual Percentage” means the Aggregate Principal Amount of Semi Annual Portfolio
Collateral in the Portfolio divided by the Aggregate Collateral Balance (and expressed as a
percentage).
“Semi Annual Portfolio Collateral” means, as at any Determination Date, Portfolio
Collateral which provides for the payment of interest in cash semi-annually.
“Semi Annual Proportion” means the proportion (expressed as a percentage) of:
(i)
(ii)
the Aggregate Principal Amount of items of Semi Annual Portfolio Collateral which
have paid interest during the Payment Period ending on or about such Determination
Date, to
the Aggregate Principal Amount of all items of Semi Annual Portfolio Collateral in
the Portfolio as at such Determination Date.
“Semi Annual Proportion Threshold Excess” means the percentage amount which is the
greater of:
(i)
(ii)
zero per cent.; and
the relevant Semi Annual Proportion minus the relevant Semi Annual Proportion
Threshold (specified below) for the applicable Semi Annual Percentage as at such
date of measurement:
Semi Annual Percentage
Semi Annual Proportion Threshold
0% to ≤9% 100%
>9% to ≤18% 75%
>18% to ≤30% 70%
>30% to ≤100% 50%
On the Business Day following each Payment Date, the Balance standing to the
credit of the Semi Annual Interest Smoothing Account shall be transferred to the
Interest Collection Account.
(ix)
Counterparty Downgrade Collateral Account
The Issuer will procure that all Counterparty Downgrade Collateral pledged pursuant to an
Asset Swap Agreement (as the case may be) shall be deposited in the Counterparty
Downgrade Collateral Account (specifically, in an account with the Account Bank if in cash
or in an account with the Custodian if in the form of securities) relating to each Asset Swap
Counterparty. All Counterparty Downgrade Collateral deposited from time to time in any
Counterparty Downgrade Account shall be held and released pursuant to the terms of any
Asset Swap Agreement. Upon any default by an Asset Swap Counterparty under an Asset
Swap Agreement, the Issuer or the Collateral Manager, on its behalf, shall promptly exercise
its remedies under the related agreement, including liquidating the related Counterparty
Downgrade Collateral, whereupon such Counterparty Downgrade Collateral shall be
transferred to the Principal Collection Account in an amount agreed pursuant to the related
Asset Swap Agreement.
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4. Security
(a)
Security
Pursuant to the Trust Deed, the obligations of the Issuer, inter alios, under the Notes of each Class, the
Trust Deed, the Agency Agreement and the Collateral Management Agreement (together with the
obligations owed by the Issuer to the other Secured Parties) are secured in favour of the Trustee for the
benefit of the Secured Parties by:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
an assignment by way of security of the Issuer’s right, title, interest and benefit, present and
future, in and to the Portfolio Collateral from time to time (where such obligations are
contractual rights) and a first fixed charge and a first priority security interest over all of the
Issuer’s right, title, interest and benefit, present and future, in and to the Portfolio Collateral
(where such obligations are securities) and any related security or guarantee from time to time
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 over all of the Issuer’s right, title, interest and benefit, present and future,
in and to each of the Accounts and all moneys from time to time standing to the credit of such
Accounts, subject to, in the case of, the Counterparty Downgrade Collateral Account, the
rights of any Asset Swap Counterparty pursuant to the terms of the related Asset Swap
Agreement for the benefit of such Asset Swap Counterparty and the debts represented thereby
and including, without limitation, all interest accrued and other moneys received in respect
thereof;
an assignment by way of security of the Issuer’s right, title, interest and benefit, present and
future in and to the Eligible Investments from time to time (where such obligations are
contractual rights) and a fixed charge over all the Issuer’s right, title, interest and benefit,
present and future, in and to the Eligible Investments from time to time, together with all
monies, income and proceeds payable or due to become payable thereunder and all interest
accruing thereon from time to time;
an assignment by way of security of the Issuer’s right, title, interest and benefit, present and
future, in and to and under the Agency Agreement and a first fixed charge over each Custody
Account (including, without limitation, each cash account relating to any Custody Account,
any cash held therein and the claim represented by the positive balance from time to time of
any Custody Account);
an assignment by way of security of the Issuer’s right, title, interest and benefit, present and
future, in and to and under any Asset Swap Transaction (including the Issuer’s rights under
any credit support annex entered into pursuant to any Asset Swap Transaction or any Credit
Support Document (as defined therein)), 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 of any Asset Swap Transaction;
an assignment by way of security of the Issuer’s right, title, interest and benefit, present and
future, under the Collateral Management Agreement, the Collateral Administration
Agreement, the Collateral Acquisition Agreements, the Trust Deed, and each other
Transaction Document and any other agreement or document to which the Issuer is party or to
which it is, or may at any time be, expressed to have the benefit of or to have any rights under
or to have any other rights to or interests in unless otherwise charged by the Issuer under the
Trust Deed;
a first fixed charge in favour of the Trustee for the benefit of the Secured Parties over the
Issuer’s right, title, interest and benefit, present and future, in and to all money from time to
time held by the Principal Paying Agent or any other Agent for the payment of principal or
interest on the Notes; and
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(viii)
a floating charge over the whole of the Issuer’s undertaking and assets, to the extent that such
undertaking and assets are not subject to any other security created by the Issuer above,
excluding, for the purpose of paragraphs (i) to (viii) above, (a) any and all assets, property or rights
which are located in, or governed by the laws of The Netherlands (except for contractual rights or
receivables (rechten of vorderingen op naam), which are to be assigned or charged to the Trustee
pursuant to paragraphs (i) to (viii) above (or if applicable, pledged to the Trustee under the Pledge
Agreement)), (b) any and all Dutch Ineligible Securities, (c) the Issuer’s rights under the Management
Agreement and (d) any and all amounts standing to the credit of the Issuer Dutch Account.
If for any reason the purported assignment by way of security of any of the Collateral is found to be
ineffective, the Issuer shall, to the extent possible under applicable law, hold the benefit of such
Collateral and any sums received in respect of such Collateral or any security interest, guarantee or
indemnity or undertaking of whatever nature given to secure the Collateral on trust for the Trustee and
shall (a) account to the Trustee for or otherwise apply all such sums as the Trustee may direct
(provided that subject to the conditions and the terms of the Collateral Management Agreement if no
Event of Default has occurred and is continuing, the Issuer shall be entitled to apply the benefit of such
Collateral and such sums received by it and held on trust under this clause without prior direction from
the Trustee), (b) exercise any rights it may have in respect of the Collateral at the direction of the
Trustee and (c) at its own cost take such action and execute such documents as the Trustee may in its
sole discretion require.
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 until the security over such obligations is
irrevocably discharged in accordance with the provisions of the Trust Deed. The Custodian shall at all
times be an institution whose ratings satisfy the Required Ratings in accordance with the Agency
Agreement. In the event that the ratings of the Custodian fall below the Required Ratings at any time
the Issuer shall procure that a replacement Custodian who is acceptable to the Trustee and whose
ratings satisfy the Required Ratings is appointed within 30 calendar days of such downgrade in
accordance with the provisions of the Agency Agreement.
The Issuer may from time to time grant without the consent of the Noteholders or the Trustee security
to an Asset Swap Counterparty over the Counterparty Downgrade Collateral deposited by such Asset
Swap Counterparty in the Counterparty Downgrade Collateral Account as security for the Issuer’s
obligations to repay such Counterparty Downgrade Collateral pursuant to the terms of the applicable
Asset Swap Agreement. In granting any such security to a third party the Issuer may enter into such
ancillary documentation as may be necessary to effect such security and reflect the respective rights of
the beneficiary thereof and the Secured Parties.
Pursuant to the terms of the Trust Deed, the Trustee is exempted, inter alia, from any liability in
respect of any loss or theft of or reduction in the value of the Collateral and from any obligation to
insure the Collateral and from any claim arising from the fact and in the event that any item of the
Collateral is held by the Collateral Manager. 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.
Pursuant to the Pledge Agreement, the Issuer has also created a Belgian law pledge over the Portfolio
Collateral from time to time held by the Custodian on behalf of the Issuer in Euroclear.
(b)
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 shall be applied in accordance with the
Priorities of Payment.
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(c)
Limited Recourse and Non-Petition
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. If the net proceeds of realisation of the
security constituted by the Trust Deed upon enforcement thereof in accordance with Condition 11
(Enforcement) and the provisions of the Trust Deed, 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 amount being referred to herein as a “shortfall”), all of 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 Issuer will not be obligated to pay, and the other assets (if any) of
the Issuer (including the amounts standing to the credit of the Issuer Dutch Account and the Issuer’s
rights under the Management Agreement) will not be available for payment of, such shortfall which
shall be suffered 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 shall not thereafter revive and none of the Noteholders of each
Class or the other Transaction Creditors may take any further action to recover such amounts. 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 to institute against the Issuer, or join in
any institution against the Issuer of, any bankruptcy, reorganisation, arrangement, insolvency, windingup
or liquidation proceedings or any proceedings for the appointment of a liquidator or administrator or
a similar bankruptcy official 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.
Pursuant to the terms of the Trust Deed on each Payment Date prior to enforcement of the security
constituted under the terms of the Trust Deed or redemption of the Notes in accordance with Condition
7(b) (Optional Redemption), the Transaction Creditors shall be bound by the application of Interest
Proceeds and Principal Proceeds as set out in Conditions 3(c)(i) and 3(c)(ii) (Priorities of Payment).
None of the Trustee, the Manager, the Collateral Manager, the Collateral Administrator, the Account
Bank, the Custodian, any Asset Swap Counterparty or the Agents 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 Class S1 Combination Notes shall be limited recourse obligations of the Issuer to the extent of
their respective Components.
(d)
Acquisition and Sale of Portfolio
The Collateral Manager is 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 Manager in managing the Portfolio
include: (i) the initial selection of the Original Portfolio Collateral intended to be acquired on the
Closing Date and during the Ramp-Up Period and the acquisition of such Original Portfolio Collateral
on behalf of the Issuer during the Ramp-Up Period to the extent not purchased on the Closing Date; (ii)
the sale of certain of the Portfolio Collateral during the Reinvestment Period and, in certain
circumstances after expiry of the Reinvestment Period; (iii) the acquisition of Additional Portfolio
Collateral during and, in certain circumstances, after the Reinvestment Period; and (iv) the acquisition
of Substitute Portfolio Collateral. The Collateral Manager is required to monitor the Portfolio
Collateral with a view to seeking to determine whether any Portfolio Collateral has become Defaulted
Portfolio Collateral or Credit Risk Portfolio Collateral or Appreciated Portfolio Collateral, provided
that, if it fails 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 the Issuer or the
Collateral Manager and no Noteholder shall have any recourse against any of the Issuer, the Collateral
Manager, the Collateral Administrator, the Principal Paying Agent, the Custodian, the Irish Paying
Agent, any Asset Swap Hedge Counterparty or the Trustee for any loss suffered as a result of such
failure.
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(e)
Exercise of Rights in Respect of the Portfolio
Pursuant to the Collateral Management Agreement, the Issuer authorises the Collateral Manager, 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 and agrees that it will not
exercise any such rights on its own behalf. In particular, the Collateral Manager is 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 to any composition, compounding or other similar
arrangement with respect to any obligation forming part of the Portfolio.
(f)
Information Regarding the Portfolio
The Issuer shall procure that the Reports are mailed upon publication thereof by pre-paid first class
post to the Trustee, each Asset Swap Counterparty, the Collateral Manager, the Rating Agencies and
(at the address specified in each of the requests referred to below) to each Noteholder of each Class
upon request in writing therefor.
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 the Senior Notes and Subordinated Notes, that it will do the
following:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
take such steps as are reasonable to enforce all of its rights under the Transaction Documents
and such steps as are reasonable to enforce its rights in respect of the Collateral;
comply with its obligations under the Notes and the Transaction Documents to which it is a
party;
keep proper books of account in accordance with its obligations under the laws of The
Netherlands;
at all times maintain its tax residence outside the United Kingdom and the United States of
America and will not establish a branch, agency or place of business or register as a company
in the United Kingdom or the United States of America;
pay its debts generally as they fall due;
do all such things as are necessary to maintain its corporate existence;
use its best endeavours to obtain and maintain a listing of the Notes (to the extent that such
Notes are Outstanding) on the Irish Stock Exchange. If however, it is unable to do so, having
used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be
unduly onerous and the Trustee is satisfied that the interests of the holders of the Notes (to the
extent that such Notes are Outstanding) 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, such approval not to be unreasonably withheld) decide or failing such decision as the
Trustee may determine;
supply such information to the Rating Agencies as they may reasonably request;
maintain its “centre of main interests” (within the meaning of Council Regulation (EC) no.
1346/2000 on Insolvency Proceedings, the “Insolvency Regulations”) in The Netherlands
and will not open any “centre of main interests”, branch office or permanent establishment (as
the term is used in article 2(h) of the Insolvency Regulations) anywhere in the world; and
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(x)
prepare, or procure the preparation of, the Reports in the manner contemplated in the
Collateral Administration Agreement.
(b)
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
Senior Notes and Subordinated Notes, that (to the extent applicable) it will not, without the written
consent of the Trustee and (save in respect of Condition 5(b)(i) or (ii) below) receipt of Rating Agency
Confirmation in respect thereof:
(i)
(ii)
(iii)
sell, discount, transfer, assign, lend or otherwise dispose of any of its right, title or interest in
or to the Collateral nor will it create or permit to be outstanding any mortgage, pledge, lien,
charge, encumbrance or other security interest over the Collateral other than in accordance
with the Trust Deed;
sell, 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 other property or assets or any part thereof or interest therein other than in
accordance with the Trust Deed;
engage in any business other than:
(a)
(b)
(c)
(d)
acquiring and holding any property, assets or rights which 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 pursuant to the Trust Deed;
issuing and performing its obligations under the Notes;
entering into, exercising its rights and performing its obligations under or enforcing
its rights under the Transaction Documents; or
performing any act incidental to the above;
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
agree to any amendment to any provision of or grant any waiver or consent under any of the
Transaction Documents (save in accordance with these Conditions and the Trust Deed);
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, or as otherwise
permitted pursuant to the Trust Deed;
amend its constitutional documents;
have any subsidiaries;
have any employees (for the avoidance of doubt the Managing Directors of the Issuer do not
constitute employees);
enter into any reconstruction, amalgamation, merger or consolidation;
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 the Foundation (or the holders of depository receipts of the Issuer’s
shares) from amounts standing to the credit of the Issuer Dutch Account;
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;
77

(xii)
(xiii)
otherwise than as contemplated in these Conditions and the Transaction Documents, release
from or terminate the appointment of the Collateral Manager under the Collateral
Management Agreement or the Collateral Administrator under the Collateral Administration
Agreement (including in each case any transactions entered into thereunder) or release any of
them from any executory obligation thereunder; or
enter into any lease in respect of, or own, premises.
6. Interest
(a)
Payment Dates
(i)
Senior Notes
Each Class of Senior Notes bears interest at a floating rate from the Closing Date and such
interest will be payable quarterly (or, in the case of interest accrued during the first Interest
Accrual Period, on the Payment Date immediately following the first Interest Accrual Period)
in arrear on each Payment Date.
(ii)
Subordinated Notes
The Subordinated Notes shall bear interest from the Closing Date at a fixed rate equal to 7.5
per cent. per annum (the “Subordinated Fixed Rate of Interest”) and such interest will be
payable quarterly (or, in the case of interest accrued during the first Interest Accrual Period,
on the Payment Date immediately following the first Interest Accrual Period) in arrear on each
Payment Date (the “Subordinated Interest Amount”). In addition, residual interest shall be
payable in respect of the Subordinated Notes 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 Condition 6(f) (Interest on the Subordinated Notes).
(b)
Interest Accrual
(i)
Senior Notes
Each Senior Note will cease to bear interest from the due date for final 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 Principal Paying Agent has notified the Noteholders of
such Class of 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 will 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.
(iii)
Calculation Basis of Accrual
Interest on each Class of Senior Notes shall accrue from day to day and shall be calculated on
the basis of a 360 day year and the actual number of days elapsed.
The Subordinated Interest Amount for the relevant Interest Accrual Period will be determined
on the basis of a 360 day year consisting of 12 months of 30 days each.
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(iv)
Interest on the Class S1 Combination Notes
The Components comprising the Class S1 Combination Notes bear interest at the same rate, or
receive interest in the same manner as the Class D Notes in the case of the Class S1/D
Component and the Subordinated Notes in the case of the Class S1/Subordinated Component.
The Issuer shall, and shall only be obliged to, pay any interest amount payable in respect of
the Components comprising the Class S1 Combination Notes in full on any Payment Date to
the extent that payments made on the Class D Notes and the Subordinated Notes are allocated,
respectively, to the Class S1/D Component and the Class S1/Subordinated Component of the
Class S1 Combination Notes for the payment of interest thereon.
Interest will cease to be payable in respect of the Class S1 Combination Notes on the date the
respective Components of the Class S1 Combination Notes cease to bear interest.
(c)
Deferral of Interest
If interest on the Class A Notes, Class B Notes or the Class C Notes is not paid on the related Payment
Date, such unpaid interest (together with interest accrued on such unpaid interest, which shall accrue,
from, and including, such Payment Date, at the rate and in accordance with the terms applicable to
interest payable on the Class of Notes to which such unpaid interest is related) shall be paid at the
immediately succeeding Payment Date in accordance with the Priorities of Payment. For so long as
any of the Class A Notes, the Class B Notes and the Class C 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 D Notes on any Payment Date (each such amount being referred to as “Class D Deferred
Interest”) shall be deferred and shall, with effect from and including such Payment Date, be added to
the Aggregate Principal Amount of the Class D Notes of the applicable Class D Note Outstanding and
the principal amount of each such Class D Note shall be increased, for the purposes of this Condition
6(c) (Deferral of Interest) only, by the amount of its pro rata share of such Class D Deferred Interest
which shall itself bear interest in accordance with these Conditions from such date. For so long as any
of the Class A Notes, the Class B Notes, the Class C Notes and the Class D 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 E Notes on any Payment Date (each such amount being referred to as “Class E
Deferred Interest”) shall be deferred and shall, with effect from and including such Payment Date, be
added to the Aggregate Principal Amount of the Class E Notes of the applicable Class E Note
Outstanding and the principal amount of each such Class E Note shall be increased, for the purposes of
this Condition 6(c) (Deferral of Interest) only, by the amount of its pro rata share of such Class E
Deferred Interest which shall itself bear interest in accordance with these Conditions from such date.
For so long as any of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and
the Class E 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 F Notes on any Payment Date (each such
amount being referred to as “Class F Deferred Interest”) shall be deferred and shall, with effect from
and including such Payment Date, be added to the Aggregate Principal Amount of the Class F Notes of
the applicable Class F Note Outstanding and the principal amount of each such Class F Note shall be
increased, for the purposes of this Condition 6(c) (Deferral of Interest) only, by the amount of its pro
rata share of such Class F Deferred Interest which shall itself bear interest in accordance with these
Conditions from such date. For so long as any of the Senior Notes remain Outstanding, an amount of
interest equal to any shortfall in payment of the Subordinated Interest Amount due and payable in
respect of the Subordinated Notes on any Payment Date (each such amount being referred to as
“Subordinated Deferred Interest”) shall be deferred and shall, with effect from and including such
Payment Date, be added to the Aggregate Principal Amount of the Subordinated Notes of the
applicable Subordinated Notes Outstanding and the principal amount of each such Subordinated Note
shall be increased, for the purposes of this Condition 6(c) (Deferral of Interest) only, by the amount of
its pro rata share of such Subordinated Deferred Interest which shall itself bear interest in accordance
with these Conditions from such date.
For the avoidance of doubt, references to “Class D Notes” and “Subordinated Notes” include the
relevant Components of the Class S1 Combination Notes.
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(d)
Payment of Deferred Interest
Class D Deferred Interest in respect of any Class D Note, Class E Deferred Interest in respect of any
Class E Note, Class F Deferred Interest in respect of any Class F Note and Subordinated Deferred
Interest in respect of any Subordinated Note shall only become payable by the Issuer in accordance
with Condition 3(c) (Priorities of Payment) to the extent that Interest Proceeds or Principal Proceeds
are available to make such payment in accordance with the Priorities of Payment. For the avoidance of
doubt, references to “Class D Notes” and “Subordinated Notes” include the relevant Components of
the Class S1 Combination Notes.
(e)
Interest on the Senior Notes
(i)
Rate of Interest
Subject as provided in paragraph (iii) below, the rate of interest from time to time in respect of
each Class of Senior Notes (respectively, the “Class A Floating Rate of Interest”, the “Class
B Floating Rate of Interest”, the “Class C Floating Rate of Interest”, the “Class D
Floating Rate of Interest”, the “Class E Floating Rate of Interest” and the “Class F
Floating Rate of Interest”) will be determined by the Agent Bank on the following basis:
(a)
On the second Business Day before the beginning of each Interest Accrual Period
(the “Interest Determination Date”) the Agent Bank will determine the offered rate
for three month euro deposits (or, in the case of the first Interest Accrual Period, as
determined through the use of linear interpolation by reference to 6 month euro
deposits and 7 month euro deposits rounded, if necessary, to the nearest one hundredthousandth
of a percentage point (with 0.000005 being rounded upwards)) as at 11:00
am (Brussels time) on the Interest Determination Date in question. Such offered rates
will be that which appears on the display designated as page EURIBOR01 on Reuters
(or (aa) such other page or service as may replace it for the purpose of displaying
EURIBOR rates; or (bb) if that service ceases to display such information, such page
as displays such information on such service (or, if more than one, that one
previously approved in writing by the Trustee) (the “Screen Rate”). For each Interest
Accrual Period:
(1) the Class A Floating Rate of Interest shall be the aggregate of the rate which
is so determined and the Class A Margin (as defined below);
(2) the Class B Floating Rate of Interest shall be the aggregate of the rate which
is so determined and the Class B Margin (as defined below);
(3) the Class C Floating Rate of Interest shall be the aggregate of the rate which
is so determined and the Class C Margin (as defined below);
(4) the Class D Floating Rate of Interest shall be the aggregate of the rate which
is so determined and the Class D Margin (as defined below);
(5) the Class E Floating Rate of Interest shall be the aggregate of the rate which
is so determined and the Class E Margin (as defined below); and
(6) the Class F Floating Rate of Interest shall be the aggregate of the rate which
is so determined and the Class F Margin (as defined below),
all as determined by the Agent Bank.
(b)
If the offered rate so determined 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 hundredthousandth
of a percentage point (with 0.000005 being rounded upwards)) of the
rates (being at least two) which so appear, as determined by the Agent Bank. If for
any other reason such offered rate does not so appear, or if the relevant page is
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unavailable, the Agent Bank 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 Agent Bank
with its offered quotation to leading banks for euro deposits in the Euro-zone
interbank market for a period of three months (or, in the case of the first Interest
Accrual Period, as determined through the use of linear interpolation by reference to
6 month euro deposits and 7 month euro deposits) as at 11:00 am (Brussels time) on
the Interest Determination Date in question. The Floating Rate of Interest in respect
of each of the Senior Notes for such Interest Accrual Period shall be the aggregate of
the Margin (as defined below) for each respective Senior Note 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), all as determined by the Agent Bank.
(c)
(d)
If on any Interest Determination Date one only or none of the Reference Banks
provides such quotation, the Floating Rate of Interest (as defined below) in respect of
each of the Senior Notes for the next Interest Accrual Period shall be the rate per
annum which the Agent Bank determines to be the arithmetic mean (rounded, if
necessary, to the nearest one hundred thousandth of a percentage point (with
0.000005 being rounded upwards)) of the euro lending rates which major banks in
the Euro-zone selected by the Agent Bank are quoting, on the relevant Interest
Determination Date, for loans in euro for a period of three months to leading
European banks (or, in the case of the first Interest Accrual Period, as determined
through the use of linear interpolation by reference to loans in euro for a period of 6
months and 7 months to leading European banks), plus the relevant Margin (as
defined below) for each respective Senior Note.
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, as amended by the Treaty on European Union and the Treaty
of Amsterdam;
“Class A Margin” means 0.26 per cent. per annum;
“Class B Margin” means 0.36 per cent. per annum;
“Class C Margin” means 0.47 per cent. per annum;
“Class D Margin” means 0.71 per cent. per annum;
“Class E Margin” means 1.90 per cent. per annum;
“Class F Margin” means 4.75 per cent. per annum;
“Floating Rate of Interest” means in respect of the Senior Notes all or any of the
following: the Class A Floating Rate of Interest, the Class B Floating Rate of Interest,
the Class C Floating Rate of Interest, the Class D Floating Rate of Interest, the Class
E Floating Rate of Interest and the Class F Floating Rate of Interest, as applicable;
and
“Margin” means in respect of the Senior Notes all or any of the following: the Class
A Margin, the Class B Margin, the Class C Margin, the Class D Margin, the Class E
Margin and the Class F Margin, as applicable.
(ii)
Determination of Floating Rate of Interest and Calculation of Interest Amount
The Agent Bank 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 after such date,
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determine the Floating Rate of Interest and calculate the Interest Amount payable in respect of
principal amounts of the Senior Notes for the relevant Interest Accrual Period. The Interest
Amount in respect of each Senior Note shall be calculated by applying the Floating Rate of
Interest on the relevant Senior Note to an amount equal to such Notes outstanding principal
amount as at such Interest Determination Date, 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).
(iii)
Reference Banks and Agent Bank:
The Issuer will procure that, so long as any Senior Notes remain outstanding:
(a)
(b)
an Agent Bank shall be appointed and maintained for the purposes of determining the interest
rate and interest amount payable in respect of each Class of Senior Notes, as applicable; and
in the event that the 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 Agent Bank is unable or unwilling to continue to act as the Agent Bank for the purpose of
calculating interest hereunder or fails duly to establish the relevant Floating Rate of Interest for any
Interest Accrual Period or to calculate the Interest Amount on any of the Senior Notes, the Issuer shall
(with the prior approval of the Trustee) appoint some other leading bank to act as such in its place. The
Issuer shall procure that the Irish Stock Exchange is notified of such appointment. The Agent Bank
may not resign its duties without a successor having been so appointed. The Agent Bank’s
appointment may be terminated by the Issuer (with the prior approval of the Trustee) on at least 45
days’ prior written notice, provided that no such notice will take effect until a suitable replacement
agent bank has been appointed (with the approval of the Trustee) and such appointment becomes
effective.
(f)
Interest on the Subordinated Notes
The Subordinated Fixed Rate of Interest shall be 7.5 per cent. per annum. In addition, to the extent that
there are available funds, the Subordinated Noteholders shall also be entitled to additional interest on
the Subordinated Notes (the “Subordinated Residual Interest”). The Subordinated Residual Interest
will be payable on each Payment Date on an available funds basis, subject to prior payment of all other
amounts in accordance with the Priorities of Payment. The Agent Bank, on behalf of the Issuer, will on
each Interest Determination Date calculate the Subordinated Interest Amount payable in respect of each
€100,000 in original principal amount of the Subordinated Notes for the relevant Interest Accrual
Period.
Notwithstanding any other provisions of the Conditions or the Trust Deed, all references herein and
therein to any of the Subordinated Notes being redeemed in full or at their Principal Amount
Outstanding shall be deemed to be amended to the extent required to ensure that €1 principal amount of
Subordinated Notes remains Outstanding at all times and amounts which are to be applied in
redemption of such Notes pursuant hereto which are in excess of the Principal Amount Outstanding
thereof minus €1, shall constitute Subordinated Residual Interest payable in respect of such Notes and
shall not be applied in redemption of the Principal Amount Outstanding thereof, provided always
however that such €1 shall no longer remain outstanding and the Subordinated Notes shall be redeemed
in full on the date on which all of the Collateral securing the Notes has been realised and is to be finally
distributed to the Noteholders.
(g)
Publication of Floating Rates of Interest and Interest Amounts
The Agent Bank will cause the Floating Rate of Interest, where applicable, and the Interest Amount
payable in respect of each Class of Notes for each Interest Accrual Period and Payment Date to be
notified to the Issuer, the Principal Paying Agent, the Collateral Administrator, the Trustee, any Paying
Agent and, for so long as the Notes are listed on the Irish Stock Exchange, the Irish Stock Exchange as
soon as possible after their determination but in no event later than the fourth Business Day thereafter,
and shall cause each such rate, amount and date to be notified to the Noteholders of each Class in
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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 and Payment Date in respect of each of the Senior 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 Agent Bank (or the Collateral
Administrator, in respect of the Subordinated Residual Interest) in accordance with this Condition but
no publication of the applicable Interest Amount shall be made unless the Trustee so determines.
(h)
Determination or Calculation by Trustee
If the Agent Bank does not at any time for any reason so determine a Floating Rate of Interest or
calculate the Interest Amounts payable in respect of any of the Notes for an Interest Accrual Period, the
Trustee (or a person appointed by it for the purpose) shall do so and such determination or calculation
shall be deemed to have been made by the Agent Bank and shall be binding on 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 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 is required to
make pursuant to this Condition 6(h) (Determination or Calculation by Trustee).
(i)
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 Agent Bank, the Principal Paying Agent or the Trustee, will (in the absence of
wilful default, bad faith or manifest or proven error) be binding on the Issuer, the Reference Banks, the
Agent Bank, the Trustee, the Principal Paying Agent, any Paying Agent, all Noteholders and all other
Secured Parties 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 Agent Bank or the Trustee in connection with the
exercise or nonexercise by them of their powers, duties and discretions under this Condition.
7. Redemption, Purchase and Cancellation
(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 accordance with the Priorities of Payment. Notes may not be redeemed
other than in accordance with this Condition 7 (Redemption, Purchase and Cancellation) (otherwise
than as provided in the Conditions) and the Class S1 Combination Notes shall be redeemed in
accordance with the redemption provisions applicable to the respective Component of each Class S1
Combination Note, as applicable.
(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
Senior Notes and the Subordinated Notes shall be redeemable by the Issuer, in whole as to all
Classes at once but not in part, at the applicable Redemption Prices, from the proceeds of
liquidation or realisation of the Collateral, following consultation with the Collateral
Administrator as to the amount of administrative and other fees and expenses payable in such
circumstances under the Priorities of Payment prior to the payment of the principal of the
Senior Notes and the Subordinated Notes:
(a)
(b)
upon the occurrence of a Collateral Tax Event; or
on any Payment Date after expiry of the Non-Call Period,
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in each case at the request in writing of the holders of at least 66⅔ per cent. of the Aggregate
Principal Amount of Subordinated Notes Outstanding (as evidenced by duly completed
Redemption Notices) in accordance with the procedures described in paragraph (ii) below.
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).
“Collateral Tax Event” means at any time, as a result of the introduction of a new, or any
change in, any home jurisdiction or foreign tax statute, treaty, regulation, rule, ruling, practice,
procedure or judicial decision or interpretation (whether proposed, temporary or final), interest
payments due from the obligors under any Portfolio Collateral in relation to any Payment
Period becoming properly subject to the imposition of home jurisdiction or foreign
withholding tax (other than where such withholding tax is compensated for by a “gross-up”
provision in the terms of the Portfolio Collateral or such requirement to withhold is eliminated
pursuant to a double taxation treaty so that the Issuer as holder thereof is held completely
harmless from the full amount of such withholding tax on an after-tax basis) so that the
aggregate amount of such withholding tax on all Portfolio Collateral in relation to such
Payment Period is equal to or in excess of six per cent. of the aggregate interest payments due
(for the avoidance of doubt, excluding any additional interest arising as a result of the
operation of any gross-up provision) on all Portfolio Collateral in relation to such Payment
Period.
(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 to exercise any right of optional
redemption pursuant to this Condition 7(b) (Optional Redemption), the Collateral
Administrator shall, as soon as practicable, and in any event not later than 17 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 which rank in priority to payments in respect of the Subordinated Notes in accordance
with the Priorities of Payment minus the amounts standing to the credit of the Accounts.
The Notes shall not be optionally redeemed pursuant to paragraph (i) (Redemption at the
Option of the Subordinated Noteholders) above unless at least seven Business Days before the
scheduled Redemption Date the Collateral Manager shall have certified to the Trustee who
shall be entitled to rely on such certificate without further enquiry, in form satisfactory to the
Trustee that the Collateral Manager on behalf of the Issuer has entered into a binding
agreement or agreements with a financial institution or institutions whose (or whose
guarantor’s under such obligations) short term senior unsecured debt obligations (other than
such obligations whose rating is based on the credit of a person other than such institution)
have a credit rating of at least “F1” by Fitch and, for so long as any Class A Notes, Class B
Notes, Class C Notes and Class D Notes are outstanding and rated by S&P, “A-1+” by S&P,
to purchase, not later than the Business Day immediately preceding the scheduled Redemption
Date, upon payment in immediately available funds, all or part of the Portfolio and that the net
proceeds of sale thereof, together with amounts realisable from Eligible Investments maturing
on or prior to the Redemption Date, is at least equal to the amount notified by the Collateral
Administrator as being the Redemption Threshold Amount.
(iii)
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 Administration 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.
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Any exercise of a right of optional redemption pursuant to this Condition shall be effected by
delivery to the Principal Paying Agent or any Paying Agent by the requisite amount of
Subordinated Noteholders of the Subordinated Notes held by them together with a duly
completed Redemption Notice 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 received to each of the Issuer, the Trustee, the Collateral
Administrator and the Collateral Manager.
The Collateral Manager shall notify the Issuer, the Trustee, the Collateral Administrator, each
Asset Swap Counterparty and the Principal Paying Agent, whereupon the Principal Paying
Agent shall notify the Noteholders, upon satisfaction of any of the conditions set out in
paragraph (ii) above and shall arrange for liquidation and/or realisation of the Portfolio 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 (together with all other amounts required to be paid in such circumstances in
accordance with the Priorities of Payment) in accordance with this 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 and Additional Coverage Test
(i)
Class C Coverage Test
If the Class C Coverage Test is not met on any Determination Date after the Effective Date,
Interest Proceeds and, to the extent applicable, Principal Proceeds transferred to the Payment
Account immediately prior to the related Payment Date will be applied, in accordance with the
Priorities of Payment, in redemption of the Class A Notes and, following redemption in full of
the Class A Notes, in redemption of the Class B Notes and, following redemption in full of the
Class B Notes, in redemption of the Class C Notes (subject in each case to payment of any
prior ranking amounts) until the Class C Coverage Test is satisfied if recalculated following
such redemption.
(ii)
Class D Coverage Test
If the Class D Coverage Test is not met on any Determination Date after the Effective Date,
Interest Proceeds and, to the extent applicable, Principal Proceeds transferred to the Payment
Account immediately prior to the related Payment Date will be applied, in accordance with the
Priorities of Payment, in redemption of the Class A Notes and, following redemption in full of
the Class A Notes, in redemption of the Class B Notes and, following redemption in full of the
Class B Notes, in redemption of the Class C Notes and, following the redemption in full of the
Class C Notes, in redemption of the Class D Notes (subject in each case to payment of any
prior ranking amounts) until the Class D Coverage Test is satisfied if recalculated following
such redemption.
(iii)
Class E Coverage Test
If the Class E Coverage Test is not met on any Determination Date after the Effective Date,
Interest Proceeds and, to the extent applicable, Principal Proceeds transferred to the Payment
Account immediately prior to the related Payment Date will be applied, in accordance with the
Priorities of Payment, in redemption of the Class A Notes and, following redemption in full of
the Class A Notes, in redemption of the Class B Notes and, following redemption in full of the
Class B Notes in redemption of the Class C Notes and, following the redemption in full of the
Class C Notes, in redemption of the Class D Notes and, following redemption in full of the
Class D Notes, in redemption of the Class E Notes (subject in each case to payment of any
prior ranking amounts) until the Class E Coverage Test is satisfied if recalculated following
such redemption.
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(iv)
Class F Coverage Test
If the Class F Coverage Test is not met on any Determination Date after the Effective Date,
Interest Proceeds and, to the extent applicable, Principal Proceeds transferred to the Payment
Account immediately prior to the related Payment Date will be applied, in accordance with the
Priorities of Payment, in redemption of the Class A Notes and, following redemption in full of
the Class A Notes, in redemption of the Class B Notes and, following redemption in full of the
Class B Notes in redemption of the Class C Notes and, following the redemption in full of the
Class C Notes, in redemption of the Class D Notes and, following redemption in full of the
Class D Notes, in redemption of the Class E Notes and, following redemption of the Class E
Notes, in redemption of the Class F Notes (subject in each case to payment of any prior
ranking amounts) until the Class F Coverage Test is satisfied if recalculated following such
redemption.
(v)
Interest Coverage Test
If the Interest Coverage Test is not met on any Determination Date after the Effective Date,
Interest Proceeds and to the extent applicable, Principal Proceeds, transferred to the Payment
Account immediately prior to the related Payment Date will be applied, in accordance with the
Priorities of Payment, in redemption of the Class A Notes and, following redemption in full of
the Class A Notes, in redemption of the Class B Notes and, following redemption in full of the
Class B Notes in redemption of the Class C Notes (subject in each case to payment of any
prior ranking amounts) until the Interest Coverage Test is satisfied if recalculated following
such redemption.
(vi)
Additional Coverage Test
On any Determination Date after the Reinvestment Period if the Additional Coverage Test is
not met on such Determination Date, Interest Proceeds transferred to the Payment Account
immediately prior to the related Payment Date will be applied in accordance with item (U)(ii)
of the Interest Proceeds Priorities of Payment.
(d)
Redemption upon Effective Date Rating Event
In the event that, as at the second Business Day prior to the Payment Date following the Effective Date
and any Payment Date thereafter, an Effective Date Rating Event has occurred and is continuing, the
Senior Notes shall be redeemed in accordance with the Priorities of Payment on such Payment Date out
of Interest Proceeds and thereafter Principal Proceeds, in each case, until redeemed in full or, if earlier,
until the Rating Agencies confirm the Initial Ratings of the Notes. For the avoidance of doubt, the
Collateral Manager (acting on behalf of the Issuer) is under no obligation whatsoever 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 to the Rating Agencies in favour of redemption of Senior
Notes pursuant to this Condition 7(d) (Redemption upon Effective Date Rating Event).
(e)
Redemption upon Failure to Identify Additional Portfolio Collateral and Substitute Portfolio
Collateral during the Reinvestment Period
If the Collateral Manager determines that it has been unable to identify suitable Additional Portfolio
Collateral or Substitute Portfolio Collateral in sufficient amounts to permit the investment or
reinvestment of (i) the Sale Proceeds of any Portfolio Collateral; or (ii) any Scheduled Principal
Proceeds or Unscheduled Principal Proceeds during the Reinvestment Period, received by the Issuer
during the three Payment Periods immediately preceding a Payment Date (including the Payment
Period on the date of receipt of such proceeds), then such amounts (each a “Reinvestment
Redemption Amount”) shall be applied in redemption of the Notes in accordance with the Priorities of
Payment on such Payment Date.
(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 in redemption of the Class A Notes until fully redeemed and,
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thereafter, in redemption of the Class B Notes until fully redeemed and, thereafter, in redemption of the
Class C Notes until fully redeemed and, thereafter, in redemption of the Class D Notes until fully
redeemed and, thereafter, in redemption of the Class E Notes until fully redeemed and, thereafter, in
redemption of the Class F Notes until fully redeemed and, thereafter, in redemption of the Subordinated
Notes until fully redeemed, in each case, in accordance with the Priorities of Payment and subject to
payment of any prior ranking amounts.
(g)
Redemption
All Notes in respect of which any notice of redemption is given under this Condition 7 (Redemption,
Purchase and Cancellation) 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 7 (Redemption, Purchase and Cancellation).
For the purposes of this Condition 7 (Redemption) the Class S1 Combination Notes shall be redeemed
and cancelled when their respective Components are fully redeemed and cancelled and each
Component of the Class S1 Combination Notes shall be redeemed to the extent that such Component is
redeemed or cancelled pursuant to the Conditions applicable to the Class of Notes to which it relates.
Each Component of the Class S1 Combination Notes will be redeemed by allocation of payments in
respect of the redemption of the Class of Notes to which it relates. The Components of the Class S1
Combination Notes will be redeemed as follows: (a) with respect to the Class S1/D Component, by
allocation of payments in respect of redemption of the Class D Notes to such Component in the
proportion that the principal amount of the Class S1/D Component Outstanding bears to the principal
amount of the Class D Notes Outstanding; and (b) with respect to the Class S1/Subordinated
Component, by allocation of payments in respect of redemption of the Subordinated Notes to such
Component in the proportion that the principal amount of the Class S1/Subordinated Component
Outstanding bears to the principal amount of the Subordinated Notes Outstanding.
(h)
Purchase of Notes by the Issuer
(i)
Senior Notes
The Issuer may at any time purchase the Senior Notes in the open market or in privately
negotiated transactions, or otherwise at a price not exceeding the relevant Redemption Prices
and including interest accrued thereon to the date of such purchase; provided, however, that
no such Note shall be purchased unless:
(a)
(b)
(c)
in the case of Class F Notes, all of the Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes and the Class E Notes have been redeemed and paid in full;
in the case of Class E Notes, all of the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes have been redeemed and paid in full; in the case of the
Class D Notes, all of the Class A Notes, the Class B Notes and the Class C Notes
have been redeemed and paid in full; in the case of the Class C Notes, all of the Class
A Notes and the Class B Notes have been redeemed in full and in the case of the
Class B Notes, all of the Class A Notes have been redeemed in full;
after giving effect to such purchase, the Coverage Tests and the Additional Coverage
Test (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 satisfied, as notified
by the Collateral Administrator to the Trustee and confirmed in writing by the
independent accountants appointed pursuant to the Collateral Administration
Agreement;
the Collateral Administrator notifies to the Trustee in writing that an amount
sufficient to pay interest on the Class A Notes, or in the event that the Class A Notes
have been redeemed and paid in full, on the Class B Notes, or in the event that the
Class B Notes have been redeemed and paid in full, on the Class C Notes, or in the
event that the Class C Notes have been redeemed and paid in full, on the Class D
Notes, or in the event that the Class D Notes have been redeemed and paid in full, on
the Class E Notes, or in the event that the Class E Notes have been redeemed and
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paid in full, on the Class F 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
Collection Account; and
(d)
in the event that any Senior Note will remain Outstanding following such purchase,
the Issuer and the Trustee have received the Rating Agency Confirmation in respect
of such purchase.
(ii)
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 Senior Notes have been redeemed and paid in full.
(iii)
Conditions to Purchase
The Collateral Manager on behalf of the Issuer shall use either cash available on the date of
purchase or may sell one or more items of Portfolio Collateral and use the Sale Proceeds
thereof to acquire any Notes to be purchased pursuant to this Condition 7 (Redemption,
Purchase and Cancellation), provided that the Collateral Manager may not sell (and the
Trustee shall not be required to release) Portfolio Collateral pursuant to this Condition 7
(Redemption, Purchase and Cancellation) unless the Collateral Manager certifies to the
Trustee (and the Trustee shall be entitled to rely on such certificate without any further
enquiry) that (A) the Sale Proceeds from the sale of such Portfolio Collateral (based on
commitments to purchase such Portfolio Collateral received by the Collateral Manager on
behalf of the Issuer) will be sufficient to pay the purchase price of such Notes; and (B) in the
case of any purchase of Subordinated Notes only, the market value of the Portfolio Collateral
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 Portfolio Collateral forming part of the
Portfolio 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 outstanding principal
amount of the Subordinated Notes to be purchased bears to the Aggregate Principal Amount
of all Subordinated Notes Outstanding immediately prior to purchase thereof).
(i)
Cancellation
All Notes redeemed in full or purchased in accordance with this Condition 7 (Redemption, Purchase
and Cancellation), will be cancelled and may not be reissued or resold.
(j)
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 of each Class of Notes outstanding following any such
partial redemption and the modality of such partial redemption.
(k)
Redemption of Subordinated Notes
Notwithstanding any other provisions of the Conditions or the Trust Deed, all reference herein and
therein to any of the Subordinated Notes being redeemed in full or at their Principal Amount
Outstanding shall be deemed to be amended to the extent required to ensure that €1 principal amount of
the Subordinated Notes remains Outstanding at all times and any amounts which are to be applied in
redemption of such Notes pursuant hereto which are in excess of the Principal Amount Outstanding
thereof minus €1, shall constitute Subordinated Residual Interest payable in respect of such Notes and
shall not be applied in redemption of the Principal Amount Outstanding thereof, provided always
however that such €1 shall not longer remain outstanding and the Subordinated Notes shall be
redeemed in full on the date on which all of the Collateral securing the Notes has been realised and is
to be finally distributed to the Noteholders.
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8. Payments
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Payments of principal in respect of the Notes will be made against presentation (and, in the case of
final redemption, surrender) (or, in the case of a partial payment, endorsement) of the Notes at the
specified office (outside the United States and its possessions) of any Paying Agent. Payments of
interest in respect of the Notes will be made only against presentation (and, in the case of final
redemption, surrender) of the coupons at the specified office (outside the United States and its
possessions) of any Paying Agent. Payments will be made in euro at the specified office (outside the
United States and its possessions) of any Paying Agent by euro cheque drawn on, or, at the option of
the holder, by credit or transfer to a euro account (or any other account to which euro may be credited
or transferred) specified by the payee.
Payments of principal and interest in respect of the Notes are subject in all cases to any fiscal or other
laws and regulations applicable thereto.
Upon the date on which any Note becomes due and payable in full, all unmatured coupons and talons
for further coupons, if any, appertaining thereto (whether or not attached to such Note) will become
void and no payment or, as the case may be, exchange shall be made in respect thereof. If the due date
for redemption of any Note is not a Payment Date, accrued interest will be paid only against
presentation (and, in the case of final redemption, surrender) of such Note.
If payment of principal is improperly withheld or refused on or in respect of any Note or part thereof,
the interest which continues to accrue in respect of such Note in accordance with Condition 6 (Interest)
will be paid against presentation of such Note at the specified office of any Paying Agent.
The names of the initial Principal Paying Agent and the Irish Paying Agent and their initial specified
offices are set out in Condition 1 (Definitions). The Issuer reserves the right, subject to the prior
written approval of the Trustee, at any time, to vary or terminate the appointment of the Principal
Paying Agent and the Irish Paying Agent and to appoint additional or other Paying Agents, provided
that it will maintain (i) a Principal Paying Agent and (ii) a Paying Agent having specified offices in at
least one major European city approved by the Trustee (including Dublin, for so long as the Notes of
any Class are listed on the Irish Stock Exchange and the rules of that exchange so require) and (iii) a
paying agent in a European Union member state that will not be obliged to withhold or deduct tax
pursuant to Council Directive 2003/48/EC on Taxation of Savings Income in the Form of Interest
Payments and Related Matters, in each case, as approved by the Trustee and shall procure that it shall
at all times maintain a Custodian, Account Bank, Collateral Manager and Collateral Administrator.
Notice of any change in any Agent or their specified offices or in the Collateral Manager or Collateral
Administrator will promptly be given to the Noteholders by the Issuer in accordance with Condition 16
(Notices).
If any Note or coupon is presented for payment on a day which is not a Business Day, no further
payments of additional amounts by way of interest, principal or otherwise shall be due in respect of
such Note or coupon, as the case may be.
If a Paying Agent makes a partial payment in respect of any Note presented to it for payment, such
agent will endorse on the grid endorsed on such Note (in respect of payments of principal) a statement
indicating the amount and date of such payment.
On or after the relevant Payment Date on which the final coupon forming part of a coupon sheet is
surrendered, each talon forming part of such coupon sheet may be surrendered at the specified office of
any Paying Agent for a further coupon sheet (including a further talon) but excluding any coupons in
respect of which claims have already become void pursuant to Condition 12 (Prescription). Upon the
due date for redemption of any Note, any unexchanged talon relating to such Note shall become void
and no coupon will be delivered in respect of such talon.
On each Payment Date on which payments of principal, interest, redemption amounts, or other
payments are made on any Component of a Class S1 Combination Note, such payment shall be
allocated to the Class S1 Combination Notes in the proportion that the relevant payment of principal,
interest, redemption amount or other payment of such Component bears to the relevant payment of
principal, interest, redemption amount of the Class of Notes to which the Component refers. On each
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Payment Date on which any payments are made in respect of the Components that comprise the Class
S1 Combination Notes, the payment by the Issuer of such amounts will discharge the Issuer’s
obligations to make any payments under the Class S1 Combination Notes.
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 The Netherlands, 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 the laws of The Netherlands to withhold or
account for tax so that it would be unable to make payment of the full amount then due, the Issuer (with prior
notification to the Trustee and save as provided below), shall use all reasonable endeavours to arrange for the
substitution of a company incorporated in another jurisdiction notified to 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 of the 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 any taxes referred to in this Condition 9 (Taxation) arise:
(a)
(b)
(c)
(d)
due to the connection of any Noteholder with The Netherlands 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
to establish non-residence or other similar claim for exemption from such tax; or
in respect of a payment made or secured for the immediate benefit of an individual or a non corporate
entity pursuant to Council Directive 2003/48/EC on Taxation of Savings Income in the Form of Interest
Payments or any law implementing or complying with, or introduced in order to conform to, such
Directive, or any arrangements entered into between the Member States and certain other third
countries and territories in connection with the Directive; or
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 relevant Note to another paying agent in a
Member State of the European Union,
the requirement to substitute the Issuer as a principal obligor and/or to change its residence for taxation purposes
shall not apply.
10. Events of Default
(a)
Events of Default
Subject as provided in Condition 3(c) (Priorities of Payment), the occurrence of any of the following
events shall constitute an “Event of Default”:
(i)
Non-Payment of Interest: the Issuer fails to pay any interest in respect of: any Class A Note
when the same becomes due and payable; or following redemption and payment in full of the
Class A Notes, the Issuer fails to pay any interest on any Class B Note when the same
becomes due and payable; or, following redemption and payment in full of the Class B Notes,
the Issuer fails to pay any interest on any Class C Note when the same becomes due and
payable; or, following redemption and payment in full of the Class C Notes, the Issuer fails to
pay any interest on any Class D Note when the same becomes due and payable; or, following
redemption and payment in full of the Class D Notes, the Issuer fails to pay any interest on
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any Class E Note when the same becomes due and payable; or, following redemption and
payment in full of the Class E Notes, the Issuer fails to pay any interest on any Class F Note
when the same becomes due and payable (save in each case as the result of any deduction
therefrom or the imposition of any withholding tax thereon in the circumstances described in
Condition 9 (Taxation)) provided that any such failure to pay such interest continues for a
period of five Business Days;
(ii)
(iii)
(iv)
(v)
(vi)
Non-Payment of Principal: 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 procure
disbursement out of available cash of amounts due and payable from, and available in, the
Payment Account in accordance with the Priorities of Payment, which failure (other than a
failure already referred to in paragraph (i) or (ii) above) continues for a period of five Business
Days;
Breach of Other Obligations: the Issuer does not perform or comply with any other of its
covenants, warranties or other agreements under the Notes, the Trust Deed, the Agency
Agreement, any Asset Swap Agreement, the Collateral Management Agreement, the
Collateral Administration Agreement or any of the other Transaction Documents (other than a
covenant, warranty or other 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
Coverage Test or Additional 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 continuation of such default, breach or failure for a period of 30
Business Days from the date of the first such default, breach or failure and subject to the
Trustee having given written notice of it to the Issuer, certifying that the default, breach or
failure is, in its opinion, materially prejudicial to the interests of the Controlling Class at such
time;
Insolvency Proceedings: proceedings are initiated against the Issuer under any applicable
liquidation, insolvency, bankruptcy, composition, reorganisation or other similar laws
(together, “Insolvency Law”), or, to the extent applicable under the laws of The Netherlands,
a receiver, trustee, administrator, liquidator, 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 deemed by law or a court in the appropriate jurisdiction to
be, bankrupt, 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
Illegality: it is or will become unlawful for the Issuer to perform or comply with any one or
more of their obligations under the Notes.
(b)
Acceleration
(i)
If an Event of Default occurs and is continuing the Trustee may at its discretion and shall, at
the request in writing of at least 66⅔ per cent. by principal amount of the holders of the Notes
Outstanding of the Controlling Class at such time or as so directed by an Extraordinary
Resolution of the holders of the Controlling Class at such time, (subject to being indemnified
and/or secured to its satisfaction against or in respect of 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.
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(ii)
Upon any such notice being given to the Issuer in accordance with paragraph (i) of this
Condition 10(b) (Acceleration), all of the Notes shall immediately become due and repayable
at their applicable Redemption Prices together with accrued interest to the date of redemption,
provided that no such notice shall be required in the case of the Event of Default referred to in
Condition 10(a)(v)(i), the occurrence of which shall result in automatic acceleration of
maturity of the Notes in accordance with this Condition 10(b) (Acceleration).
(c)
Curing of Default
At any time after a notice of acceleration of 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 in writing by at least 66⅔ per cent. by
principal amount of the holders of the Controlling Class at such time, shall, (in each case, subject to
being indemnified and/or secured to its satisfaction against or in respect of 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 such notice of acceleration under
paragraph (b)(i) above or automatic acceleration under (b)(ii) above and its consequences if:
(i)
the Issuer has paid or deposited with the Trustee a sum sufficient to pay:
(a)
(b)
(c)
(d)
(e)
all overdue payments of interest and principal (including, but not limited to, all Class
D Deferred Interest, Class E Deferred Interest and Class F Deferred Interest payable)
on the Notes, other than the Subordinated Notes;
all due but unpaid taxes owing by the Issuer as certified by an authorised officer of
the Issuer to the Trustee;
all unpaid Administrative Expenses and Trustee Fees and Expenses;
the total amount of any unpaid Collateral Management Fee; and
all amounts due and payable under each Asset Swap Agreement; and
(ii)
the Trustee has determined in its discretion that all Events of Default, other than the nonpayment
of the interest in respect of, or principal of, the Notes that have become due solely as
a result of the acceleration thereof under paragraph (b) above due to such Events of Default,
have been cured or waived.
Any previous recession and annulment of a notice of acceleration or automatic acceleration pursuant to
this paragraph (c) shall not prevent the subsequent acceleration of the Notes if the Trustee, at its
discretion or as subsequently requested, decides to accelerate the Notes in accordance with paragraph
(b)(i) above or upon subsequent automatic acceleration in accordance with paragraph (b)(ii) above.
(d)
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 Controlling Class as provided in Condition 10(b) (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.
(e)
Notification and Confirmation of No Default
The Issuer shall notify the Trustee, the Collateral Manager, the Collateral Administrator, the
Noteholders and the Rating Agencies promptly 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, to
the best of the knowledge and belief of the Issuer, no Event of Default has occurred and that no
condition, event or act has occurred 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
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fulfilment of any similar condition could constitute an Event of Default 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 over the Collateral shall become enforceable upon an
acceleration of the maturity 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 becomes
enforceable, the Trustee may, at its discretion and without further notice:
(i)
(ii)
institute such proceedings against the Issuer as it may think fit to enforce the terms of the
Trust Deed and the Notes and pursuant to and subject to the terms of the Trust Deed realise
and/or otherwise liquidate the Collateral; and/or
take such action as may be permitted under applicable laws against any obligor in respect of
the Collateral and/or take any other action to enforce the security over the 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: (A) requested in writing by the holders of at least 66⅔ per cent. in Aggregate Principal Amount of
the Notes Outstanding of the Controlling Class at such time; or (B) directed by an Extraordinary
Resolution of the holders of the Controlling Class at such time; and, in each case, the Trustee is
indemnified and/or secured to its satisfaction against or in respect of 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 Senior Notes,
the Trustee shall (provided it is indemnified and/or secured to its satisfaction against or in respect of 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 upon the
direction of the holders of at least 66⅔ per cent. in Aggregate Principal Amount of the Subordinated
Notes Outstanding or as directed by an Extraordinary Resolution of the Subordinated Noteholders.
The net proceeds of enforcement of the security over the Collateral shall be credited to the Payment
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 shall be
distributed in accordance with the following priorities of payment (the “Post-Enforcement Priorities
of Payment”):
(i)
(ii)
(iii)
(iv)
to the payment of amounts equal to the minimum profit as required to be retained by the Issuer
for Dutch tax purposes obtained on behalf of the Issuer for deposit into the Issuer Dutch
Account from time to time;
to the payment of accrued and unpaid Trustee Fees and Expenses (and any value added tax
thereon, if applicable);
to the payment of taxes owing by the Issuer to any tax authority accrued and unpaid (other
than any Dutch corporate income tax in relation to the amounts equal to the minimum profit
referred to in paragraph (i) above);
to the payment of accrued and unpaid Administrative Expenses (and any value added tax
thereon, if applicable) up to an amount equal to €90,000;
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(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
(xx)
(xxi)
(xxii)
(xxiii)
to the payment of any Collateral Management Fee (and any value added tax thereon, if
applicable) due and payable;
to the payment on a pari passu and pro rata basis of any Scheduled Periodic Asset Swap
Issuer Payments due and payable under any Asset Swap Transaction to the extent not paid
from funds available in the account applicable to the related Asset Swap Transaction within
the Non-Euro Currency Account;
to the payment, on a pari passu and pro rata basis, of any Asset Swap Issuer Termination
Payments due and payable to any Asset Swap Counterparty to the extent not paid from funds
available in the Hedge Termination Account, save for any Defaulted Asset Swap Termination
Payments;
to the payment of interest due and payable on the Class A Notes;
in redemption of the Class A Notes in full;
to the payment of interest due and payable on the Class B Notes;
in redemption of the Class B Notes in full;
to the payment of interest due and payable on the Class C Notes;
in redemption of the Class C Notes in full;
to the payment of interest due and payable on the Class D Notes (other than any Class D
Deferred Interest);
in redemption of the Class D Notes in full (including any amount of the principal amount
thereof which constitutes Class D Deferred Interest);
to the payment of interest due and payable, on the Class E Notes (other than any Class E
Deferred Interest);
in redemption, of the Class E Notes in full (including any amount of the principal amount
thereof which constitutes Class E Deferred Interest);
to the payment of interest due and payable, on the Class F Notes (other than any Class F
Deferred Interest);
in redemption, of the Class F Notes in full (including any amount of the principal amount
thereof which constitutes Class F Deferred Interest);
to the payment on a pari passu and pro rata basis of any amounts due and payable to the
Issuer to (i) any Asset Swap Counterparty on or prior to such Payment Date in connection
with the entry into a Replacement Asset Swap Agreement and (ii) to the extent that such
amounts exceed amounts received by the Issuer upon the relevant Asset Swap Agreement
being replaced;
to the payment on a pari passu and pro rata basis of any (i) Defaulted Asset Swap
Termination Payments due to any Asset Swap Counterparty and (ii) to the extent not paid
from funds available in the Hedge Termination Account;
to the payment on a pro rata basis of any Administrative Expenses (and any value added tax
thereon if applicable) to the extent not paid pursuant to paragraph (iv) above;
to the payment of the Subordinated Interest Amount due and payable on the Subordinated
Notes (including payment of Subordinated Deferred Interest);
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(xxiv)
(xxv)
to the payment of any Collateral Manager Termination Amount; and
in redemption of the Subordinated Notes on a pro rata basis and thereafter, the balance if any,
in payment to the holders of the Subordinated Notes immediately prior to redemption in full,
on a pro rata basis.
(c)
Only Trustee to Act
Only the Trustee may pursue the remedies available under the Trust Deed to enforce the rights of the
Noteholders or of any of the other Secured Parties under the Trust Deed and the Notes and no
Noteholder or other Secured Party may proceed directly against the Issuer, or any of the Collateral
unless the Trustee, having become bound to proceed in accordance with the terms of the Trust Deed,
fails or neglects to do so within a reasonable period of time following the instance of the obligations to
proceed having arisen and such failure or neglect is continuing and the Trustee having received a notice
to this effect from such holder or Secured Party as the case may be, in which case, such holder or
Secured Party may proceed directly against the Issuer or any of the Collateral after a reasonable period
of time has elapsed since the giving of such notice and where the Trustee has not remedied such failure
or neglect by such time. 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 Secured Party
may take any further steps against the Issuer or any of its other assets (if any) (including the amounts
standing to the Issuer Dutch Account and the Issuer’s rights under the Management Agreement) to
recover any sum still unpaid in respect of the Notes or the Issuer’s obligations to such Secured Party
and all claims against the Issuer to recover any such sum still 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 then
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.
12. Prescription
Claims in respect of principal and interest 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 Record Date.
13. Replacement of Notes
If any Note (including any coupons or talons) is lost, stolen, mutilated, defaced or destroyed it may be replaced
at the specified office of the any Paying 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 such Paying
Agent may require (provided that the requirement is reasonable in the light of prevailing market practice).
Mutilated or defaced Notes 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 Trust Deed. Decisions may be taken by Noteholders by way of Ordinary Resolution
or 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. Meetings of the
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Noteholders of a Class may be convened by two or more Noteholders of such Class holding not less
than ten per cent. in principal amount 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 more than 50 per cent. in principal amount of the Notes of
such Class Outstanding, or at any meeting previously adjourned through want of quorum two or more
persons holding or representing Notes of such Class whatever the principal amount of the Notes
Outstanding of such Class held or represented. Save to the extent otherwise provided in the Trust Deed,
no proposal to sanction, inter alia:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
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 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
maturity on 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
(including the currency thereof);
a change in the currency of payment of the Notes of the relevant Class or any other amounts
payable under the Priorities of Payment;
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;
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 of the Notes of any Class Outstanding; and
the modification of any provision relating to the security over the Collateral constituted by the
Trust Deed except as contemplated by these Conditions and the Trust Deed,
shall be effective unless approved by the holders of each Class of Notes acting independently by
Extraordinary Resolution.
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).
The Trust Deed provides that a resolution in writing signed by, or on behalf of, the holders of not less
than 66⅔ per cent. in outstanding principal amount of Notes of a Class who for the time being are
entitled to receive notice of a meeting shall for all purposes be as valid and effective as an
Extraordinary Resolution passed at a meeting of such Noteholders duly convened and held.
(b)
Modification and Waiver
The Trust Deed provides that the Trustee may agree, subject to satisfaction of certain conditions,
without the consent of the Noteholders to:
(i)
(ii)
any modification of any of the provisions of the Trust Deed which in the opinion of the
Trustee is of a formal, minor or technical nature or is made to correct a manifest or proven
error; and
any other modification (except as mentioned in the Trust Deed), and any waiver or
authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed
which is, in the opinion of the Trustee, not materially prejudicial to the interests of the
Noteholders of any Class. Any such modification, authorisation or waiver shall be binding on
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all Noteholders and shall be notified to the Rating Agencies and, unless the Trustee otherwise
agrees, to the Noteholders as soon as practicable in accordance with Condition 16 (Notices).
The Trustee shall not be expected to give such agreement within 21 days of any request therefor by any
person and the Trustee shall be entitled at all times to seek and receive any expert or specialist opinion
from any relevant reputable Person, provided that the provision of such opinion shall not entail
excessive cost. Such cost shall be for the account of the Issuer.
The Trust Deed provides that, among other things, any modification that is not of the type set out in
paragraphs (i) and (ii) above will be subject to Rating Agency Confirmation.
(c)
Substitution
The Trust Deed contains provisions permitting the Trustee to agree to such amendment of the Trust
Deed and such other conditions as the Trustee may require, but without the consent of the Noteholders
of any Class, to permit 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 such a
substitution is required for taxation purposes. In the case of such a substitution the Trustee may agree,
without the consent of the Noteholders but subject to receipt of a Rating Agency Confirmation (subject
to receipt 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 as soon as practicable to the Irish Stock Exchange and to Noteholders
in accordance with Condition 16 (Notices). A supplement to the Prospectus shall be prepared
accordingly and submitted to the Irish Stock Exchange.
The Trustee may, subject to the satisfaction of certain conditions, including receipt by the Trustee of
Rating Agency Confirmation that the rating of any of the Senior Notes will not be adversely affected as
a result of the following, 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 reasonably require in order that such change in the place of residence of the Issuer for
taxation purposes is fully effective and complies with such other requirements which are in the interests
of the Noteholders as it may reasonably direct.
(d)
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 where expressly provided otherwise, the Trust Deed provides that in the event of any conflict of
interest between the holders of the Senior Notes and the Subordinated Notes the interests of the holders
of the Controlling Class will prevail. If, in the sole discretion of the Trustee, the holders of any Class of
Notes do not have an interest in the outcome of the conflict, the Trustee shall give priority to the
interests of the holders of the most senior ranking Class of Notes over the holders of the other Classes
of Notes. In the event the Trustee receives 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 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. In addition, the Trust Deed provides that the
Trustee will act upon the directions of the relevant Controlling Class (or any other Class given priority)
in such circumstances, and shall not be obliged to consider the interests of the holders of any other
Class of Notes. The Trust Deed further provides that in the event of any conflict of interest between the
Noteholders and any other Secured Party, the interests of the Noteholders will prevail.
(e)
Class S1 Combination Notes
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For the purposes of this Condition 14 (Meetings of Noteholders, Modification, Waiver and
Substitution), the Class S1 Combination Notes shall not be deemed to have a separate interest except to
the extent of the Classes of the Notes corresponding to the Components of the Class S1 Combination
Notes.
15. Indemnification of the Trustee
The Trust Deed contains provisions for the indemnification and/or security for costs 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
and/or secured to its satisfaction against or in respect of 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. 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, under the Trust Deed the Trustee is not under any such
obligation) and from any claim arising in the event that any part of the Collateral is held by the Collateral
Manager. The Trustee shall not be responsible for the performance by the Collateral Manager of any of its duties
under the Collateral Management Agreement; for the performance by the Collateral Administrator of its duties
under the Collateral Administration 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.
16. Notices
(a)
(b)
So long as the Notes are listed on the Irish Stock Exchange and the Irish Stock Exchange rules so
require, any notice to the Noteholders, shall be validly given if sent to the Company Announcements
Office of the Irish Stock Exchange. In addition, the Issuer may procure that the notices appear on a
page of the Reuters screen or Bloomberg or any other medium for electronic display of data as may be
previously approved in writing by the Trustee (in each case a “Relevant Screen”). Any such notice
shall be deemed to have been given on the date of such publication or if published more than once or
on different dates on the first date on which publication shall have been made through the Company
Announcements Office of the Irish Stock Exchange or on the Relevant Screen.
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 consistent with 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.
17. Class S1 Combination Notes
(a)
Acts of Class S1 Noteholders
Except as otherwise expressly provided in these Conditions, the Components of the Class S1
Combination Note will be treated as Notes of the Classes represented by such Components for the
purposes of requests, demands, authorisations, directions, notices, consents, waivers or other actions.
The Class S1 Noteholders will be entitled to vote in respect of the Class S1/D Component and the
Class S1/Subordinated Component and will not otherwise be entitled to vote.
(b)
Stated Principal Balance of the Class S1 Combination Notes
The payments allocated to the Class S1 Combination Notes will be applied by the Issuer as follows:
(i)
first, (a) the payment allocated (whether described as interest or principal) on the Class S1/D
Component and (b) any payment allocated as interest on the Class S1/Subordinated
Component to the payment of interest at a rate equal to EURIBOR for three month EUR
deposits (except for the payment on the first Payment Date where the rate will be determined
through the use of linear interpolation by reference to 6 month EURIBOR and 7 month
EURIBOR) plus 1.20 per cent. per annum (the “S1 Stated Coupon”) on the aggregate
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principal amount of the Class S1 Combination Note Outstanding, computed on an Actual/360
basis. To the extent that there are insufficient amounts for payment of the S1 Stated Coupon or
proportion thereof (as the case may be) due and payable on any Payment Date in respect of the
Class S1 Combination Notes, such amount to be paid under the S1 Stated Coupon on such
Payment Date shall not be deferred and shall be extinguished;
(ii)
(iii)
second, (i) the sum of the amounts under paragraphs (i)(a) and (i)(b) above which exceeds the
S1 Stated Coupon and (ii) any payment allocated as principal on the Subordinated Component
to the reduction of the Stated Principal Balance of the Class S1 Combination Note until the
Stated Principal Balance of the Class S1 Combination Note has been reduced to zero; and
third, any amount under paragraph (ii) above, after the reduction of the Stated Principal
Balance of the Class S1 Combination Note has been reduced to zero, as additional interest.
Notwithstanding any reduction of the Stated Principal Balance of the Class S1 Combination Note, the
principal amount of the Class S1/D Component and the Class S1/Subordinated Component shall only
be reduced to the extent of their proportionate share of payments treated as principal payments with
respect to the Class D Notes or the Subordinated Notes, as applicable. For the avoidance of doubt, (i)
the Class S1/D Component and the Class S1/Subordinated Component of the Class S1 Combination
Notes shall continue to receive allocations with respect to the principal amount outstanding of the Class
S1/D Component and the Class S1/Subordinated Component, respectively, which exceeds the Stated
Principal Balance even after the Stated Principal Balance has been reduced to zero and (ii) the
proportion which the Class S1/D Component and the Class S1/Subordinated Component bears to the
Class D Notes and the Subordinated Notes, respectively, shall remain the same regardless of any
reduction in the Stated Principal Balance of the Class S1/D Component and the Class S1/Subordinated
Component.
18. Third Party Rights
No person (other than the Secured Parties) shall have any right to enforce any term or condition of any Note
under the Contracts (Rights of Third Parties) Act 1999.
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 TMF Management (UK) Limited of Pellipar House, First Floor, 9 Cloak Lane,
London, EC4R 2RU 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.
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USE OF PROCEEDS
The net proceeds from the issuance of the Notes on the Closing Date after payment of applicable fees and the
expenses incurred by the Issuer in connection with the issuance of the Notes are expected to be approximately
€300,000,000. Proceeds from the issuance of the Notes will be applied by the Issuer (i) to fund the purchase of
the Initial Portfolio Collateral on the Closing Date (including the entry into Asset Swap Transactions), (ii) in
payment into the Expense Reimbursement Account on the Closing Date of approximately €70,000, (iii) to pay
expenses related to the admission to trading on the Irish Stock Exchange, which is estimated to be
approximately €6,282.40, and (iv) to pay organisational, underwriting, legal and offering fees and expenses
related to the transaction, including the underwriting and placement fees and expenses of the Manager and
certain management fees of the Collateral Manager in relation to services rendered by the Collateral Manager.
The remaining proceeds shall be paid into the Unused Proceeds Account.
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FORM OF THE NOTES
The Notes of each Class will initially be represented on issue by a Temporary Global Note without interest
coupons deposited with a common depositary for Euroclear and Clearstream, Luxembourg for credit to the
accounts of the owners of beneficial interests in such Note (or such other account as they may direct) at
Euroclear or at Clearstream, Luxembourg. A beneficial interest in a Temporary Global Note may only be
transferred to non-US Person in an “offshore transaction” (within the meaning of Regulation S under the
Securities Act (“Regulation S”)).
Each Temporary Global Note will be exchangeable in whole or in part for interests in a Permanent Global Note
not earlier than 40 days after the later of the commencement of this offering and the Closing Date upon
certification as to non-U.S. beneficial ownership. No payments will be made under a Temporary Global Note
unless exchange for interests in the Permanent Global Note is improperly withheld or refused. In addition,
interest payments in respect of the Notes cannot be collected without certification of non U.S. beneficial
ownership.
Beneficial interests in a Global Note may be held only through Euroclear or Clearstream, Luxembourg at any
time. Beneficial interests in a Global Note may not be offered, sold, delivered, pledged or otherwise transferred
within the United States or to, or for the account or benefit of, any U.S. person. By acquisition of a beneficial
interest in a Global Note the purchaser thereof will be deemed to make certain representations as set forth under
“Transfer Restrictions”.
Except in the limited circumstances described below, owners of beneficial interests in Global Notes will not be
entitled to receive Definitive Notes.
Amendments to Conditions
Each Global Note contains provisions that apply to the notes that they represent, some of which modify the
effect of the Conditions in definitive form (See “Conditions of the Notes”). The following is a summary of
those provisions:
• Payments Payments of principal and interest in respect of Notes represented by a Global Note will
be made against presentation and, if no further payments 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. 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.
• Notices 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 the Conditions of such Notes, provided that such notice is also given to the
Company Announcements Office of the Irish Stock Exchange for so long as the Notes are listed on the
Irish Stock Exchange and the rules of the Irish Stock Exchange so require.
• Prescription 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 date on which any
payment first becomes due.
• Meetings 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 €100,000 of original principal amount of Notes for
which the relevant Global Note may be exchanged.
• Trustee’s Powers In considering the interests of Noteholders while the Global Notes are held on
behalf of a clearing system, the Trustee may have regard to any information provided to it by such
clearing system or its operator as to the identity (either individually or by category) of its account
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holders with entitlements to each Global Note and may consider such interests as if such account
holders were the holders of any Global Note.
• Cancellation Cancellation of any Note required by the Conditions of the Notes to be cancelled will
be effected by reduction in the principal amount of the relevant Global Note.
• Optional Redemption The Subordinated Noteholders’ option in Condition 7(b) (Redemption at the
Option of the Subordinated Noteholders) may be exercised in respect of any Global Note representing
Subordinated Notes by the holders thereof giving notice to a Paying Agent of the principal amount 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 in Condition 7(b) (Redemption at the Option of
the Subordinated Noteholders).
Exchange for Permanent Global Notes and Definitive Notes
Exchange
Each Temporary Global Note is exchangeable in whole or in part for interests in a Permanent Global Notes on
or after the date which is 40 days after the later of the commencement of this offering and the Closing Date upon
certification as to non-U.S. beneficial ownership if the form set out in the Temporary Global Note.
Each Permanent Global Note will be exchangeable, free of charge to the holders, in whole but not in part, for
Definitive Notes on request of the bearer of the Permanent Global Note if (a) the Permanent Global Note is held
(directly or indirectly) on behalf of Euroclear and 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
holding, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so or
(b) an event of Default occurs.
For so long as a Class S1 Combination Note remains Outstanding, exchanges of any Class S1 Combination Note
will be made in accordance with Condition 2(c) (Exchange of Class S1 Combination Notes).
Delivery
Whenever a Permanent Global Note is to be exchange for Definitive Notes, the Issuer shall procure the prompt
delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and, if applicable, with
coupons and talons for further coupons attached in an aggregate principal amount equal to the principal amount
of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the
Permanent Global Note at the specified office of the Principal Paying Agent within 30 days of the bearer
requesting such exchange.
The Notes, whether in global or definitive form, will bear the following legend: “This Note has not been and
will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), any
state securities laws in the United States or the securities laws of any other jurisdiction. This Note and any
interest herein may be transferred only in accordance with the Securities Act and all applicable laws of any other
jurisdiction. Any United States Person (as defined in the United States Internal Revenue Code of 1986, as
amended (the “Code”)) who holds this obligation will be subject to limitations under the United States income
tax laws, including the limitations provided in section 165(j) and 1287(a) of the Code. Each Purchaser of this
Note or any interest herein agrees that it will deliver to each purchaser of this Note or any interest herein a
notice substantially to the effect of this legend”. The code sections referred to in the legend provide that a
United States Person will not, with certain exceptions, be permitted to deduct any loss and will not be eligible
for favourable capital gains treatment with respect to any gain realised on a sale, exchange or redemption of any
Note.
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BOOK-ENTRY CLEARANCE PROCEDURES
The information set out below has been obtained from sources that the Issuer believes to be reliable, 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 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. The Issuer accepts responsibility solely for the correct reproduction of the information
contained in this Section. None of the Issuer, the Trustee, the Manager, the Collateral Manager, the Collateral
Administrator, any Asset Swap Counterparty or any Agent (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.
1. Euroclear and Clearstream, Luxembourg
Custodial and depositary links have been established between Euroclear and Clearstream, Luxembourg to
facilitate the initial issue and cross-market transfers of the Notes associated with secondary market trading.
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 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 Global Notes 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.
2. Book-Entry Ownership
Each Global Note will have an ISIN and a Common Code and will be deposited with a common depositary for
Euroclear and Clearstream, Luxembourg.
3. Payments on Global Notes
Payments of any amounts owing in respect of the Global Notes will be made by or on behalf of the Issuer in
euro, to the Principal Paying Agent. The Principal Paying Agent will, in turn, make such payments to a common
depositary for Euroclear or Clearstream, Luxembourg, which will distribute such payments to Participants in
accordance with their procedures.
Under the terms of the Trust Deed, the Issuer and the Trustee will treat the bearer of the Global Notes (a
common depositary) 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 Direct Participant or
Indirect Participant relating to or payments made on account of an ownership interest in a Global Note
(a “Book-Entry Interest”) or for maintaining, supervising or reviewing any of the records of Euroclear
or Clearstream, Luxembourg or any Direct Participant or Indirect Participant relating to or payments
made on account of a Book-Entry Interest; or
Euroclear or Clearstream, Luxembourg or any Direct Participant or Indirect Participant.
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Payments by participants to owners of Book-Entry Interests in the Global Notes held through these Participants
are the responsibility of such Participants.
4. Settlement and Transfer of Notes
Subject to the rules and procedures of each applicable Clearing System, purchases of Notes within a Clearing
System must be made by or through Direct Participants, which will receive a credit for such Notes on the
Clearing System’s records. The ownership interest of each purchaser of each such Note (the “Beneficial
Owner”) will in turn be recorded on the Direct Participant’s and the 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 Participant or the Indirect Participant through which such
Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes held within the
Clearing Systems 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 Notes,
unless, and, until interests in any Global Notes held within a Clearing System are exchanged for Definitive
Notes.
No Clearing System has knowledge of the actual Beneficial Owners of the Notes held within such Clearing
Systems and their records will reflect only the identity of the Direct Participants to whose accounts such Notes
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 the arrangements
among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Initial settlement for the Notes will be made in euro.
Book-Entry Interests owned through Euroclear and Clearstream, Luxembourg accounts will follow the
settlement procedures applicable to conventional bonds in bearer form.
5. Secondary Market Trading
The Book-Entry Interests will trade through Participants of Euroclear and Clearstream, Luxembourg and will
settle in same-day funds.
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RATINGS OF THE NOTES
It is a condition to the issuance of the Notes that the Class A Notes and the Class B Notes be rated “AAA” by
Fitch and “AAA” by S&P, that the Class C Notes be rated “AA” by Fitch and “AA” by S&P, that the Class D
Notes be rated “A” by Fitch and “A” by S&P, that the Class E Notes be rated “BBB-” by Fitch, that the Class F
Notes be rated “BB-” by Fitch and that the Class S1 Combination Notes be rated “A” by Fitch. The Class E
Notes, the Class F Notes and the Class S1 Combination Notes will not be rated by S&P. The Subordinated
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.
The ratings assigned to the Senior Notes by the Rating Agencies are based upon their assessment of the
probability that the Portfolio Collateral will provide sufficient funds to pay each such Class of Senior Notes,
based largely upon such Rating Agency’s statistical analysis of historical default rates on debt obligations with
various ratings, assumptions on recovery rates, the asset and interest coverage required for the relevant Class of
Notes (which is achieved through the subordination of the Subordinated Notes, the Class F Notes, the Class E
Notes, the Class D Notes, the Class C Notes and Class B Notes, in the case of the Class A Notes, the
subordination of the Subordinated Notes, the Class F Notes, the Class E Notes, the Class D Notes and the Class
C Notes in the case of the Class B Notes, the subordination of the Subordinated Notes, the Class F Notes, the
Class E Notes and the Class D Notes, in the case of the Class C Notes, the subordination of the Subordinated
Notes, the Class F Notes and the Class E Notes, in the case of the Class D Notes, the subordination of the
Subordinated Notes and the Class F Notes, in the case of the Class E Notes and the subordination of the
Subordinated Notes, in the case of the Class F Notes) and the diversification requirements that the Portfolio
Collateral is required to satisfy.
The ratings assigned to the Class A Notes, the Class B Notes and the Class C Notes address the timely payment
of interest and the ultimate payment of principal by their respective Maturity Date thereof. The ratings assigned
to the Class D Notes, the Class E Notes and the Class F Notes address the ultimate payment of interest and the
ultimate payment of principal by their respective Maturity Date. The rating assigned to the Class S1
Combination Notes by Fitch only addresses the ultimate receipt of the Rated Balance. For the purposes of such
rating, any distribution received in respect of the Components will be considered to reduce the Rated Balance, as
described more particularly in “Conditions of the Notes”. For the avoidance of doubt and for rating purposes
only, once the Rated Balance has been reduced to zero, Fitch will deem the Rated Balance to have been
redeemed and, in its discretion, may not maintain a rating on the Class S1 Combination Notes beyond that point
in time.
Fitch Ratings
The ratings assigned to the Notes rated by Fitch are based upon its assessment of the probability that the
Portfolio Collateral will provide sufficient funds to pay each such Class of Notes rated by Fitch based largely
upon Fitch 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, in the case of the Class A
Notes, subordination of each of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the
Class F Notes and the Subordinated Notes; and, in the case of the Class B Notes, subordination of each of the
Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Subordinated Notes; and, in the
case of the Class C Notes, subordination of the Class D Notes, the Class E Notes, the Class F Notes and the
Subordinated Notes; and, in the case of the Class D Notes, subordination of the Class E Notes, the Class F Notes
and the Subordinated Notes; and, in the case of the Class E Notes, subordination of the Class F Notes and the
Subordinated Notes; and, in the case of the Class F Notes, subordination of the Subordinated Notes and through
the diversification requirements that the Portfolio Collateral are required to satisfy).
Fitch analyses the likelihood that each Portfolio Collateral 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. Fitch then determines the level of credit protection necessary based on a specific percentile of the
portfolio default distribution determined by the Fitch VECTOR model which takes into account the correlation
between assets in the portfolio based on the level of diversification by region, issuer and industry. The results of
a statistical analysis are incorporated into a cash flow model built to mimic the structure of the transaction. In
this regard, the results of several default scenarios, in conjunction with various qualitative tests (for example,
105

analysis of the strength of the portfolio manager), are used to determine the credit enhancement required to
support a particular rating.
There can be no assurance that the actual loss on the Portfolio Collateral will not exceed those assumed in the
application of Fitch models or Fitch recovery rates and the timing of recovery with respect thereto will not differ
from those assumed by Fitch in its model. The Issuer and the Collateral Manager make no representation as to
the expected rate of defaults on the Portfolio or as to the expected timing of any defaults that may occur. The
rating of the Notes by Fitch will be established under various assumptions and scenario analysis.
There can be no assurance that actual defaults on the Portfolio Collateral will not exceed those assumed by Fitch
in its analysis, or that recovery rates with respect thereto (and consequently loss rates) will not defer from those
assumed by Fitch.
In addition to these quantitative tests, Fitch 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 Fitch deems relevant.
In addition, a portion of the Portfolio Collateral will not be rated by Fitch but will be assigned a rating pursuant
to the methodology described herein. See “Description of the Portfolio”.
S&P Ratings
S&P will rate the Senior Notes in a manner similar to the manner in which it rates other structured issues. This
requires an analysis of the following:
(a)
(b)
(c)
credit quality of the Portfolio Collateral and Eligible Investments securing the Notes;
cashflow used to pay liabilities and the priorities of these payments; and
legal considerations.
Based on these analyses, S&P determines the necessary level of credit enhancement needed to achieve a desired
rating.
S&P’s analysis includes the application of its proprietary default expectation computer model, the “S&P CDO
Rating Test”, which is used to estimate the default rate S&P projects the portfolio is likely to experience, and
which will be provided to the Collateral Manager on or before the Closing Date. The S&P CDO Rating Test
calculates the cumulative default rate of a pool of Portfolio Collateral consistent with a specified benchmark
rating level based upon S&P’s proprietary corporate debt default studies. The S&P CDO Rating Test takes into
consideration the rating of each obligor, the number of obligors, the obligor industry concentration and the
remaining weighted average maturity of each of the Portfolio Collateral included in the Portfolio. The risks
posed by these variables are accounted for by effectively adjusting the necessary default level needed to achieve
a desired rating. The higher the desired rating, the higher the level of defaults the portfolio must withstand. For
example, the higher the obligor industry concentration or the longer the weighted average maturity, the higher
the default level is assumed to be.
Credit enhancement to support a particular rating is then provided on the results of the S&P CDO Rating Test,
as well as other more qualitative considerations such as legal issues and management capabilities. Credit
enhancement is typically provided by a combination of over-collateralisation/ subordination, cash
collateral/reserve account, excess spread/interest and amortisation. A “Transaction-Specific Cash Flow
Model” prepared by the Manager is used to evaluate the portfolio and determine whether it can comfortably
withstand the estimated level of default while fully repaying the class of debt under consideration.
There can be no assurance that actual losses on the Portfolio Collateral will not exceed those assumed in the
application of the S&P CDO Rating Test or that recovery rates and the timing of recovery with respect thereto
will not differ from those assumed in the Transaction-Specific Cash Flow Model. The Issuer makes no
representation as to the expected rate of defaults on the Portfolio or as to the expected timing of any defaults that
may occur.
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S&P’s rating of the Senior Notes will be established under the various assumptions and scenario analyses. There
can be no assurance that actual defaults on the Portfolio Collateral will not exceed those assumed by S&P in its
analysis, or that recovery rates with respect thereto (and, consequently, loss rates) will not differ from those
assumed by S&P.
The Issuer will inform the Irish Stock Exchange, so long as any of the Notes are listed thereon, if any of the
ratings assigned to such Notes as of the Closing Date are reduced or withdrawn.
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DESCRIPTION OF THE ISSUER
1. General
The Issuer, Pangaea ABS 2007-1 B.V., was incorporated in The Netherlands as a private company with limited
liability (besloten vennootschap met beperkte aansprakelijkheid) on 15 January 2007. The Issuer has been
incorporated as a special purpose vehicle for the purpose of issuing the Notes. The Issuer’s registered office is at
Locatellikade 1, 1076 AZ Amsterdam, The Netherlands and the telephone number of its registered office is +31
20 5755 694. Its corporate seat is in Amsterdam and its correspondence address is its registered office. The
Issuer is registered with the Trade Register of the Chamber of Commerce in Amsterdam under number
34264593.
The Notes are obligations of the Issuer alone. The Notes are not the obligations of the Trustee, the Manager or
any of their respective Affiliates or any directors, shareholders or officers of the Issuer, or the Collateral
Manager, the Collateral Administrator or any obligor under any part of the Portfolio. Furthermore, they are not
obligations of, or guaranteed in any way by any Asset Swap Counterparty.
The Issuer’s issued and paid-up share capital is €20,000 divided into 20 ordinary shares of €1,000 each. The
entire issued share capital of the Issuer is owned by Stichting Pangaea ABS 2007-1 (the “Foundation”), a
foundation (stichting) incorporated under the laws of The Netherlands. The Issuer has no subsidiaries.
Pursuant to the terms of a management agreement dated on or about the Closing Date between the Foundation
and TMF Management B.V. and a letter of undertaking (the “Letter of Undertaking”) dated on or about the
Closing Date between, inter alios, the Foundation and TMF Management B.V., measures will be put in place to
limit and regulate the control which the Foundation has over the Issuer.
2. Capitalisation
The unaudited capitalisation and indebtedness of the Issuer as at the date of this Prospectus adjusted for the
issue of the Notes is as follows:
Indebtedness
Class A Notes ………………………………………………………………… €220,000,000
Class B Notes ………………………………………………………………… €16,000,000
Class C Notes ………………………………………………………………… €18,000,000
Class D Notes ………………………………………………………………… €22,000,000
Class E Notes ………………………………………………………………… €16,000,000
Class F Notes ………………………………………………………………… €5,000,000
Subordinated Notes ………………………………………………………………… €12,200,000
Class S1 Combination Notes ………………………………………………………………… €5,000,000
Share Capital
Authorised and paid up Share Capital ……...................................................... €20,000
Total Capitalisation and Indebtedness ……...................................................... €309,220,000*
*This assumes that the capitalisation of the Class S1 Combination Notes is included in the capitalisation of
the Class D Notes and the Subordinated Notes.
Save as disclosed above, the Issuer has no loan capital outstanding, has not created shares which have not been
allotted and has no term loans and no other borrowings or indebtedness in the nature of borrowings nor any
contingent liabilities or guarantees.
3. Business
The objects of the Issuer, stated in Article 2 of its Articles of Association are, inter alia, the raising of funds
through the issuance of bonds, notes and other evidences of indebtedness, the use of financial derivatives and
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the investment in bonds, loans, debt instruments and other evidences of indebtedness, shares, warrants and other
similar securities and also financial derivatives.
Pursuant to the Trust Deed and the Conditions of the Notes, the business of the Issuer is restricted to: issuing the
Notes and acquiring, holding and disposing of the Portfolio in accordance with the Conditions of the Notes, the
Collateral Management Agreement and the Collateral Administration Agreement; entering into the Trust Deed,
the Agency Agreement, the Collateral Management Agreement, the Management Agreement, and the other
Transaction Documents and exercising the rights and performing the obligations under each such agreement and
all other transactions incidental thereto. The Issuer will not have any subsidiaries and, save in respect of the fees
and expenses generated in connection with the issue of the Notes (referred to below), the Issuer will not
accumulate any surpluses.
The assets of the Issuer will consist of the Portfolio held from time to time, the sums standing to the credit of the
Accounts, the benefit of the Transaction Documents (as defined in Condition 1 (Definitions)) to which it is a
party, the sum of €20,000 representing its issued and paid-up capital and other amounts standing to the credit of
the Issuer Dutch Account. The only assets of the Issuer available to meet claims of the holders of the Notes and
the other Secured Parties are the assets comprised in the Collateral.
4. Managing Directors
Management
The Issuer’s current managing directors (the “Managing Directors”) are:
Name Occupation Business Address
Mrs Maria Chr. van der Sluijs-
Plantz
Mrs Theresia F.C. Wijnen
Mr. Hubertus P.C. Mourits
Chief Executive Officer of TMF
Group Holding B.V.
Managing Director of TMF
Structured Finance B.V.
Risk Controller of TMF Structured
Finance B.V.
Parnassustoren Locatellikade 1
1076 AZ Amsterdam
The Netherlands
Parnassustoren Locatellikade 1
1076 AZ Amsterdam
The Netherlands
Parnassustoren Locatellikade 1
1076 AZ Amsterdam
The Netherlands
Pursuant to a management agreement (the “Management Agreement”), the Managing Directors will provide
management, corporate and administrative services to the Issuer. The Issuer may terminate the Management
Agreement by giving not less than 14 days’ written notice. The Managing Directors may retire from their
obligations pursuant to the Management Agreement by giving at least two months’ notice in writing to the
Issuer. None of the Managing Directors will resign or be dismissed from his or her position as managing
director (bestuurder) of the Issuer except where a suitable replacement has first been appointed and contracted
to act as managing director(s) (bestuurder) of the Issuer and has/have become a party to the Letter of
Undertaking.
5. Financial Statements
Since the date of incorporation, other than in relation to matters relating to the proposed issuance of the Notes,
the Issuer has not commenced operations and, as of the date of this Prospectus, no financial statements of the
Issuer have been prepared. The Trust Deed requires the Issuer to provide written confirmation to the Trustee, on
an annual basis, that (to the best of its knowledge and belief) no Event of Default or other matter which is
required to be brought to the Trustee’s attention has occurred. The first audited financial statements of the Issuer
will be in respect of the period from incorporation to 31 December 2008. The Issuer will not prepare interim
financial statements unless required to do so under applicable law.
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DESCRIPTION OF THE COLLATERAL MANAGER
The information appearing in this section relating to the Collateral Manager has been prepared by Investec
Bank (UK) Limited (“Investec”) and has not been independently verified by the Issuer. Accordingly,
notwithstanding anything to the contrary herein, the Issuer does not assume any responsibility for the accuracy,
completeness or applicability of such information. The Collateral Manager accepts responsibility for the
information contained in this section to the extent that it is correct to the best of its knowledge as at the Closing
Date.
The Collateral Manager
Investec Principal Finance (“IPF”), a business unit division within Investec will be providing the collateral
management services to the Issuer.
IPF was established in mid-2005 and was set up to develop the securitisation and principal finance business
within Investec. IPF currently has a team of 30 professionals with related experience in the management,
structuring, syndication and trading of both asset-backed securities (“ABS”) and CDOs. IPF is able to draw on
Investec’s large banking infrastructure and in particular relies upon the investment committee for sourcing,
assessment and ongoing surveillance of ABS and CDO securities.
Investec is a banking institution regulated by the Financial Services Authority (“FSA”) and the South African
Reserve Bank (“SARB”), and holds a full banking licence in the United Kingdom. Investec also has the
regulatory capacity to act as Collateral Manager in The Netherlands.
Investment Policy
Investec will manage the Portfolio for the Issuer and will determine on behalf of the Issuer how the proceeds
from the Notes will be invested. The eligible collateral consists of ABS and CDOs backed predominantly by
European collateral of a diversified nature. The focus will be on CMBS, RMBS and CLO securities
complemented by other asset classes including CDOs, consumer ABS, etc.
Investment Approval Procedure
Investment decisions will be made by a credit committee comprising of Andy Clapham, Henrik Malmer, James
Cuby, David Beadle, James Briggs and Konstantine Pastras. The quorum will be three with a provision to name
one alternate if required. The credit committee will monitor credit, liquidity, currency and interest rate risk and
compliance with the terms of the Trust Deed and Collateral Management Agreement. In addition, the credit
committee will determine the Collateral Manager’s investment strategy on behalf of the Issuer and review the
Portfolio on a regular basis. In practice, all members of the IPF team will be encouraged to contribute their
views to the matters considered by the credit committee in order to ensure that the experience of all members of
staff is included where relevant.
New investment opportunities will be subject to appraisal in two contexts:
●
●
First, the suitability of the proposed new investment in terms of the Portfolio, i.e. with reference to the
required diversity score and weighted average rating, to currency and interest rate risk and to issuer and
country concentration rules, etc.
Second, to the cash flow and credit worthiness of the proposed obligor, taking into account both
financial and commercial risks, industry and economic factors and strategic and financial structuring
considerations.
In addition, any asset sales will be subject to the review of the credit committee, taking into account the
rationale for any sale and relative value considerations.
Where the Collateral Manager, on behalf of the Issuer, is making an investment in the private debt markets, it
will usually make use of reports from specialist advisers who performed due diligence on, for example, the
historic and forecast financial performance of the proposed borrower, tax, pension and legal issues. The
Collateral Manager will perform, inter alia, a detailed commercial assessment of the borrower, cash flow
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modelling and stress testing, industry and economic reviews, management meetings and site visits (where
practical and necessary).
There may be circumstances where debt investments are split between Investec and/or one or more funds
managed by Investec or transferred in whole or in part between them. This may enable Investec and/or one or
more of the funds managed by Investec to benefit from sufficiently large participations to maximise
arrangement fees or meet diversity/size requirements. No such transactions will be made unless in the best
interests of the parties involved. If appropriate, third party or market valuations would be taken to validate
transfer values.
Holding of Subordinated Notes
On the Closing Date, Investec and/or one or more of its Affiliates will acquire 49 per cent. of the principal
amount of the Subordinated Notes. Investec and/or any fund, partnership, trust, company or any entity with
respect to which it acts as investment manager will not acquire or hold at any time, directly or indirectly, more
than 49 per cent. of the Principal Amount Outstanding of the Subordinated Notes. It is the intention of Investec
either to hold, directly or indirectly, or to have a fund, partnership, trust, company or other entity with respect to
which it acts as investment manager hold, a minimum average of 19.5 per cent. of the Principal Amount
Outstanding of the Subordinated Notes in any five year period until maturity or earlier redemption, so long as
Investec is the Collateral Manager.
Key Biographies
The following sets out the biographies of the key personnel on the team.
Andy Clapham joined Investec in July 2005 as Head of IPF. Previous to joining, Andy spent 5 years as Senior
Managing Director running the European Securitisation and Principal Finance businesses at Bear Stearns. Prior
to that Andy was Managing Director and Head of Principal Finance at Nikko CDO Securities. Whilst there,
Andy was responsible for managing the public to private of Powell Duffryn, and the subsequent £300m
leveraged whole business securitisation, as well as managing other investments such as the Roadchef Motorway
Service Area chain. Prior to that Andy spent 13 years as Managing Director at Greenwich Natwest as head of its
Securitisation and Principal Finance business. During this time Andy was responsible for arranging and
managing the world’s first CLO in 1991 – $1bn Thames Funding programme, and for arranging and managing
the world’s first balance sheet CLOs – Rose Funding No.1 and Rose Funding No.2 - $10bn in size. In addition
to this, Andy arranged and managed Europe’s first asset backed CBO - $500m TAGS No.1 Plc. Andy also
arranged and was responsible for managing a $10bn asset backed CP programme – Thames Asset Global
Securitisation Inc (“TAGS”). Andy is accredited with being one of the founders of the CDO market, developing
innovative programs such as Rose Funding. Andy has 20 years experience in Europe of successfully managing
over $25bn in assets as diverse as corporate loans, leveraged loans, asset backed bonds, lease receivables and
business cashflows. Andy has a BSc in Mechanical Engineering from Nottingham University.
Henrik Malmer joined Investec in September 2005 as Head of ABS/CDO Trading. He will trade the
proprietary trading book for IPF as well as play an essential part in the risk management of the residential and
commercial mortgage business and the CLO/CDO management business. Henrik has spent time at both
Wachovia Securities and Bear Stearns in the role of ABS/CDO Secondary Trader as well as ABS/CDO
Syndication. Henrik was also involved in the management of assets before their inclusion in 3rd party CDOs at
Bear Stearns as well as playing an active role in the reverse engineering and fundamental analysis of
ABS/CDOs for the trading desk and for CDO managers. He has a BSc in Economics and an MSc in Investment
Management from Cass Business School and speaks Swedish, French and Spanish.
James Cuby, joined Investec in May 2006 to manage the CDO programme. He will acquire and manage the
European ABS and CDO assets sitting in IPF’s managed portfolio as well as structuring various CDO funds and
involvement in other parts of the principal business. James has spent time at both The Prytania Group and
Standard and Poor’s in London. At Prytania, a credit hedge fund where James was a partner, he acquired
managed portfolios of European and US ABS and CDOs, structured CDO funds and led a team of investment
analysts. He was also responsible for developing Prytania’s analytical methodologies. At Standard & Poor’s,
James was a senior rating analyst rating both new issue European CMBS, ABS and CDOs with product focus on
CLOs and credit card ABS. James begun his career in 1997 managing a portfolio of leveraged loans. He has a
BSc in Economics and speaks Spanish.
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David Beadle joined Investec in May 2005, to work on the ongoing development of the business of Investec
Acquisition Finance, another business unit within Investec, with a particular focus on the CLO programme for
which he will perform the role of portfolio manager. Prior to Investec, David was with NIB Capital for 3 years,
where he led the origination and analysis team for the North Westerly CLO business. He previously spent 17
years with The Royal Bank of Scotland where he undertook a variety of front line and credit roles in Corporate
Banking, culminating in 5 years in Leveraged Finance where he had senior roles in both loan management
(1998-2000) and origination of lead transactions (2000-2002). David is an Associate of the Chartered Institute
of Bankers.
James Briggs joined Investec as Head of Real Estate in September 2005 to develop a pan European
Commercial Real Estate business within the Principal Finance Group. The group has since become an active
lender, across the full capital structure, for a wide array of property sectors throughout the UK and continental
Europe. James has been involved in the capital markets in both New York and London over the last 17 years.
Prior to joining Investec he founded Black Kettle International, a structured property focused boutique
investment bank, where he developed a credit tenant lease backed methodology for the UK commercial property
market. James was head of Sumitomo Bank’s US credit trading business, originally trading Corporate, CDO
and ABS debt products before expanding his responsibilities into Real Estate Finance. James held similar roles
at ING Barings and began his career as an asset swap and FRN trader at Bankers Trust. James is a member of
the Association of Property Bankers.
Konstantine Pastras joined Investec in July 2005 as Director of Mortgages. He is responsible for developing
relationships with mortgage originators and acquiring mortgage assets from whole loan traders to support the
mortgage securitisation program. Konstantine has spent time at Fitch Ratings Ltd and Countrywide Homeloans
in London and while in the USA he was with Fannie Mae on the MBS and Whole Loan Trading Desk. He has a
BSc in Business Management with a focus in Accounting and Finance.
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DESCRIPTION OF THE COLLATERAL ADMINISTRATOR AND ACCOUNT BANK
The information appearing in this section has been prepared by the Collateral Administrator and Account Bank,
and has not been independently verified by the Issuer or the Manager. Accordingly, notwithstanding anything to
the contrary herein, neither the Issuer nor the Manager assumes any responsibility for the accuracy,
completeness or applicability of such information.
The Account Bank
HSBC Bank plc and its subsidiaries form a UK-based group providing a comprehensive range of banking and
related financial services.
HSBC Bank plc (formerly Midland Bank plc) was formed in England in 1836 and subsequently incorporated as
a limited company in 1880. In 1923, the company adopted the name of Midland Bank Limited which it held
until 1982 when it re-registered and changed its name to Midland Bank plc.
During the year ended 31 December 1992, Midland Bank plc became a wholly owned subsidiary undertaking of
HSBC Holdings plc, whose Group Head Office is at 8 Canada Square, London E14 5HQ. HSBC Bank plc
adopted its current name, changing from Midland Bank plc, in the year ended 31 December 1999.
The HSBC Group is one of the largest banking and financial services organisations in the world, with around
9,500 offices in 76 countries and territories in five geographical regions: Europe; Hong Kong; the rest of Asia-
Pacific, including the Middle East and Africa; North America and South America. Its total assets at 30 June
2006 were US$1,738 billion. HSBC Bank plc is the HSBC Group’s principal operating subsidiary undertaking
in Europe. Shares in HSBC Holdings plc are listed on the London, Hong Kong, New York, Paris and Bermuda
stock exchanges. The shares are traded on the New York stock exchange in the form of American depositary
receipts.
The short-term unsecured obligations of HSBC Bank plc are currently rated A-1+ by S&P, P-1 by Moody’s and
F1+ by Fitch and the long-term obligations of HSBC Bank plc are currently rated AA by S&P, Aa2 by
Moody’s, and AA by Fitch.
HSBC is regulated pursuant to the Financial Services and Markets Act 2000 and is an authorised institution
supervised by the Financial Services Authority. HSBC Bank plc’s principal place of business in the United
Kingdom is 8 Canada Square, London E14 5HQ.
The Collateral Administrator
Law Debenture was founded in 1889 and is listed on the London Stock Exchange. With its head office situated
at Fifth Floor, 100 Wood Street, London EC2V 7EX, Law Debenture has operating subsidiaries in Hong Kong,
Grand Cayman, Jersey, New York and Delaware.
Law Debenture is one of Europe’s leading independent trustee operations whose extensive global client base
includes many government entities as well as leading national and multi-national institutions. Its appointment on
bond issues range from sovereign issues through to high yield bonds in emerging markets throughout the world
whilst acting also on major capital project financings, securitisations and synthetic issues. Additionally, Law
Debenture provides speciality trustee and corporate services for all types of structured financings and its active
trustee experience involves many different jurisdictions. Law Debenture Asset Backed Solutions Ltd is a
wholly owned subsidiary of Law Debenture and was established in 2006 to provide administration services to
the structured finance sector.
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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.
1. Introduction
Pursuant to the Collateral Management Agreement, the Collateral Manager is required to act as the Issuer’s
manager in respect of the Portfolio, to act in specific circumstances in relation to the Portfolio on behalf of the
Issuer and to carry out the duties and functions described below and pursuant to the Collateral Administration
Agreement, the Collateral Administrator is required to perform certain calculations in relation to the Portfolio on
behalf of the Issuer.
2. Acquisition of Portfolio Collateral at Closing and During the Ramp-Up Period
The Collateral Manager (acting on behalf of the Issuer) will purchase a portfolio of Asset Backed Securities and
Synthetic Securities on or before the Closing Date and, subsequently, during the Ramp-Up Period. The Ramp-
Up Period will comprise the period from, and including the Closing Date to and including the Effective Date.
The “Effective Date” shall be 24 December 2007 (or, if such day is not a Business Day, the next following
Business Day), or in the event that the Collateral Manager, acting on behalf of the Issuer, is able to purchase
Portfolio Collateral prior to 24 December 2007 with an Aggregate Principal Balance equal to the Required
Portfolio Collateral Balance, the Collateral Manager may declare that the Effective Date has occurred on a
Business Day prior to such date, subject to receipt of (a) notification from the Collateral Administrator of the
results of the Collateral Quality Tests, the Portfolio Profile Tests, the Coverage Tests and the Additional
Coverage Test, (b) certification from the independent accountants appointed by the Issuer pursuant to the
Collateral Administration Agreement that the Collateral Quality Tests, the Portfolio Profile Tests, Coverage
Tests and Additional Coverage Test have been satisfied and that the Aggregate Principal Balance of the
Portfolio Collateral (or Portfolio Collateral committed to be acquired) on such date is equal to or greater than the
Required Portfolio Collateral Balance and (c) Rating Agency Confirmation in respect of such declaration.
In entering into arrangements on behalf of the Issuer, to buy and sell Portfolio Collateral, the Collateral Manager
(acting on the information to be provided by the Collateral Administrator to the Collateral Manager in
accordance with the Transaction Documents) shall take into consideration, amongst other things, the payment
obligations of the Issuer on each Payment Date to ensure that, as far as practicable, expected distributions on the
Portfolio Collateral and the Eligible Investments will permit timely performance of the Issuer’s payment
obligations under the Notes and Asset Swap Transactions. The proceeds of the issue of the Notes on the Closing
Date, following payment of certain fees and expenses payable, shall be applied in the payment of €70,000 into
the Expense Reimbursement Account, the acquisition of the Initial Portfolio Collateral purchased on or before
the Closing Date (including the entry into associated Asset Swap Transactions) and the payment of the
remaining proceeds into the Unused Proceeds Account on the Closing Date. During the Ramp-Up Period, the
Collateral Manager, acting on behalf of the Issuer, shall use all commercially reasonable efforts to apply
amounts standing to the credit of the Unused Proceeds Account in the acquisition of Original Portfolio
Collateral, subject to the restrictions described below.
The Collateral Manager, acting on behalf of the Issuer, shall procure that, within 30 Business Days after the
Effective Date, the independent accountants appointed by the Issuer in accordance with the Collateral
Administration Agreement issue a report certifying the matters referred to above, copies of which shall be
forwarded to the Issuer, the Trustee, the Collateral Manager, the Collateral Administrator and the Rating
Agencies and shall promptly following receipt of such report request that each of the Rating Agencies confirms
the Initial Ratings of the Notes. In the event that (i) the Initial Ratings of the Notes have been reduced or
withdrawn or (ii) either or both of the Rating Agencies notify 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 Notes, in each case,
all further purchases of Portfolio Collateral shall cease until the Collateral Manager, acting on behalf of the
Issuer, prepares and presents to the Rating Agencies a Rating Confirmation Plan which is acceptable to the
Rating Agencies setting forth the timing and manner of acquisition of additional Portfolio Collateral or any
other intended action which will cause confirmation or reinstatement of the Initial Ratings including, without
limitation, (A) the proposed timing and the manner of acquisition of Portfolio Collateral that will satisfy the
Collateral Quality Tests and the Coverage Tests; (B) the proposed sale of a portion of the Portfolio Collateral;
(C) proposed amendments to the Collateral Quality Tests, Portfolio Profile Tests, the Coverage Tests,
Additional Coverage Test, Eligibility Criteria and/or the Reinvestment Criteria; (D) the proposed extension of
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the Effective Date; and (E) the proposed payment of principal of and accrued interest on the Notes (any such
repayment of principal of the Notes in the order of seniority or pro rata among the relevant Classes of Notes).
The Collateral Manager (acting on behalf of the Issuer) is under no obligation whatsoever 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 a plan in favour of redemption of Notes as described in this paragraph 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 second Business Day prior to the Payment Date next following the
Effective Date and any other Payment Date thereafter, the Balance standing to the credit of the Unused Proceeds
Account 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 Notes in accordance with the Priorities of
Payment to the extent required to cause the Initial Ratings assigned to the Notes to be confirmed. Upon
confirmation by each of the Rating Agencies of the Initial Ratings assigned to the Notes after the Effective Date,
the transaction will be “effective” and the Balance standing to the credit of the Unused Proceeds Account (if
any) shall, upon the direction of the Collateral Manager acting on behalf of the Issuer, be transferred to the
Principal Collection Account.
3. Portfolio Collateral
3.1 Eligibility Criteria
An obligation will be eligible for purchase by the Issuer or by the Collateral Manager (acting on behalf of the
Issuer) if such obligation satisfies the Eligibility Criteria at the time of entry into a commitment to purchase such
obligation. Except as provided herein, the “Eligibility Criteria” will be met if the relevant Portfolio Collateral
satisfies each of the following:
(i)
it is denominated either in:
(a)
(b)
(c)
Euro and it is not convertible into or payable in any other currency; or
Sterling and is not convertible into or payable in any other currency, provided that the Issuer,
with effect from the date of acquisition thereof, enters into an Asset Swap Transaction with a
notional amount in euro equal to the aggregate principal amount in Sterling of such obligation
and otherwise complies with the requirements set out in the Collateral Management
Agreement; or
U.S. Dollars and is not convertible into or payable in any other currency, provided that the
Issuer, with effect from the date of acquisition thereof, enters into an Asset Swap Transaction
with a notional amount in euro equal to the aggregate principal amount in U.S. Dollars of such
obligation and otherwise complies with the requirements set out in the Collateral Management
Agreement;
(ii)
(iii)
(iv)
(v)
(vi)
the majority of its underlying exposure is domiciled in Western Europe or U.S.A.;
it is an Eligible Type of Asset Backed Security (as defined below under “Eligible Types of Asset
Backed Securities”);
it has an S&P Rating or an S&P Notched Rating (neither of which shall carry an “r” or a “t” subscript)
and a Fitch Rating (as defined below);
such item of Portfolio Collateral has a rating from Fitch of at least “B” and a rating from S&P of at
least “B”;
the payment on such security is not subject to any withholding tax at any time (subject to completion of
any administrative or procedural requirements) unless the issuer or the obligor thereof is required to
make additional payments sufficient to cover any such withholding tax imposed on payments made to
the Issuer or unless such withholding can be eliminated either pursuant to a claim for exemption by the
Issuer or pursuant to the provision of an applicable double tax treaty and the rating assigned by the
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Rating Agencies to such items of Portfolio Collateral does address the timely payment of such
additional or gross-up amounts;
(vii)
(viii)
(ix)
(x)
it does not require the holder thereof to make any advances or pay any amounts in respect thereof after
the date of the purchase;
it is publicly rated as to the repayment of both interest and principal;
it would not constitute an item of Defaulted Portfolio Collateral, Low Grade Portfolio Collateral, Credit
Risk Portfolio Collateral or an Accruing PIK Security;
other than in respect of the Fixed Rate Portfolio Collateral, it pays a floating rate of interest only;
(xi) it matures in or before 31 December 2095;
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
(xx)
(xxi)
it provides for the payment of interest thereon not less frequently than annually;
it is not a loan or a participation interest in a loan;
it is not a Synthetic Security which is a CDO Security and that has a public rating below “BBB-” by
S&P or “BBB-” by Fitch;
upon acquisition, (a) such item of Portfolio Collateral is capable of being, and will be, the subject of a
first fixed charge, first priority security interest or other arrangement having a similar commercial
effect in favour of the Trustee for the benefit of the Secured Parties pursuant to the Trust Deed (or any
deed or document supplement thereto) and/or the Pledge Agreement and (b) (subject to (a) above) the
Issuer (or the Collateral Manager on behalf of the Issuer) has notified the Trustee in the event that such
item of Portfolio Collateral is a debt security held through the Custodian which is not held through
Euroclear or does not satisfy the requirements relating to Euroclear collateral specified in the Trust
Deed and/or the Pledge Agreement, and has taken such action as the Trustee may require to effect such
security interest;
it is not a Dutch Ineligible Security;
it is not an Emerging Market security;
the collateral relating to such security is not any type of aircraft;
the security relating to such collateral is not a Combination Note;
it is not subject to stamp duty reserve tax, stamp duty or any other similar documentary tax on
transfers; and
it is not managed or originated by Investec Bank (UK) Limited (for so long as Investec Principal
Finance, a business unit division of Investec Bank (UK) Limited, is the Collateral Manager),
provided that a Synthetic Security shall not be required to satisfy paragraphs (ii), (iii) and (ix), which shall
instead be satisfied by the related Reference Obligation.
The failure by any Portfolio Collateral to satisfy the Eligibility Criteria at any time after its acquisition shall not
cause any obligation which would otherwise be Portfolio Collateral from being Portfolio Collateral so long as
such obligation was Portfolio Collateral satisfying the Eligibility Criteria when purchased or a binding
commitment to purchase was entered into by or on behalf of the Issuer.
For the purposes of the Eligibility Criteria:
“Combination Note” means a note which is comprised of two or more principal components derived from other
notes.
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“Emerging Market” means any country whose external foreign indebtedness is rated below “AA-” by S&P or
“AA-” by Fitch, other than any country in respect of which Rating Agency Confirmation is received.
“Fixed Rate Portfolio Collateral” means any of the Portfolio Collateral that bears interest at a fixed rate.
“Floating Rate Portfolio Collateral” means any of the Portfolio Collateral that bears interest calculated by
reference to a floating rate or index.
The “Fitch Rating” means, for any item of Portfolio Collateral:
(a)
(b)
(c)
(d)
if such item is rated by Fitch, as published in any publicly available news source, such rating;
if the rating cannot be assigned pursuant to (a) (above) and there is a publicly available rating for such
item of Portfolio Collateral by Moody’s or S&P (but not both), the rating that corresponds to S&P or
Moody’s rating, as the case may be;
if the rating cannot be assigned pursuant to (a) or (b) (above) and there is a publicly available rating for
such item of Portfolio Collateral by Moody’s and S&P, the rating that corresponds to the lower of the
Moody’s or S&P rating; or
if the rating cannot be assigned pursuant to (a), (b) or (c) (above), the Issuer or the Collateral Manager,
on behalf of the Issuer, shall apply to Fitch for a private rating which shall then be the Fitch Rating,
provided that (x) if such item of Portfolio Collateral has been put on rating watch negative or negative credit
watch for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating above
shall be one rating subcategory below such rating by that Rating Agency, and (y) if such item of Portfolio
Collateral has been put on rating watch positive or positive credit watch for possible upgrade by any Rating
Agency, then the rating used to determine the Fitch Rating above shall be one rating subcategory above such
rating by that Rating Agency, and (z) not withstanding the rating definition described above, Fitch reserves the
right to issue a rating estimate for any item of Portfolio Collateral at any time.
“S&P Notched Rating” means, in respect of an item of Portfolio Collateral which is not publicly rated by S&P,
the S&P equivalent rating derived as follows:
With respect to any Portfolio Collateral that is in the reasonable opinion of the Collateral Manager primarily
backed by European assets, the following notching provisions apply (provided that if the Portfolio Collateral is
rated by only one rating agency, such Portfolio Collateral shall be notched down in accordance with the
following table and then further notched down one more S&P rating sub-category):
(A) with respect to any item of Portfolio Collateral which is in one of the following asset classes (as
defined by S&P) and is publicly rated by either Moody’s or Fitch:
Lower of Public Rating
by Moody’s or Fitch
Lower of Public Rating by
Moody’s or Fitch
ASSET CLASS Aaa/AAA to Baa3/ BBB- Below Baa3/ BBB-
Auto-Prime 1 2
Consumer Loans 1 2
Credit Card 1 2
Leases other than Italian Leases 1 2
Italian Leases 1 2
SME Loan Collateral Debt Obligations 1 2
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Cash Flow Residential Mortgages – prime 1 2
Cash Flow Residential Mortgages – non prime 2 3
CMBS 2 3
Cashflow CBO/CLO backed by pool of corporate
loans
1 2
(B) with respect to any item of Portfolio Collateral which is in one of the following asset classes (as
defined by S&P):
ASSET CLASS
Lower of Public Rating by
Moody’s and Fitch
Aaa/AAA to Aa3/AA-
Lower of Public Rating by
Moody’s and Fitch
Below Aa3/AA- and above
A3/A-
Operating Company Securitisation Security
rated by Moody’s and Fitch
2 3
Non-Performing Loans 1 n/a
provided that:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
in the case of Italian Leases, the highest S&P Notched Rating for any Portfolio Collateral that is an
Italian Lease determined pursuant to this provision shall be AA- unless the originator of such Portfolio
Collateral is publicly rated Baa3 or higher by Moody’s or publicly rated BBB- or higher by Fitch;
the S&P Notched Rating of any Portfolio Collateral which is a Synthetic Security and is publicly rated
Aaa by Moody’s and publicly rated AAA by Fitch shall be AA+;
a German Residential Mortgage Security that is not rated Aaa by Moody’s and AAA by Fitch may not
be determined by notching;
European Residential Mortgage Securities with multi-family properties and/or construction dwellings
may not be determined by notching;
with respect to any Portfolio Collateral in respect of which the relevant obligor is organised in the
Netherlands, the relevant rating of Moody’s and/or Fitch for the purposes of the foregoing shall be the
lower of the public ratings assigned by such rating agency to such obligor and any insurance company
that guarantees payments in respect of such European Residential Mortgage Security;
Operating company securitisations from a single obligor will not constitute more than 2.5 per cent. of
the Aggregate Collateral Balance of Portfolio Collateral;
Portfolio Collateral may only be notched in accordance with the above provisions to the extent that the
underlying assets of the Portfolio Collateral that are notched belong to the following jurisdictions:
Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland and United Kingdom; and
the total principal amount of Portfolio Collateral not rated by S&P, but notched utilising the
aforementioned notching provisions will comprise no more than 15 per cent. of the Aggregate
Collateral Balance of the Portfolio Collateral and further provided that no more than 10 per cent. of the
Aggregate Collateral Balance may be rated based on a public rating that is not provided by either S&P
or Fitch.
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“S&P Rating” means for any item of the Portfolio Collateral or country the rating, if any, assigned by S&P to
such Portfolio Collateral or country or, if there is no such rating assigned by S&P at the relevant time, the S&P
credit estimate or the S&P Notched Rating then assigned to such item of Portfolio Collateral or country
provided that no more than 20 per cent. of the Aggregate Principal Balance of the Portfolio Collateral
(excluding Portfolio Collateral assigned a credit estimate by S&P) shall have a rating based on the S&P Notched
Rating and provided that where a security is to be designated as Portfolio Collateral and at the time of such
designation, S&P has published (and not withdrawn) a statement that the S&P Rating of such security is (i)
under review or on watch for possible downgrade, the S&P Rating of such security to be designated as Portfolio
Collateral shall be deemed to be one sub-category below the existing S&P Rating of such security to be
designated as Portfolio Collateral or (ii) under review or on watch for possible upgrading, the S&P Rating of
such security to be designated as Portfolio Collateral shall be deemed to be one sub-category above the existing
S&P Rating of such security to be designated as Portfolio Collateral.
3.2 Asset Backed Securities
Most of the Portfolio Collateral will consist of Asset Backed Securities and will be of an “Eligible Type”, as
defined under paragraph 7 (“Eligible Types of Asset Backed Securities”) below. Asset Backed Securities are
typically securities that entitle the holders thereof to receive payments that depend primarily on the cash flow
from a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a
finite time period, together with rights or other assets designed to assure the servicing or timely distribution of
proceeds to holders of the Asset Backed Securities.
An Asset Backed Security generally is created by the transfer of assets or collateral to a special purpose entity
(which may be a trust, limited liability company, corporation or other entity), which becomes the issuer of the
Asset Backed Securities. The sponsor or originator usually establishes the special purpose entity. The special
purpose entity may issue securities in the form of debt secured by the underlying assets or representing
ownership interests in the underlying assets. Generally, a servicer (often the originator) is responsible for
collecting the cash flow generated by the underlying assets and distributing such cash flow (through a trustee) to
security holders in accordance with the terms of the securities. In certain transactions, the trustee performs these
functions.
The structure of an Asset Backed Security and the terms of the investors’ interest in the underlying assets may
vary widely depending on the type of collateral, the tax, accounting or regulatory treatment desired by the
originator, investor preferences and the use of credit enhancement. Asset Backed Securities may bear interest at
fixed or floating rates. The Asset Backed Securities included in the Portfolio Collateral may consist of
mezzanine or subordinated securities which bear the risk of loss on the underlying assets and payments under
which may be interrupted if insufficient funds are available or if available amounts are redirected upon failure to
satisfy a covenant or test.
See “Nature of Collateral” and “Liquidity of Portfolio Collateral; Sale of Portfolio Collateral by Collateral
Manager” in “Risk Factors”.
3.3 Synthetic Securities
A portion of the Portfolio Collateral may consist of Synthetic Securities. “Synthetic Security” (as more
particularly defined in Condition 1 (Definitions)) means any structured bond investment or other investment
denominated in euro (which is not a credit default swap) purchased from, or entered into by, the Issuer with a
Synthetic Security Counterparty the returns on which (as determined by the Collateral Manager) are linked to
the credit performance of a Reference Obligation, but which may provide for a different maturity (but not later
than the Payment Date falling in December 2095), interest rate, currency or other non-credit characteristics to
such Reference Obligation provided that the Eligibility Criteria are satisfied with respect to such security.
The entry into, or acquisition of, any Synthetic Security will be subject to Rating Agency Confirmation. All
Synthetic Securities acquired by the Issuer must be settled by physical delivery of the relevant interest in the
Reference Obligation to which such Synthetic Security relates to the Synthetic Security Counterparty and in no
circumstances may be cash settled. If the Reference Obligation is not denominated in euro, the Synthetic
Security may only be physically settled if Rating Agency Confirmation is received in respect of the manner in
which the currency risk is covered.
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Any amounts received upon liquidation of Synthetic Security shall be deemed to constitute (i) Sale Proceeds in
the event that the Synthetic Security or the Synthetic Security Counterparty’s security interest was terminated by
the Collateral Manager on behalf of the Issuer or sold or assigned or (ii) Unscheduled Principal Proceeds in the
event that the Synthetic Security or the Synthetic Security Counterparty’s security interest was subject to an
early termination other than by the Collateral Manager acting on behalf of the Issuer or (iii) Scheduled Principal
Proceeds in the event that the Synthetic Security was terminated at its scheduled maturity.
For purposes of the Coverage Tests and the limits set forth in the Portfolio Profile Tests and the Collateral
Quality Tests, a Synthetic Security shall be included as an item of Portfolio Collateral 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 the purposes of the Coverage Tests, the Collateral Quality Tests (other than the Fitch Weighted Average
Recovery Rate Test and the S&P Weighted Average Recovery Rate Test) and the Portfolio Profile Tests, a
Synthetic Security shall be included as Portfolio Collateral having the relevant characteristics of the Synthetic
Security and not of the related Reference Obligation, unless the Collateral Manager, acting on behalf of the
Issuer, determines otherwise and receives Rating Agency Confirmation in respect of such determination.
For the purposes of the Fitch Weighted Average Recovery Rate Test and the S&P Weighted Average Recovery
Rate Test, a Synthetic Security shall be included as Portfolio Collateral 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 (acting on behalf
of the Issuer) determines otherwise and receives Rating Agency Confirmation in respect of such determination.
In the event that any Deliverable Obligations (as defined above) are received, the Collateral Manager, acting on
behalf of the Issuer: (a) may, to the extent that such obligations satisfy the Eligibility Criteria and the
Reinvestment Criteria, designate such Deliverable Obligations as Portfolio Collateral, or (b) shall, in all other
circumstances, sell or procure the sale thereof as soon as reasonably practicable.
3.4 Non-Euro Portfolio Collateral
The Collateral Manager shall be authorised to purchase, on behalf of the Issuer, Non-Euro Portfolio Collateral
from time to time provided that any such Non-Euro Portfolio Collateral shall only be considered to satisfy the
Eligibility Criteria if, on or about the date of settlement thereof, the Collateral Manager procures entry by the
Issuer into an Asset Swap Transaction pursuant to which the currency risk arising from receipt of cash flows
from such Non-Euro Portfolio Collateral, including interest and principal payments, is hedged by swapping such
cash flows for Euro payments to be made by an Asset Swap Counterparty. Rating Agency Confirmation shall
be required in relation to entry into each Asset Swap Transaction unless such Asset Swap Transaction is a Form
Approved Asset Swap. See “Description of the Hedging Arrangements” below.
4. Criteria for Purchase and Substitution of Collateral
In addition to the limitations set forth below under “Changes in Composition of Portfolio Collateral” the
purchase of Portfolio Collateral during the Ramp-Up Period (“Original Portfolio Collateral”), the purchase of
any Portfolio Collateral or any additional debt obligations purchased during the Reinvestment Period with
Principal Proceeds other than Sale Proceeds or, following the Reinvestment Period and subject to satisfaction of
the Additional Reinvestment Criteria, with Unscheduled Principal Proceeds (“Additional Portfolio
Collateral”) and the purchase of any debt obligations purchased during the Reinvestment Period with Sale
Proceeds (“Substitute Portfolio Collateral”) is subject in each case to compliance with or maintenance and
improvement of the tests and other criteria to the extent described below. Generally, if any limitation described
below is not satisfied at any time after the Effective Date, no Additional Portfolio Collateral or Substitute
Portfolio Collateral may be purchased unless, after giving effect to such purchase, the related test value is
maintained or improved.
4.1 Collateral Quality Tests
The Collateral Quality Tests will consist of each of the following:
(a)
so long as any Notes rated by Fitch are Outstanding:
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(i)
(ii)
the Fitch Weighted Average Rating Factor Test; and
the Fitch Weighted Average Recovery Rate Test;
(b)
so long as any Notes rated by S&P are Outstanding:
(i)
(ii)
as of the Effective Date and until the end of the Reinvestment Period, the S&P CDO Rating
Test; and
the S&P Weighted Average Recovery Rate Test; and
(c)
so long as any Notes are Outstanding:
(i)
(ii)
(iii)
the Weighted Average Spread Test;
the Weighted Average Life Test; and
the Bivariate Risk Test.
(d)
Fitch Weighted Average Rating Factor Test
The “Fitch Weighted Average Rating Factor Test” will be satisfied as at any Measurement Date from (and
including) the Effective Date if the Fitch Weighted Average Rating Factor as at such Measurement Date is less
than or equal to the level specified under the case specified in the Fitch Test Matrix as at such Measurement
Date.
The “Fitch Weighted Average Rating Factor” is the number determined by (i) summing the products obtained
by multiplying the Principal Balance of each item of Portfolio Collateral (excluding Defaulted Portfolio
Collateral) by its Fitch Rating Factor, (ii) dividing such sum by the Aggregate Principal Balance of all such
Portfolio Collateral (excluding Defaulted Portfolio Collateral) and (iii) rounding the result to the nearest one
decimal place.
The “Fitch Rating Factor” is the number set forth in the table below opposite the Fitch Rating of such Portfolio
Collateral or Eligible Investment:
Rating
Factors
AAA 0.19
AA+ 0.57
AA 0.89
AA- 1.15
A+ 1.65
A 1.85
A- 2.44
BBB+ 3.13
BBB 3.74
BBB- 7.26
BB+ 10.18
BB 13.53
BB- 18.46
B+ 22.84
B 27.67
B- 34.98
CCC+ 43.36
CCC 48.52
CCC- 62.76
CC 77.00
C 95.00
DDD — D 100.00
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(e)
Fitch Weighted Average Recovery Rate Test
The “Fitch Weighted Average Recovery Rate Test” will be satisfied as at any Measurement Date from (and
including) the Effective Date if the Fitch Class A/B Weighted Average Recovery Rate is equal to or greater than
the level specified under “Fitch Class A/B Recovery Rate” in the Fitch Test Matrix as at such Measurement
Date. Higher Fitch Weighted Average Recovery Rates reflect a greater proportion of Portfolio Collateral of a
type expected to result in greater recovery upon default.
The “Fitch Class A/B Weighted Average Recovery Rate” is determined by summing the products obtained by
multiplying the Principal Balance of each item of Portfolio Collateral (excluding Defaulted Portfolio Collateral)
by its Fitch Class A/B Recovery Rate, dividing such sum by the Aggregate Principal Balance of all such
Portfolio Collateral (excluding Defaulted Portfolio Collateral) and rounding to the nearest 0.1 per cent.
The “Fitch Class A/B Recovery Rate” will be calculated in accordance with the following table. The
applicable percentage will be determined by reference to the original rating, the seniority and the initial tranche
“thickness” of the class of notes to which the item of Portfolio Collateral belongs.
Seniority*
Fitch Class A/B Recovery Rate
AAA
SF Senior AAA 80.000%
SF AAA Non Senior 65.000%
SF AA Senior 60.000%
SF AA Non Senior (>10%) 48.000%
SF AA Non Senior (5-10%) 44.000%
SF AA Non Senior (0-5%) 40.000%
SF A Senior 52.000%
SF A Non Senior (>10%) 36.000%
SF A Non Senior (5-10%) 33.000%
SF A Non Senior (0-5%) 30.000%
SF BBB Senior 42.000%
SF BBB Non Senior (>10%) 26.000%
SF BBB Non Senior (5-10%) 23.000%
SF BBB Non Senior (0-5%) 20.000%
SF BB Senior 32.000%
SF BB Non Senior (>10%) 14.000%
SF BB Non Senior (5-10%) 12.000%
SF BB Non Senior (0-5%) 10.000%
SF B Non Senior (>10%) 5.000%
SF B Non Senior (5-10%) 4.000%
SF B Non Senior (0-5%) 3.000%
SF < B 0.000%
* The percentages in the column below refer to the initial “thickness” of the tranche. For example, “>10%” means the original
principal amount of the tranche is greater than 10% of the total original principal amount of the relevant transaction.
Fitch Test Matrix
Subject to the provisions provided below, on and after the Effective Date, the Collateral Manager (on behalf of
the Issuer), will have the option to elect which of the cases set forth in the matrix below (the “Fitch Test
Matrix”) shall be applicable for purposes of the Fitch Weighted Average Rating Factor Test, the Weighted
Average Spread Test and the Fitch Weighted Average Recovery Rate Test.
(a)
(b)
The applicable column for performing the Fitch Weighted Average Rating Factor Test will be the
column which corresponds to the elected Fitch Weighted Average Rating Factor.
The applicable row for performing the Fitch Weighted Average Recovery Rate Test will be the row
which corresponds to the elected Recovery Rate.
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(c)
The applicable cell for performing the Weighted Average Spread Test will be the cell which
corresponds to the elected Weighted Average Rating Factor and the elected Recovery Rate.
On the Effective Date, the Collateral Manager (on behalf of the Issuer), will be required to elect which case shall
apply initially. Thereafter, on ten Business Days’ written notice to the Issuer, the Trustee and the Collateral
Administrator, the Collateral Manager (on behalf of the Issuer) may elect to have a different case apply,
provided that the Fitch Weighted Average Rating Factor Test, the Weighted Average Spread Test and the Fitch
Weighted Average Recovery Rate Test applicable to the 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 case apply.
Fitch Test Matrix
Fitch Weighted Average Rating Factor
5.00 5.20 5.40 5.60 5.80 6.01 6.20 6.40 6.60 6.80 7.00 7.20 7.40
19.28% 125 127 129 131 132 134 136 137 138 142 145 148 151
AAA Recovery Rate
20.09% 125 127 128 130 132 133 135 136 137 140 143 146 148
21.18% 124 125 128 129 131 133 134 135 137 138 141 143 146
22.29% 124 125 127 129 131 132 134 135 136 137 139 141 144
23.36% 124 125 127 128 130 132 133 134 135 136 138 140 142
24.59% 123 124 125 126 128 129 130 132 133 134 135 136 137
Further cases may be added to the Fitch Test Matrix or modified after the Closing Date, subject to a Rating
Agency Confirmation from Fitch.
(f)
S&P CDO Rating Test
The “S&P CDO Rating Test” in respect of any Class A Notes, Class B Notes, Class C Notes and Class D
Notes will be satisfied if, as of any Measurement Date from (and including) the Effective Date and, if
applicable, after giving effect to the disposal or acquisition of any items of Portfolio Collateral, the Default
Differential of the Proposed Portfolio is positive. The S&P CDO Rating Test for any Class A Notes, Class B
Notes, Class C Notes and Class D Notes will be considered to be “improved” if the Default Differential of the
Proposed Portfolio for each such Class of Notes is greater than the Default Differential of the Current Portfolio
for such Class of Notes. The S&P CDO Rating Test shall not apply until the later of the (a) Effective Date and
(b) the receipt by the Collateral Manager to its reasonable satisfaction of the S&P CDO Rating Test.
The “Default Differential” in respect of any Class A Notes, Class B Notes, Class C Notes and Class D Notes at
any time is the rate calculated by subtracting the Scenario Default Rate in respect of such Class of Notes from
the Break-even Default Rate for such Class of Notes at such time.
The “Scenario Default Rate” in respect of any Class A Notes, Class B Notes, Class C Notes and Class D Notes
at any time, is an estimate of the cumulative default rate for the Current Portfolio or the Proposed Portfolio, as
applicable, consistent with a rating in respect of the relevant Class A Notes, Class B Notes, Class C Notes and
Class D Notes which is equal to the Initial Rating applicable thereto as determined by application of the S&P
CDO Evaluator at such time.
The “Break-even Default Rate” in respect of any Class A Notes, Class B Notes, Class C Notes and Class D
Notes at any time, is the maximum percentage of defaults which the Current Portfolio or the Proposed Portfolio,
as applicable, can sustain, as determined by S&P, which, after giving effect to S&P’s assumptions on recoveries
and timing and to the Priorities of Payment, will result in sufficient funds remaining for the payment in full of
the relevant Class A Notes, Class B Notes, Class C Notes and Class D Notes. The “Break-even Default Rate”
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will be determined by reference to the S&P Test Matrix (which references the following three weighted average
recovery rate tables):
S&P Class A/B Test Matrix
SPREAD
“AAA” Recovery Rate
22.0% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0% 29.0% 30.0% 31.0%
128 27.24% 27.55% 27.85% 28.16% 28.47% 28.77% 29.09% 29.41% 29.74% 30.08%
130 27.34% 27.66% 27.96% 28.26% 28.57% 28.88% 29.18% 29.51% 29.85% 30.19%
132 27.45% 27.77% 28.06% 28.36% 28.67% 28.98% 29.29% 29.62% 29.96% 30.30%
134 27.55% 27.86% 28.16% 28.46% 28.77% 29.08% 29.40% 29.73% 30.07% 30.42%
136 27.65% 27.95% 28.26% 28.55% 28.86% 29.19% 29.51% 29.84% 30.18% 30.53%
138 27.75% 28.05% 28.35% 28.65% 28.96% 29.30% 29.62% 29.95% 30.29% 30.63%
140 27.86% 28.14% 28.44% 28.75% 29.06% 29.40% 29.72% 30.06% 30.39% 30.74%
142 27.98% 28.25% 28.55% 28.85% 29.17% 29.49% 29.82% 30.15% 30.49% 30.85%
144 28.08% 28.36% 28.65% 28.96% 29.27% 29.58% 29.92% 30.25% 30.59% 30.95%
146 28.19% 28.46% 28.76% 29.06% 29.36% 29.68% 30.01% 30.35% 30.70% 31.05%
148 28.28% 28.57% 28.86% 29.16% 29.46% 29.78% 30.11% 30.45% 30.79% 31.16%
S&P Class C Test Matrix
SPREAD
“AA” Recovery Rate
27.0% 28.0% 29.0% 30.0% 31.0% 32.0% 33.0% 34.0% 35.0% 36.0%
128 24.11% 24.41% 24.72% 25.03% 25.36% 25.69% 26.04% 26.38% 26.74% 27.11%
130 24.24% 24.54% 24.84% 25.16% 25.48% 25.82% 26.16% 26.50% 26.86% 27.23%
132 24.34% 24.64% 24.94% 25.25% 25.58% 25.91% 26.25% 26.60% 26.96% 27.32%
134 24.45% 24.74% 25.02% 25.34% 25.66% 26.00% 26.34% 26.71% 27.05% 27.42%
136 24.53% 24.82% 25.12% 25.45% 25.78% 26.13% 26.45% 26.80% 27.16% 27.52%
138 24.63% 24.94% 25.26% 25.58% 25.90% 26.22% 26.57% 26.92% 27.28% 27.65%
140 24.73% 25.03% 25.35% 25.67% 25.99% 26.32% 26.68% 27.02% 27.38% 27.75%
142 24.81% 25.12% 25.43% 25.76% 26.08% 26.42% 26.78% 27.13% 27.47% 27.83%
144 24.92% 25.22% 25.54% 25.86% 26.18% 26.52% 26.87% 27.21% 27.53% 27.93%
146 25.03% 25.34% 25.64% 25.95% 26.26% 26.61% 26.96% 27.29% 27.67% 28.02%
148 25.12% 25.41% 25.71% 26.03% 26.36% 26.70% 27.05% 27.40% 27.75% 28.11%
S&P Class D Test Matrix
SPREAD
“A” Recovery Rate
31.0% 32.0% 33.0% 34.0% 35.0% 36.0% 37.0% 38.0% 39.0% 40.0%
128 17.04% 17.25% 17.46% 17.68% 17.92% 18.16% 18.40% 18.64% 18.90% 19.18%
130 17.18% 17.38% 17.61% 17.83% 18.07% 18.30% 18.54% 18.81% 19.07% 19.35%
132 17.31% 17.53% 17.76% 17.98% 18.21% 18.46% 18.71% 18.98% 19.24% 19.49%
134 17.47% 17.69% 17.90% 18.13% 18.37% 18.62% 18.88% 19.13% 19.38% 19.64%
136 17.62% 17.84% 18.07% 18.30% 18.54% 18.79% 19.04% 19.29% 19.55% 19.81%
138 17.79% 18.01% 18.23% 18.46% 18.70% 18.94% 19.18% 19.43% 19.70% 19.96%
140 17.93% 18.15% 18.38% 18.61% 18.84% 19.08% 19.33% 19.59% 19.85% 20.11%
142 18.07% 18.29% 18.52% 18.75% 18.98% 19.23% 19.48% 19.73% 19.99% 20.26%
144 18.21% 18.43% 18.66% 18.89% 19.13% 19.37% 19.62% 19.88% 20.14% 20.42%
146 18.34% 18.57% 18.80% 19.03% 19.27% 19.51% 19.76% 20.03% 20.31% 20.60%
148 18.49% 18.71% 18.93% 19.17% 19.41% 19.66% 19.92% 20.19% 20.47% 20.76%
The “Current Portfolio” means the portfolio of Collateral Debt Assets existing prior to the sale, maturity or
other disposition of a Collateral Debt Asset or a proposed reinvestment of Principal Proceeds in any Collateral
Debt Asset, as the case may be.
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The “Proposed Portfolio” means the portfolio of Portfolio Collateral resulting from the sale, maturity or other
disposition of an item of Portfolio Collateral or a proposed reinvestment of Principal Proceeds in any Portfolio
Collateral, as the case may be.
“S&P Test Matrix” means a matrix setting out each of the possible Break-even Default Rates corresponding to
the combinations of (a) Weighted Average Spread ranging from 128 basis points to 148 basis points and (b)
weighted average recovery rates as set out in the definition of “Break-even Default Rate” above (and any other
recovery rates or spreads designated by the Collateral Manager and subject to a Rating Agency Confirmation
from S&P).
The “S&P CDO Evaluator” is the dynamic, analytical computer model developed by S&P and used to estimate
default risk of the Portfolio Collateral, which is provided to the Collateral Manager on or before the Closing
Date, as it may be modified by S&P from time to time. The S&P CDO Evaluator calculates the cumulative
default rate of a pool of Portfolio Collateral and Eligible Investments consistent with a specified benchmark
rating level based upon S&P’s proprietary corporate debt default studies. In calculating the Scenario Default
Rate applicable to any Class A Notes, Class B Notes, Class C Notes and Class D Notes, the S&P CDO
Evaluator considers each obligor’s most senior unsecured debt rating, the number of obligors in the portfolio,
the obligor and industry concentrations in the Portfolio and the remaining weighted average maturity of the
items of Portfolio Collateral and Eligible Investments and calculates a cumulative default rate based on the
statistical probability of distributions or defaults on the items of Portfolio Collateral and Eligible Investments.
(g)
S&P Weighted Average Recovery Rate Test
The “S&P Weighted Average Recovery Rate Test” will be satisfied if the S&P Class A/B Weighted Average
Recovery Rate of the Portfolio Collateral is greater than or equal to the S&P Class A/B Weighted Average
Recovery Rate specified under the relevant case in the S&P Class A/B Test Matrix, the S&P Class C Weighted
Average Recovery Rate of the Portfolio Collateral is greater than or equal to the S&P Class C Weighted
Average Recovery Rate specified under the relevant case in the S&P Class C Test Matrix and the S&P Class D
Weighted Average Recovery Rate of the Portfolio Collateral is greater than or equal to the S&P Class D
Weighted Average Recovery Rate specified under the relevant case in the S&P Class D Test Matrix. Higher
S&P Weighted Average Recovery Rates reflect a greater proportion of Portfolio Collateral of a type expected to
result in greater recovery upon default.
The “S&P Class A/B Weighted Average Recovery Rate” is determined by summing the products obtained by
multiplying the Principal Balance of each item of Portfolio Collateral (excluding Defaulted Portfolio Collateral)
by its Class A/B Recovery Rate, dividing such sum by the Aggregate Principal Balance of all such Portfolio
Collateral (excluding Defaulted Portfolio Collateral).
The “S&P Class C Weighted Average Recovery Rate” is determined by summing the products obtained by
multiplying the Principal Balance of each item of Portfolio Collateral (excluding Defaulted Portfolio Collateral)
by its Class C Recovery Rate, dividing such sum by the Aggregate Principal Balance of all such Portfolio
Collateral (excluding Defaulted Portfolio Collateral).
The “S&P Class D Weighted Average Recovery Rate” is determined by summing the products obtained by
multiplying the Principal Balance of each item of Portfolio Collateral (excluding Defaulted Portfolio Collateral)
by its Class D Recovery Rate, dividing such sum by the Aggregate Principal Balance of all such Portfolio
Collateral (excluding Defaulted Portfolio Collateral).
The “Class A/B Recovery Rate”, the “Class C Recovery Rate” and the “Class D Recovery Rate” will be
calculated in accordance with the following table:
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S&P Recovery Rates*
Asset Class Liability rating =>(%)
Senior AAA AA A BBB BB B CCC
AAA 80.00 85.00 90.00 90.00 90.00 90.00 90.00
AA 70.00 75.00 85.00 90.00 90.00 90.00 90.00
A 60.00 65.00 75.00 85.00 90.00 90.00 90.00
BBB 50.00 55.00 65.00 75.00 85.00 85.00 85.00
Junior AAA AA A BBB BB B CCC
AAA 65.00 70.00 80.00 85.00 85.00 85.00 85.00
AA 55.00 65.00 75.00 80.00 80.00 80.00 80.00
A 40.00 45.00 55.00 65.00 80.00 80.00 80.00
BBB 30.00 35.00 40.00 45.00 50.00 60.00 70.00
BB 10.00 10.00 10.00 25.00 35.00 40.00 50.00
B 2.50 5.00 5.00 10.00 10.00 20.00 25.00
CCC 0.00 0.00 0.00 0.00 2.50 5.00 5.00
_________
* Excluded from above are: Project Finance Securities, Future Flows, Synthetics Securities, CDO Repacks of ABS or CDOs,
Guaranteed ABS, Distressed debt CDOs, Synthetic CDOs and Emerging Markets CDOs (each as defined by S&P). For these
securities, S&P must review the structure before assigning recoveries. The ratings under the column “Asset Class” refer to the
initial rating of the relevant asset.
For the purposes of any Asset Swap Obligation, the S&P Recovery Rate applicable thereto shall be reduced by a
percentage in respect of which confirmation has been received from S&P as at the date of acquisition thereof.
(h)
Weighted Average Spread Test
The “Weighted Average Spread Test” will be satisfied if, as at any Measurement Date, the Weighted Average
Spread as at such Measurement Date equals or exceeds: (A) in the event that the Aggregate Principal Balance of
all Portfolio Collateral is less than the Required Portfolio Collateral Balance, the greater of (i) the number
required in the Fitch Test Matrix, (ii) the number required in the S&P Test Matrix in each instance based upon
the case specified therein which is applicable at such Measurement Date, or (iii) such lower per annum rate in
respect of which Rating Agency Confirmation has been received; or (B) in the event that the Aggregate
Principal Balance of all Portfolio Collateral is equal to or greater than the Required Portfolio Collateral Balance,
the greater of (i) the number required in the Fitch Test Matrix according to the scenario selected multiplied by
the amount obtained by dividing the Required Portfolio Collateral Balance by the Aggregate Principal Balance
of Portfolio Collateral, (ii) the number required in the S&P Test Matrix according to the scenario selected
multiplied by the amount obtained by dividing the Required Portfolio Collateral Balance by the Aggregate
Principal Balance, or (iii) such lower per annum rate in respect of which a Rating Agency Confirmation has
been obtained.
“Weighted Average Spread” means as of any Measurement Date an amount (expressed as a percentage) equal
to a fraction (expressed as a percentage) obtained by:
(a)
(b)
multiplying the Principal Balance of each item of Floating Rate Portfolio Collateral in the Portfolio as
of such date (excluding any Defaulted Portfolio Collateral) by the current per annum rate at which it
pays interest in excess of EURIBOR or such other floating rate index approved by the Rating Agencies
upon which such floating rate Portfolio Collateral bears interest provided that for CMBS with an
Available Funds Cap, such per annum rate shall be the lower of zero or the rate as advised by S&P and
Fitch;
multiplying the Principal Balance of each such item of Fixed Rate Portfolio Collateral in the Portfolio
as at such date (excluding any Defaulted Portfolio Collateral) by the fixed rate per annum rate at which
its pays interest in excess of the EURIBOR rate as determined in accordance with Condition 6(e)(i) for
the relevant Interest Accrual Period for such Measurement Date;
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(c)
(d)
summing the amounts determined pursuant to sub-clause (a) for all Floating Rate Portfolio Collateral
as of such date and sub-clause (b) for all Fixed Rate Portfolio Collateral; and
dividing such sum by the Aggregate Principal Balance of all Floating Rate Portfolio Collateral and all
Fixed Rate Portfolio Collateral (excluding any Defaulted Portfolio Collateral) as of such date,
provided that for any Asset Swap Obligation, the amount at sub-clause (a) or sub-clause (b) above shall be
calculated by reference to the euro notional amount of the related Asset Swap Transaction and the spread or
coupon payable thereon shall be determined using the spread over the EURIBOR or the euro coupon,
respectively, payable to the Issuer under the related Asset Swap Transaction.
“Available Funds Cap” means, in respect of a CMBS, that if on any interest payment date thereunder there are
insufficient funds to pay interest in respect of that CMBS, then in accordance with the terms of the relevant
Underlying Instrument, such shortfall shall be extinguished and the Issuer would have no further claim against
the obligor of such CMBS in respect of such amounts.
(i)
Weighted Average Life Test
The “Weighted Average Life Test” will be satisfied, in respect of any Measurement Date, if the Weighted
Average Life of all Portfolio Collateral is less than or equal to the number of years shown below which
corresponds to the Payment Date following such Measurement Date as set out below (or such other weighted
average life in respect of which Rating Agency Confirmation is received).
Payment Date
Maximum WAL
September 2007 8.00
December 2007 8.00
March 2008 8.00
June 2008 7.75
September 2008 7.75
December 2008 7.75
March 2009 7.50
June 2009 7.50
September 2009 7.50
December 2009 7.25
March 2010 7.25
June 2010 7.25
September 2010 7.00
December 2010 7.00
March 2011 7.00
June 2011 6.75
September 2011 6.75
December 2011 6.75
March 2012 6.50
June 2012 6.50
September 2012 6.50
December 2012 6.25
March 2013 6.25
June 2013 6.00
The “Weighted Average Life” of the Portfolio Collateral, as of any Measurement Date, is equal to the number
of years obtained by dividing (a) the Principal Balance of each item of Portfolio Collateral (excluding any
Defaulted Portfolio Collateral) multiplied by its expected remaining average life in each case as at such
Measurement Date (if such Measurement Date is a Determination Date) or as at the immediately preceding
Determination Date (if such Measurement Date is not a Determination Date) by (b) the Aggregate Principal
Balance of the Portfolio Collateral (excluding any Defaulted Portfolio Collateral).
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(j)
Bivariate Risk Test
The “Bivariate Risk Test” will be satisfied if, at any time, a Synthetic Security that has a Synthetic Security
Counterparty with a long term senior unsecured debt rating by Fitch and/or S&P as set out in the table below, is
purchased by or on behalf of the Issuer and such purchase does not cause the corresponding percentage limits
set out below to be exceeded:
S&P Long Term Senior
Unsecured Debt Rating of
Synthetic Security
Counterparty
Fitch Long Term Senior
Unsecured Debt Rating of
Synthetic Security
Counterparty
Individual Synthetic
Security Counterparty’s
limit in the Portfolio (as a
percentage of the
Aggregate Principal
Balance of all Portfolio
Collateral)
Aggregate Synthetic
Security Counterparties’
limits in the Portfolio (as a
percentage of the
Aggregate Principal
Balance of all Portfolio
Collateral)
AAA AAA 20.00% 20.00%
AA+ AA+ 10.00% 20.00%
AA AA 10.00% 20.00%
AA- AA- 7.50% 15.00%
A+ A+ 5.00% 10.00%
A A 5.00% 10.00%
4.2 Portfolio Profile Tests
In addition to the foregoing tests, the Issuer or the Collateral Manager (on the Issuer’s behalf) may purchase
Original Portfolio Collateral, Additional Portfolio Collateral or Substitute Portfolio Collateral only if the
following criteria (the “Portfolio Profile Tests”) are satisfied, maintained or improved as required by the
Reinvestment Criteria:
(i)
(ii)
(iii)
(iv)
(v)
the Aggregate Principal Balance of all Portfolio Collateral which has a public rating equal to or lower
than (a) “BBB-” by Fitch or “BBB-” by S&P, (b) “BB+” by Fitch or “BB+” by S&P or (c) “B+” by
Fitch or “B+” by S&P, does not exceed 40 per cent., 20 per cent. and 5 per cent., respectively, of the
Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral which does not have a public rating by S&P
does not exceed 25 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral which is denominated in (i) a non-Euro
denominated currency, does not exceed 20 per cent. of the Aggregate Collateral Balance, (ii) Sterling,
does not exceed 10 per cent. of the Aggregate Collateral Balance or (iii) U.S. Dollars, does not exceed
10 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Synthetic Securities does not exceed 20 per cent. of the
Aggregate Collateral Balance;
the Principal Balance of an item of, or of a particular tranche of an item of, Portfolio Collateral does
not exceed €10,000,000 if such tranche or item of Portfolio Collateral has a public or implied rating of
(or, if publicly rated by both Rating Agencies, the lower of such ratings is) “BBB-” or above by Fitch
or “BBB-” or above by S&P, or €5,000,000 if such tranche or item of Portfolio Collateral has a public
or implied rating of (or, if publicly rated by both Rating Agencies, the lower of such ratings is) “BB+”
or below by Fitch or “BB+” or below by S&P;
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(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
(xx)
(xxi)
(xxii)
(xxiii)
with respect to the particular issuer of the Portfolio Collateral, the Aggregate Principal Balance of all
items of Portfolio Collateral issued by such issuer does not exceed €10,000,000;
the Aggregate Principal Balance of all PIK Securities does not exceed 25 per cent. of the Aggregate
Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral which pays interest less frequently than
quarterly does not exceed 100 per cent. of the Aggregate Collateral Balance and the Aggregate
Principal Balance of all Portfolio Collateral which pays interest less frequently than semi-annually does
not exceed 5 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising SME Securities does not exceed
15 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising CDO Securities does not exceed
25 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising CDO Securities that are rated
below “BBB-” by S&P or below “BBB-” by Fitch does not exceed 15 per cent. of the Aggregate
Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising CLO Securities does not exceed
20 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising CLO Securities that are rated
below “BBB-” by both S&P and Fitch does not exceed 15 per cent. of the Aggregate Collateral
Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising Structured Finance CDO
Securities does not exceed 10 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising Structured Finance CDO
Securities that are rated below “BBB-” by both S&P and Fitch does not exceed 5 per cent. of the
Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising Managed Synthetic CDO
Securities does not exceed 5 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising CDO Securities that are not
CLO Securities does not exceed 10 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising sub-prime Residential Mortgage
Backed Securities does not exceed 20 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising ABS Commercial Lease
Securities does not exceed 5 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising ABS Commercial Securities
does not exceed 10 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising CMBS does not exceed 40 per
cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising NPL Securities does not exceed
5 cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral comprising Tax/Government Receivable
Securities does not exceed 5 per cent. of the Aggregate Collateral Balance;
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(xxiv)
(xxv)
(xxvi)
the Aggregate Principal Balance of all Portfolio Collateral with a maturity date later than the Payment
Date falling in 2096 does not exceed 0 per cent. of the Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral which are rated below “BBB-” by S&P or
“BBB-” by Fitch and are subject to an Available Funds Cap does not exceed 10 per cent. of the
Aggregate Collateral Balance;
the Aggregate Principal Balance of all Portfolio Collateral serviced by a single servicer which is rated
(a) “AA-” or “S1”, (b) “A-” or “S2” or (c) below “A-” or “S2” by Fitch does not exceed (x) 25 per
cent., (y) 17 per cent. and (z) 13 per cent., respectively, of the Aggregate Collateral Balance;
(xxvii) the Aggregate Principal Balance of all Portfolio Collateral which is Fixed Rate Portfolio Collateral
does not exceed 5 per cent. of the Aggregate Collateral Balance; and
(xxviii) the Aggregate Principal Balance of all CDO Securities that are managed by the same collateral
manager will not exceed 10 per cent. of the Aggregate Collateral Balance.
5. Sale of Portfolio Collateral and Reinvestment Criteria
5.1 Overview
The Collateral Manager (acting on behalf of the Issuer) is permitted in certain circumstances and subject to
certain requirements to sell Portfolio Collateral and subject to certain conditions and in certain circumstances,
use the Sale Proceeds thereof to purchase Notes (as provided for in Condition 7(h) (Purchase of Notes by the
Issuer)) or reinvest the Sale Proceeds thereof in Substitute Portfolio Collateral. The details relating to the
reinvestment in Substitute Portfolio Collateral are described below in the remainder of this Clause 5 (Sale of
Portfolio Collateral and Reinvestment Criteria). The Collateral Administrator shall determine and shall provide
notification of whether the relevant criteria which are required to be complied with in connection with any such
sale or reinvestment are complied with or, if any such criteria are not complied with, shall promptly notify the
Collateral Manager of the reasons and the extent to which such criteria are not so complied with. The Collateral
Administrator shall only be obliged to carry out such determination after the Effective Date and following a
written request by the Collateral Manager, which request shall specify all necessary details of the Portfolio
Collateral to be sold and the proposed Portfolio Collateral to be purchased.
The Collateral Manager will inform the Issuer as to the Portfolio Collateral to be purchased by it on the Issuer’s
behalf and will monitor the performance and credit quality of the Portfolio Collateral on an ongoing basis.
Sale of Portfolio Collateral: Subject to the terms of the Collateral Management Agreement, the Collateral
Manager, acting on behalf of the Issuer, may sell Portfolio Collateral held by or on behalf of the Issuer if it
becomes Defaulted Portfolio Collateral and/or Credit Risk Portfolio Collateral and/or Appreciated Portfolio
Collateral and/or in other circumstances contemplated in “Discretionary Sales” below.
Application of Proceeds of Sale: Subject to certain conditions, as set out below, Sale Proceeds, any
Unscheduled Principal Proceeds and Scheduled Principal Proceeds received, will be applied by the Collateral
Manager, acting on behalf of the Issuer as follows:
(a)
(b)
during the Reinvestment Period, in the acquisition of Additional Portfolio Collateral and/or Substitute
Portfolio Collateral, subject to compliance with the Reinvestment Criteria and certain other conditions
described below; and
following expiry of the Reinvestment Period, provided that Unscheduled Principal Proceeds may be
reinvested in Additional Portfolio Collateral on satisfaction of the Additional Reinvestment Criteria, in
application towards redemption of each Class of Notes in accordance with the Priorities of Payment.
5.2 Sale of Credit Risk Portfolio Collateral
The Collateral Manager (acting on behalf of the Issuer) may sell Credit Risk Portfolio Collateral at any time,
subject to:
(a)
no Event of Default having occurred which is continuing; and
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(b)
(c)
during the Reinvestment Period, the Collateral Manager using all commercially reasonable efforts to
invest the Sale Proceeds thereof before the end of the immediately succeeding Payment Period in
Substitute Portfolio Collateral which complies with the Reinvestment Criteria with an Aggregate
Principal Balance equal to or greater than such Sale Proceeds, provided that the use of “reasonable
efforts” shall not require the Collateral Manager to purchase any Substitute Portfolio Collateral the
purchase of which is not, in its reasonable judgement, in the best interests of the Noteholders; and
following the expiry of the Reinvestment Period, the Sale Proceeds of any Credit Risk Portfolio
Collateral shall not be reinvested but shall be deposited in the Principal Collection Account to be
disbursed in accordance with the Priorities of Payment on the first Payment Date following such sale.
5.3 Sale of Defaulted Portfolio Collateral
The Collateral Manager (acting on behalf of the Issuer) may sell any Defaulted Portfolio Collateral at any time,
subject to:
(a)
(b)
(c)
no Event of Default having occurred which is continuing; and
during the Reinvestment Period, the Collateral Manager using all commercially reasonable efforts to
invest the Sale Proceeds (excluding any Sale Proceeds exceeding 100 per cent. of the Principal Balance
of the Portfolio Collateral which the Collateral Manager determines shall be paid into the Interest
Collection Account) thereof in Substitute Portfolio Collateral which complies with the Reinvestment
Criteria and which has a Principal Balance equal to or greater than such Sale Proceeds, provided that
the use of “reasonable efforts” shall not require the Collateral Manager to purchase any Substitute
Portfolio Collateral the purchase of which is not, in its reasonable judgement, in the best interest of the
Noteholders; and
following the expiry of the Reinvestment Period, the Sale Proceeds of any Defaulted Portfolio
Collateral shall not be reinvested but shall be deposited in the Principal Collection Account, as
applicable, and disbursed in accordance with the Priorities of Payment on the first Payment Date
following such sale.
5.4 Sale of Appreciated Portfolio Collateral
The Collateral Manager (acting on behalf of the Issuer) may sell an Appreciated Portfolio Collateral at any time,
subject to:
(a)
(b)
no Event of Default having occurred which is continuing; and
the Collateral Manager certifying prior to any such sale that it believes that:
(i)
(ii)
(iii)
the Sale Proceeds therefrom will be not less than 100 per cent. of the Principal Balance of the
Appreciated Portfolio Collateral being sold;
during the Reinvestment Period, the Sale Proceeds therefrom can be reinvested in Substitute
Portfolio Collateral which it has identified in compliance with the Reinvestment Criteria
within 20 Business Days of the sale thereof; and
at the time of such sale it will be able to apply the Sale Proceeds therefrom in Substitute
Portfolio Collateral having an Aggregate Principal Balance equal to or greater than the
Aggregate Principal Balance of the Appreciated Portfolio Collateral sold,
provided that following the expiry of the Reinvestment Period, the Sale Proceeds of any Appreciated
Portfolio Collateral will not be reinvested but will be deposited in the Principal Collection Account to
be disbursed in accordance with the Priorities of Payment on the first Payment Date following such
sale.
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5.5 Discretionary Sales
During the Reinvestment Period, the Collateral Manager may dispose of any item of Portfolio Collateral, which
is not an item of Credit Risk Portfolio Collateral, Appreciated Portfolio Collateral or Defaulted Portfolio
Collateral, subject to:
(a)
(b)
no Event of Default having occurred which is continuing;
the Collateral Manager certifying prior to any such sale that it believes that:
(i)
(ii)
the Sale Proceeds therefrom can be reinvested in Substitute Portfolio Collateral which it has
identified in compliance with the Reinvestment Criteria within 20 Business Days of the sale
thereof; and
it will be able to apply such Sale Proceeds in the purchase of Substitute Portfolio Collateral
having an Aggregate Principal Balance equal to or greater than the Aggregate Principal
Balance of the Portfolio Collateral sold; and
(c)
the Aggregate Principal Balance of all such Portfolio Collateral sold during any twelve month period
beginning on each anniversary of the Effective Date not exceeding 20 per cent. of the Aggregate
Collateral Balance on the first day of such period (or on the Effective Date with respect to the first such
period).
5.6 Sales of Portfolio Collateral upon Imposition of Withholding Tax
Notwithstanding any term hereof to the contrary, provided that no Event of Default has occurred that is
continuing, any Portfolio Collateral may be sold upon delivery to the Trustee of a certificate of the Collateral
Manager to the effect that it has reasonably determined, which may be based upon the advice of an opinion of
counsel (obtained at the expense of the Issuer where it was reasonable in the circumstances to obtain such
advice) (a copy of which opinion shall be included with such certificate), that such Portfolio Collateral is, or is
likely to become, subject to a withholding or other similar tax that cannot be recovered by the Issuer.
5.7 Principal Proceeds
During the Reinvestment Period, the Collateral Manager (acting on behalf of the Issuer) shall use all
commercially reasonable efforts to apply Unscheduled Principal Proceeds and Scheduled Principal in the
acquisition of Additional Portfolio Collateral and/or Substitute Portfolio Collateral satisfying the Reinvestment
Criteria, subject to:
(a)
(b)
no Event of Default having occurred which is continuing; and
the Collateral Manager certifying that it believes that such Unscheduled Principal Proceeds or
Scheduled Principal Proceeds, as the case may be, can be reinvested in Additional Portfolio Collateral
and/or Substitute Portfolio Collateral which it has identified before the end of the immediately
succeeding Payment Period in compliance with the Reinvestment Criteria.
After the Reinvestment Period, all Scheduled Principal Proceeds and, to the extent that the Additional
Reinvestment Criteria is not satisfied, Unscheduled Principal Proceeds will not be reinvested but shall be paid
into the Principal Collection Account and disbursed in accordance with the Priorities of Payment on the next
following Payment Date.
5.8 Reinvestment Criteria
During the Reinvestment Period, (1) Principal Proceeds (other than Sale Proceeds) and/or Interest Proceeds, as
applicable and (2) Sale Proceeds may be reinvested by the Collateral Manager (acting on behalf of the Issuer) in
Additional Portfolio Collateral and Substitute Portfolio Collateral, respectively, if the criteria set out below (the
“Reinvestment Criteria”) are complied with. The Reinvestment Criteria are as follows:
(a)
such Additional Portfolio Collateral or Substitute Portfolio Collateral, as the case may be, is an item of
Portfolio Collateral which satisfies each of the Eligibility Criteria;
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(b)
(c)
(d)
after the Effective Date, either (i) the Coverage Tests are satisfied after giving effect to such
reinvestment or (ii) except in the case of any Principal Proceeds or Sale Proceeds which are received in
respect of any item of Defaulted Portfolio Collateral, if immediately prior to receipt of the Principal
Proceeds and/or Sale Proceeds so reinvested any Coverage Test was not satisfied, is maintained or
improved after giving effect to such purchase;
after the Effective Date, either (i) after giving effect to such reinvestment, the Portfolio Collateral in
aggregate satisfies the requirements of the Portfolio Profile Tests and the Collateral Quality Tests or (ii)
if any such requirement is not satisfied immediately prior to receipt of the Principal Proceeds so
reinvested, such requirement will be maintained or improved after giving effect to such purchase; and
the Aggregate Collateral Balance immediately prior to receipt of any Principal Proceeds to be
reinvested is maintained or increased after giving effect to such reinvestment.
Following the Reinvestment Period, any Unscheduled Principal Proceeds may be reinvested by the Collateral
Manager (acting on behalf of the Issuer) in Additional Portfolio Collateral if, immediately after such
reinvestment, the Reinvestment Criteria are satisfied and the additional criteria set out below (the “Additional
Reinvestment Criteria”) are satisfied:
(a)
(b)
(c)
(d)
none of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes have been
downgraded below the Initial Ratings assigned to them by S&P;
each of the Coverage Tests and the Portfolio Profile Tests are satisfied both immediately before and
after any Unscheduled Principal Proceeds are reinvested in Additional Portfolio Collateral;
the expected maturity of the Additional Portfolio Collateral to be acquired is not greater than the
expected maturity of the Portfolio Collateral that generated the Unscheduled Principal Proceeds that are
to be reinvested; and
the rating (if any) assigned by each Rating Agency to such item of Additional Portfolio Collateral is no
lower than the rating assigned by such Rating Agency to the Portfolio Collateral that generated the
Unscheduled Principal Proceeds that are to be reinvested.
5.9 Designation as Interest Proceeds
The Collateral Manager (acting on behalf of the Issuer) may direct that the proceeds of sale of any Portfolio
Collateral which represent accrued interest be designated as Interest Proceeds and paid into the Interest
Collection Account, save for Purchased Accrued Interest (other than Purchase Accrued Interest purchased on the
Closing Date) and may also determine whether Sale Proceeds of Defaulted Portfolio Collateral that exceed 100
per cent. of the Principal Balance thereof be paid into the Interest Collection Account rather than the Principal
Collection Account.
5.10 Block Trades
The requirements set out above in paragraphs 5.2 (Sale of Credit Risk Portfolio Collateral) to 5.5 (Discretionary
Sales) (inclusive) shall be deemed to be satisfied upon any sale and/or Portfolio Collateral on any day in the
event that such Portfolio Collateral satisfy such requirements in aggregate rather than on an individual basis.
5.11 Margin Stock
The Issuer will not purchase or hold Margin Stock (as defined under Regulation U issued by the Board of
Governors of the Federal Reserve System), and if any Portfolio Collateral held by the Issuer becomes Margin
Stock, the Collateral Manager, acting on behalf of the Issuer, will dispose of such Portfolio Collateral as
promptly as practicable upon becoming aware that such Portfolio Collateral constitutes Margin Stock.
6. Eligible Investments
The Collateral Manager, acting on behalf of the Issuer, may from time to time purchase Eligible Investments out
of amounts standing to the credit of the Accounts (other than the Counterparty Downgrade Collateral Accounts
and the Expenses Reimbursement Account) provided that no such Eligible Investment may be purchased at a
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price above par and provided that the Stated Maturity of any Eligible Investment so purchased is no later than
two Business Days prior to the next occurring Payment Date.
7. Eligible Types of Asset Backed Securities
For the purpose of the Eligibility Criteria, the “Eligible Types” of Asset Backed Securities include any of the
following:
“ABS Commercial Lease Securities” means Asset Backed Securities that entitle the holders thereof to receive
payments that depend on the cash flow from a portfolio of commercial leases, including such Asset Backed
Securities secured by interests in or representing one or more credit default swaps or other synthetic or similar
instruments the reference obligations of which are commercial leases.
“ABS Commercial Securities” means Asset Backed Securities that entitle the holders thereof to receive
payments that depend on the cash flow from a portfolio of commercial securities that are not otherwise CLO
Securities, but which include, for the avoidance of doubt, WBS.
“ABS Equipment Leasing Securities” means Asset Backed Securities (other than ABS Healthcare, Education
and Childcare Securities, ABS Personal, Food and Miscellaneous Services Securities, ABS Aerospace and
Defence Securities and ABS Small Business Loan Securities) that entitle the holders thereof to receive payments
that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds
to holders of the Asset Backed Securities) on the cash flow from leases and subleases of equipment (other than
automobiles) to commercial and industrial customers, generally having the following characteristics: (1) the
leases and subleases have varying contractual maturities; (2) the leases or subleases are obligations of a
relatively limited number of obligors and accordingly represent an undiversified pool of obligor credit risk; (3)
the repayment stream on such leases and subleases is primarily determined by a contractual payment schedule,
with early termination of such leases and subleases predominantly dependent upon the disposition to a lessee,
sublessee or third party of the underlying equipment; and (4) such leases or subleases typically provide for the
right of the lessee or sublessee to purchase the equipment for its stated residual value, subject to payments at the
end of lease term for excess usage.
“ABS Miscellaneous Securities” means any Asset Backed Security that is not one of the Eligible Types
otherwise defined in this section 7, including, without limitation, securities that entitle the holders thereof to
receive payments that depend on the cash flow from entertainment royalties, franchise loans, utility receivables,
structured litigation settlements or securities within a Fitch or S&P industry category or as otherwise acceptable
to Fitch or S&P.
“CDO Securities” means Asset Backed Securities that entitle the holders thereof to receive payments that
depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to
holders of the Asset Backed Securities) on the cash flow from a portfolio of corporate debt securities (excluding
any such securities secured by real estate unless such security is not the primary source of credit for securities),
including such Asset Backed Securities secured by interests in or representing one or more credit default swaps
or other synthetic or similar instruments the reference obligations of which are such corporate debt securities,
generally having the following characteristics: (1) the debt securities have varying contractual maturities; (2) the
securities are obligations of a relatively limited number of obligors or issuers and accordingly represent a
relatively undiversified pool of obligor credit risk; (3) repayment thereof can vary substantially from the
contractual payment schedule (if any), with early prepayment of individual debt securities depending on
numerous factors specific to the particular issuers or obligors; and (4) proceeds from such repayments can for a
limited period and subject to compliance with certain eligibility criteria be reinvested in additional debt
securities. Any reference to CDO Securities will be deemed to include, for the avoidance of doubt, any CLO
Securities, Structured Finance CDO Securities and Managed Synthetic CDO Securities, but will exclude any
SME Securities.
“CLO Securities” means Asset Backed Securities (excluding any SME Securities) that entitle the holders
thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset Backed Securities) on the cash flow from a portfolio of
commercial and industrial bank loans (excluding any such loan secured by real estate unless such security is not
the primary source of credit for such loan), including such Asset Backed Securities secured by interests in or
representing one or more credit default swaps or other synthetic or similar instruments the reference obligations
of which are such loans, generally having the following characteristics: (1) the bank loans have varying
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contractual maturities; (2) the loans are obligations of a relatively limited number of obligors or issuers and
accordingly represent a relatively undiversified pool of obligor credit risk; (3) repayment thereof can vary
substantially from the contractual payment schedule (if any), with early prepayment of individual bank loans
depending on numerous factors specific to the particular issuers or obligors; and (4) proceeds from such
repayments can for a limited period and subject to compliance with certain eligibility criteria be reinvested in
additional bank loans.
“CMBS” or “Commercial Mortgage Backed Securities” means securities issued as part of a securitisation of a
pool of receivables at least 50 per cent. of which by (notional amount) are commercial mortgage receivables.
“Managed Synthetic CDO Securities” means CDO Securities that have a managed synthetic component.
“NPL Securities” means any Asset Backed Security that entitles holders thereof to receive payments that
depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to
holders of the Asset Backed Security) on the cash flow from a portfolio of non-performing loans.
“Residential Mortgage Backed Securities” means Asset Backed Securities that entitle the holders thereof to
receive payments that depend (except for rights or other assets designed to assure the servicing or timely
distribution of proceeds to holders of the Asset Backed Securities) on the cash flow from prime residential
mortgage loans secured (on a first priority basis, subject to permitted liens, easements and other encumbrances)
by residential real estate (single or multi-family properties) the proceeds of which are used to purchase real
estate and purchase or construct dwellings thereon (or to refinance indebtedness previously so used), generally
having the following characteristics: (1) the mortgage loans have standardised payment terms and require
minimum monthly payments; (2) the mortgage loans are obligations of numerous borrowers and accordingly
represent a very diversified pool of obligor credit risk; and (3) the repayment of such mortgage loans is subject
to a contractual payment schedule, with early repayment depending primarily on interest rates and the sale of the
mortgaged real estate and related dwelling.
“SME Securities” means Asset Backed Securities that entitle the holders thereof to receive payments that
depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to
holders of the Asset Backed Securities) on the cash flow from a portfolio of commercial and industrial bank
loans to small and medium-sized corporates, including such Asset Backed Securities secured by interests in or
representing one or more credit default swaps or other synthetic or similar instruments the reference obligations
of which are such loans or corporate debt securities, generally having the following characteristics: (1) the bank
loans and debt securities have varying contractual maturities; (2) the loans and securities are obligations obligors
or issuers that represent a relatively diversified pool of obligor credit risk; (3) repayment thereof can vary
substantially from the contractual payment schedule (if any), with early prepayment of individual bank loans or
debt securities depending on numerous factors specific to the particular issuers or obligors and upon whether, in
the case of loans or securities bearing interest at a fixed rate, such loans or securities include an effective
prepayment premium; and (4) proceeds from such repayments can for a limited period and subject to
compliance with certain eligibility criteria be reinvested in additional bank loans and/or debt securities.
“Structured Finance CDO Securities” means securities issued as part of a securitisation of a portfolio
comprised of a majority of Asset Backed Securities, Residential Mortgage Securities, CMBS, WBS or
commercial real-estate loans.
“Sub-Prime Residential Mortgage Securities” which means Asset Backed Securities that entitle the holders
thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or
timely distribution of proceeds to holders of the Asset Backed Securities) on the cash flow from sub-prime
residential mortgage loans secured (on a first priority basis, subject to permitted liens, easements and other
encumbrances) by residential real estate (single or multi-family properties) the proceeds of which are used to
purchase real estate and purchase or construct dwellings thereon (or to refinance indebtedness previously so
used), generally having the following characteristics: (1) the mortgage loans have standardised payment terms
and require minimum monthly payments; (2) the mortgage loans are obligations of numerous borrowers and
accordingly represent a very diversified pool of obligor credit risk; (3) the repayment of such mortgage loans is
subject to a contractual payment schedule, with early repayment depending primarily on interest rates and the
sale of the mortgaged real estate and related dwelling; and (4) borrowers have a history of delinquency or other
credit problems.
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“Tax/Government Receivable Securities” means any securities that entitle the holders thereof to receive
payments that are dependent on the cash flow derived from receivables due to an entity that is wholly state
owned or controlled.
“WBS” means Asset Backed Securities that entitle the holders thereof to receive payments that depend (except
for the rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of
Asset Backed Securities) on the cash flow from the operating assets of a business.
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DESCRIPTION OF THE COLLATERAL MANAGEMENT AGREEMENT
The collateral management functions described herein will be performed by the Collateral Manager pursuant to
authority granted to the Collateral Manager by the Issuer under the Collateral Management Agreement. The
Collateral Management Agreement contains procedures whereby the Collateral Manager will act on behalf of
the Issuer in relation to the composition and management of the Portfolio. Pursuant to the Collateral
Management Agreement the Issuer has delegated authority to the Collateral Manager to carry out certain of its
functions in relation to the Portfolio without the requirement for specific approval by the Issuer.
Fees
The Collateral Manager shall, subject to Condition 4(c) (Limited Recourse and Non-Petition), be paid the
Collateral Management Fee in arrear on each Payment Date in accordance with the Priorities of Payment.
Termination
Termination Without Cause: After the date falling 18 months from the Closing Date, the Collateral Manager
may be removed, without cause, subject to appointment of a successor collateral manager as described below,
upon 90 days’ written notice by the Issuer and the Trustee either subject to the consent of, or acting upon the
direction of, the holders of each Class of Notes, acting independently as a Class of Noteholders, by way of
Extraordinary Resolution, excluding those Notes of which the Trustee and/or the Collateral Administrator is
aware are held by the Collateral Manager or any of its Affiliates. In circumstances where the Collateral
Manager is removed without cause then, for as long as Investec Principal Finance, a business unit division of
Investec Bank (UK) Ltd or one of its Affiliates is the Collateral Manager, the Collateral Manager shall be
entitled to the Collateral Manager Termination Amount.
Termination With Cause: The Collateral Manager may be removed, subject to the appointment of a successor
collateral manager as described below, for “cause” upon 10 days’ prior written notice by the Issuer subject to
the consent of, or acting upon the direction of the holders of the Controlling Class acting by way of Ordinary
Resolution, excluding those Notes of which the Trustee and/or the Collateral Administrator is aware are held by
the Collateral Manager or any of its Affiliates.
For purposes of the Collateral Management Agreement, “cause” will mean:
(a)
(b)
(c)
(d)
(e)
(f)
violation by the Collateral Manager of any material provision of the Collateral Management Agreement
and failure to cure such violation within 30 days or earlier of becoming aware of, or receiving notice
from the Issuer or the Trustee of such violation, provided that if such violation cannot be cured within
30 days, no cause will exist if such violation will not, in the opinion of the Trustee, have a material
adverse effect on the Noteholders and the Collateral Manager is using all reasonable efforts to effect a
cure and a cure is capable of being effected without regard to a time period;
certain events of bankruptcy or insolvency in respect of the Collateral Manager;
any licences, approvals, authorisations and consents which are necessary for the performance of the
Collateral Manager’s obligations are not in place and the Collateral Manager has not obtained such
licences, approvals, authorisations and consents within 30 days of the same not being in place;
the occurrence of an Event of Default, and the Trustee is of the opinion that such Event of Default
results from a breach by the Collateral Manager of its duties under the Collateral Management
Agreement;
the Collateral Manager or its senior executive officers being convicted by a court of competent
jurisdiction of any action that constitutes fraud or criminal activity whilst carrying out its portfolio
management activities under this Agreement; and
for so long as Investec Principal Finance, a business unit division of Investec Bank (UK) Ltd is the
Collateral Manager, the failure to replace the Key Persons (as defined below) in the manner specified
in the Collateral Management Agreement (See “Key Persons” below).
Resignation: The Collateral Manager may resign upon 90 days’ written notice to the Issuer and the Trustee.
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Notice of Resignation or Removal: The Issuer shall notify the Trustee, the Collateral Administrator, any Asset
Swap Counterparty, the Noteholders and the Rating Agencies in the event of any resignation or removal of the
Collateral Manager and the appointment of any successor.
Replacement Collateral Manager: Upon resignation or removal of the Collateral Manager or termination of the
Collateral Management Agreement and while any of the Notes are Outstanding, the Issuer shall use its best
efforts to appoint a Person which: (a) has demonstrated an ability to perform professionally and competently
duties similar to those imposed upon the Collateral Manager under the Collateral Management Agreement and
has a substantially similar (or higher) level of expertise; (b) is legally qualified and has the capacity to act as
collateral manager under the Collateral Management Agreement, as successor to the Collateral Manager
thereunder in the assumption of all the duties, responsibilities and obligations of the Collateral Manager
thereunder and under the other Transaction Documents to which the Collateral Manager was a party; (c) will
perform its duties as collateral manager under this Agreement without causing the Issuer to be resident in, or
have a permanent establishment in, any jurisdiction other than The Netherlands, or deemed to be resident for tax
purposes, or have a permanent establishment in, or be engaged or deemed to be engaged, in the conduct of a
trade or business in any jurisdiction other than The Netherlands; and (d) has the regulatory capacity as a matter
of Dutch law to offer and provide asset management advice to residents of The Netherlands, provided that if no
successor collateral manager has been appointed upon expiry of 120 days of the date of receipt of the notice of
resignation or removal of the Collateral Manager by the Issuer or Collateral Manager, as the case may be, the
Collateral Manager may itself appoint a successor as provided for under the Collateral Management Agreement.
No termination, resignation or removal of the Collateral Manager shall be effective until the date on which (i) a
successor collateral manager has entered into a collateral management agreement on substantially the same
terms as the Collateral Management Agreement; (ii) the Noteholders have been notified of such appointment in
accordance with Condition 16 (Notices); and (iii) the Trustee has received Rating Agency Confirmation that the
appointment of such successor collateral manager will not have an adverse effect on the ratings of the Senior
Notes Outstanding. In connection with such appointment of a successor collateral manager, the Issuer may make
such arrangements for the compensation of such successor as the Issuer and such successor shall agree
(provided that the Trustee shall have consented to any such agreement and Rating Agency Confirmation has
been received in respect thereof).
Key Persons: Under the terms of the Collateral Management Agreement, where Investec Principal Finance, a
business unit division of Investec Bank (UK) Ltd, is the Collateral Manager, in the event that four out of the six
Key Persons cease to be employed by the Collateral Manager or any of its Affiliates, the Collateral Manager
shall within 90 days following the occurrence of such event hire a suitably qualified professional or
professionals with experience and expertise comparable to that of the relevant Key Persons. The failure by the
Collateral Manager to find a replacement or replacements for the Key Persons who are no longer in the
employment of the Collateral Manager or any of its Affiliates after such 90 day period will constitute “cause”
for which the Collateral Manager may be removed. “Key Persons” means Andy Clapham, Henrik Malmer,
James Cuby, David Beadle, James Briggs and Konstantine Pastras and any replacement from time to time and
“Key Person” means each or any of them (including any replacement).
The Collateral Manager may appoint any person as its sub-agent, adviser, sub-contractor or representative to
carry out or to assist the Collateral Manager in connection with its obligations under the Collateral Management
Agreement, provided that such appointment shall not in any way relieve the Collateral Manager from its
obligations thereunder for which it shall continue to be liable as if no such appointment or delegation had been
made and provided that such person has the regulatory capacity, as a matter of Dutch law, to offer and provide
asset management services to residents of The Netherlands.
Delegation: Any delegation of the obligations of the Collateral Manager under the Collateral Management
Agreement shall not in any way relieve the Collateral Manager from its obligations under the Collateral
Management Agreement for which it shall continue to be liable as if no such appointment or delegation had
been made and any failure to perform the services expressed to be performed by the Collateral Manager
hereunder by any such sub-agent, sub-contractor, adviser or representative shall be treated as a breach of the
Collateral Management Agreement by the Collateral Manager.
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DESCRIPTION OF THE COLLATERAL ADMINISTRATION AGREEMENT
The collateral administration functions described herein will be performed by the Collateral Administrator
pursuant to authority granted to the collateral administrator by the Issuer under the Collateral Administration
Agreement. Under the terms of the Collateral Administration Agreement, the Collateral Administrator will on
behalf of the Issuer, among other things:
(1) operate the Accounts;
(2) apply monies in accordance with the Priorities of Payment of the Notes;
(3) calculate and determine satisfaction of the Coverage Tests, the Additional Coverage Test, the Portfolio
Profile Tests and the Collateral Quality Tests; and
(4) prepare the Reports.
Fees
The Collateral Administrator shall, subject to Condition 4(c) (Limited Recourse and Non-Petition), be paid a fee
in arrear on each Payment Date in accordance with the Priorities of Payment. Any fee not paid on the Payment
Date on which it is due will be due on the next occurring Payment Date.
Operation of Accounts
The Collateral Administrator on behalf of the Issuer shall open all of the Accounts with the Account Bank or the
Custodian, as applicable, and shall be given authority on behalf of the Issuer to operate the Accounts on the
terms and in the manner set out in the Agency Agreement and the Collateral Administration Agreement. The
Collateral Administrator will, subject to the detailed provisions of the Collateral Administration Agreement,
ensure that all payments received by the Issuer under the Portfolio Collateral or any other assets are duly
credited to the correct Account and all amounts payable by the Issuer on each Payment Date, to the extent funds
are available, are so paid in accordance with the Priorities of Payment of the Notes from the amounts standing to
the credit of the Payment Account.
Calculation of Coverage Tests and Additional Coverage Test
On each applicable Measurement Date, the Collateral Administrator will measure and calculate the Coverage
Tests and the Additional Coverage Test as set out in the Collateral Administration Agreement on behalf of the
Issuer and notify the results of such calculations to the Issuer, the Trustee and the Collateral Manager in writing.
The Collateral Administrator shall also on behalf of the Issuer prepare the Monthly Reports and Note Valuation
Reports which are required to be sent to the Issuer, the various Secured Parties, the Rating Agencies, the
Manager and, upon written request from any Noteholder, such Noteholder as set out in the Collateral
Administration Agreement.
Termination and Resignation
Termination Without Cause: The Collateral Administrator may, subject to the appointment of a successor
collateral administrator as described below, be removed, without cause, upon 90 days’ written notice by the
Issuer (with the prior approval of the Trustee), either, subject to the consent of, or acting upon the direction of,
the holders of each of the Senior Notes and the Subordinated Notes Outstanding acting independently as a Class
of Noteholders by way of Extraordinary Resolution.
Termination With Cause: The Collateral Administrator may be removed, subject to the appointment of a
successor collateral administrator as described below, for “cause” upon 10 days’ prior written notice by the
Issuer.
For purposes of the Collateral Administration Agreement, “cause” will mean:
(a)
wilful violation by the Collateral Administrator of any provision of the Collateral Administration
Agreement.
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(b)
(c)
(d)
violation by the Collateral Administrator of any material provision of the Collateral Administration
Agreement and failure to cure such violation within 30 days or earlier of becoming aware of, or
receiving notice from the Issuer or the Trustee, of such violation;
certain events of bankruptcy or insolvency in respect of the Collateral Administrator; and
the Collateral Administrator committing an act constituting fraud or criminal activity.
Resignation: The Collateral Administrator may resign upon 90 days’ written notice to the Issuer.
Notice of Resignation or Removal: The Issuer shall notify the Trustee, the Noteholders and each Rating Agency
in the event of any resignation or removal of the Collateral Administrator and the appointment of any successor.
Replacement Collateral Administrator: Upon resignation or removal of the Collateral Administrator or
termination of the Collateral Administration Agreement and while any of the Notes are Outstanding, the Issuer
shall use its best efforts to appoint a successor collateral administrator which: (a) has demonstrated an ability to
perform professionally and competently duties similar to those imposed upon the Collateral Administrator under
the Collateral Administration Agreement and has a substantially similar (or higher) level of expertise; and (b) is
legally qualified and has the capacity to act as Collateral Administrator under the Collateral Administration
Agreement, as successor to the Collateral Administrator thereunder in the assumption of all the duties,
responsibilities and obligations of the Collateral Administrator thereunder and under the Trust Deed. No
termination, resignation or removal of the Collateral Administrator shall be effective unless: (i) a successor has
entered into a collateral administration agreement on substantially the same terms as the Collateral
Administration Agreement; and (ii) the Noteholders have been notified of such appointment in accordance with
Condition 16 (Notices), provided that if the Issuer fails to appoint such successor collateral administrator within
90 days of the Collateral Administrator’s notice of retirement, the Collateral Administrator may itself appoint a
successor collateral administrator as provided for under the Collateral Administration Agreement.
In addition, the appointment of any successor collateral administrator shall be subject to receipt of a Rating
Agency Confirmation.
Assignment by Collateral Administrator: Except for permitted assignments to Affiliates of the Collateral
Administrator specified in the Collateral Administration Agreement, the Collateral Administrator may not
assign its rights or responsibilities under the Collateral Administration Agreement without the consent of the
Issuer and the Trustee.
In addition, the Collateral Administrator may not assign its rights or responsibilities under the Collateral
Administration Agreement unless and until the Issuer and the Trustee shall have received a Rating Agency
Confirmation.
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DESCRIPTION OF THE HEDGING ARRANGEMENTS
The following is a summary of the principal terms of the currency hedging transactions that will or may be
entered into by the Issuer.
1. Currency Hedging (Asset Swap)
The Issuer (or the Collateral Manager on behalf of the Issuer) may purchase Non-Euro Portfolio
Collateral provided that on the settlement date of acquisition thereof, the Issuer (or the Collateral
Manager on behalf of the Issuer) enters into an Asset Swap Transaction pursuant to the terms of which
(a) initial and final principal exchanges are made to fund the Issuer’s acquisition of the related Non-
Euro Portfolio Collateral and convert the proceeds received (i) at maturity or (ii) upon full or partial
prepayment or (iii) upon sale of the related Non-Euro Portfolio Collateral into euro at the exchange rate
specified for such transaction and (b) the coupon receipts on the Non-Euro Portfolio Collateral are paid
by the Issuer against receipt from any Asset Swap Counterparty of a Euro-denominated amount at a
spread over EURIBOR. The entry into any Asset Swap Transaction shall, save in the case of a Form-
Approved Asset Swap, be subject to receipt of Rating Agency Confirmation and shall in addition be
subject to there being no withholding or deduction for or an amount of any tax required in respect of
any payments by both parties to such Asset Swap Transaction at the time of entry into such transaction.
Each Asset Swap Transaction will be entered into with an Asset Swap Counterparty that satisfies the
applicable Required Ratings and which has the Dutch regulatory capacity to enter into derivatives
transactions with Dutch residents.
Interest accrued on any PIK Security may be the subject of an Asset Swap Transaction to the extent
accrued prior to the date of acquisition thereof, but not to the extent accrued at any time thereafter.
The Issuer shall only be obliged to pay to any Asset Swap Counterparty such amounts as it actually
receives in respect of any Non-Euro Portfolio Collateral and shall not under any circumstances be
obliged to pay any additional amounts to an Asset Swap Counterparty in respect of such Non-Euro
Portfolio Collateral.
For purposes of the Coverage Tests, the Portfolio Profile Tests, the Minimum Weighted Average
Spread Test and the S&P CDO Rating Test, any Non-Euro Portfolio Collateral with a related Asset
Swap Transaction shall be included as Portfolio Collateral having the relevant characteristics of the
related Asset Swap Transaction and not of the Non-Euro Portfolio Collateral, unless the Collateral
Manager (acting on behalf of the Issuer) determines otherwise and receives Rating Agency
Confirmation in respect of such determination.
For the purposes of the Collateral Quality Tests other than the Minimum Weighted Average Spread
Test and the S&P CDO Rating Test, any Non-Euro Portfolio Collateral with a related Asset Swap
Transaction shall be included as Portfolio Collateral having the relevant characteristics of the related
Non-Euro Portfolio Collateral and not of the related Asset Swap Transaction, unless the Collateral
Manager (acting on behalf of the Issuer) determines otherwise and receives Rating Agency
Confirmation in respect of such determination.
2. Replacement Asset Swap Transactions
If any Asset Swap Agreement terminates in whole at any time in circumstances in which the applicable
Asset Swap Counterparty is the “Defaulting Party” or sole “Affected Party” (as defined in the
applicable Asset Swap Agreement) the Issuer, or the Collateral Manager on its behalf, shall use
commercially reasonable efforts to enter into a Replacement Asset Swap Agreement on substantially
the same terms as the applicable Asset Swap Agreement within 30 days of the termination thereof with
a counterparty which (or whose guarantor) satisfies the applicable Required Ratings and which has the
Dutch regulatory capacity to enter into derivatives transactions with Dutch residents.
In the event of termination of an Asset Swap Agreement in the circumstances referred to in the
previous paragraph, any Hedge Counterparty Termination Payments payable by any Asset Swap
Counterparty to the Issuer will be paid into the Hedge Termination Account and shall be applied
towards the costs of entry into a Replacement Asset Swap Agreement, together with, where necessary,
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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:
(a)
(b)
(c)
where the Issuer, following consultation with the Collateral Manager, determines not to
replace such Asset Swap Agreement and Rating Agency Confirmation is received in respect
of such determination; or
where termination of any Asset Swap 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 Asset Swap Termination Receipts are not required for application
towards the costs of entering into such Replacement Asset Swap Agreement,
in which event such Asset Swap Termination Receipts shall be paid into the Principal Collection
Account and shall be deemed to be Unscheduled Principal Proceeds.
If the Issuer receives any Asset Swap Replacement Receipt upon entry into a Replacement Asset Swap
Transaction, such amounts shall be paid into the Hedge Termination Account and applied directly by
the Collateral Manager (acting on behalf of the Issuer) in payment of any Asset Swap Issuer
Termination Payment payable upon termination of such Asset Swap Agreement being so replaced. To
the extent not fully paid out of any Asset Swap Replacement Receipts or any Asset Swap Issuer
Termination Payment payable by the Issuer shall be paid to such Asset Swap Counterparty on the next
Payment Date in accordance with the Priorities of Payment. To the extent not required for making any
such Asset Swap Issuer Termination Payment or Interest Hedge Issuer Termination Payment, such
Asset Swap Replacement Receipts shall be paid into the Principal Collection Account and shall
constitute Principal Proceeds.
If a Replacement Asset Swap Transaction cannot be entered into in such circumstances, the Collateral
Manager, acting on behalf of the Issuer, shall sell the applicable Non-Euro Portfolio Collateral, pay the
proceeds thereof to such Asset Swap Counterparty, to the extent required pursuant to the terms of such
Asset Swap Transaction and/or to the extent not so required, shall convert all or part of such proceeds,
as applicable, into Euro and shall pay them into the Principal Collection Account. If such proceeds are
insufficient to pay any termination payment to an Asset Swap Counterparty in full, such amount,
including any Defaulted Asset Swap Termination Payment, shall be paid out of Interest Proceeds and
Principal Proceeds on the next following Payment Date in accordance with the Priorities of Payment.
3. Counterparty Rating Downgrade Requirements
If any Senior Notes remain Outstanding and the highest of the applicable ratings of any Asset Swap
Counterparty or its Credit Support Provider (as defined therein) at any time falls below the applicable
Required Ratings or are withdrawn, the applicable Asset Swap Counterparty will be required by certain
criteria set by the Rating Agencies to take action, at its own cost and expense, in such circumstances,
including
(a)
(b)
(c)
transferring all of its rights and obligations under any Asset Swap Transaction to which it is
party at fair market value to another entity which satisfies (or whose obligations under the
relevant Asset Swap Transaction are unconditionally and irrevocably guaranteed by an entity
which satisfies) the applicable Required Ratings and which has the Dutch regulatory capacity
to enter into derivatives transactions with Dutch residents; or
causing an entity which satisfies the applicable Required Ratings (or whose Credit Support
Provider satisfies the applicable Required Ratings) to guarantee or provide an indemnity in
respect of such Asset Swap Counterparty’s (or, in each case, its Credit Support Provider’s)
obligations under any Asset Swap Transaction to which it is party in form and substance
reasonably satisfactory to the Issuer and in respect of which Rating Agency Confirmation has
been received; or
posting collateral in an amount satisfactory to the Rating Agencies (and in accordance with the
relevant Asset Swap Agreement); or
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(d)
employing any other strategy as is acceptable to the Issuer which the relevant Rating Agency
advises will have the effect that the rating of the Senior Notes will not be adversely affected
by the failure of such Asset Swap Counterparty to meet the Required Ratings and in respect of
which Rating Agency Confirmation is received.
Failure by the applicable Asset Swap Counterparty to take any action required under the ratings
downgrade requirements above, unless Rating Agency Confirmation has been received notwithstanding
such failure, will constitute an Additional Termination Event in respect of any Asset Swap Transaction
(as defined therein), entitling the Issuer to terminate such Asset Swap Transaction.
4. Transfer and Modification of Asset Swap Transactions
Other than to correct manifest errors, the Collateral Manager, acting on behalf of the Issuer, may not
modify any Asset Swap Transaction without Rating Agency Confirmation. An Asset Swap
Counterparty may assign its obligations under an Asset Swap Transaction, as applicable, to any of its
Affiliates which, inter alia, satisfies the applicable Required Ratings and has the regulatory capacity, as
a matter of Dutch law, to enter into derivatives transactions with the residents of The Netherlands.
5. Standard Terms of Asset Swap Agreements
Each Asset Swap Agreement shall contain the following standard provisions, save to the extent agreed
otherwise by the Issuer, the applicable Asset Swap Counterparty and the Collateral Manager and
subject to receipt of Rating Agency Confirmation in respect thereof.
(a)
Netting
Netting shall only be permitted in respect of the same Asset Swap Transaction.
(b)
Gross Up
Under each Asset Swap Agreement, all payments thereunder will be made without any
deduction or withholding for or on account of any Tax (as defined therein) unless such
deduction or withholding is required by any applicable law, as modified by the practice of any
relevant governmental revenue authority then in effect, in which case the relevant Asset Swap
Counterparty shall be required to gross up any payments by it. Any such event will, however,
result in a “Tax Event” (as defined in such Asset Swap Agreement) which is a “Termination
Event” for the purposes of each Asset Swap Agreement. In the event of the occurrence of a
Tax Event, any Asset Swap Agreement will include a provision for the relevant Affected Party
(as defined therein) to transfer its obligations under such Asset Swap Agreement to an
Affiliate (in the case of any Asset Swap Counterparty) or to an entity incorporated in an
alternative jurisdiction (in the case of the Issuer) subject to satisfaction of the conditions
specified therein.
(c)
Limited Recourse
The obligations of the Issuer under each Asset Swap Agreement will be limited to the
proceeds of enforcement of the Collateral as applied in accordance with the Priorities of
Payment.
(d)
Termination Provisions
Under each Asset Swap Agreement, the Issuer (or the Collateral Manager on its behalf) will
be able to terminate such Asset Swap Agreement if there is an Event of Default or a
Termination Event (each as defined in such Asset Swap Agreement and described below) with
respect to the applicable Asset Swap Counterparty and such Asset Swap Agreement and the
applicable or Asset Swap Counterparty will be able to terminate such Asset Swap Agreement
if there is an Event of Default or a Termination Event (as defined in such Asset Swap
Agreement and as described below) with respect to the Issuer. Each Asset Swap Agreement
contains termination events commonly found in standard ISDA documentation save for (i) the
disapplication as regards both parties of the Events of Default relating to “Breach of
143

Agreement”, “Misrepresentation”, “Default under Specified Transaction” and “Cross Default”
and the Termination Event “Credit Event Upon Merger” and (ii) the disapplication as regards
the Issuer only of the Event of Default relating to “Credit Support Default” and “Merger
Without Assumption” and the Termination Events relating to “Tax Event Upon Merger”.
In addition, each Asset Swap Agreement shall contain the following Additional Termination
Events:
(i)
(ii)
(iii)
(iv)
an Event of Default has occurred in respect of the Notes and the Trustee has taken
action to enforce the security over the Collateral, for the purposes of which any such
Asset Swap 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) for the purposes of which any such Asset Swap
Agreement shall be deemed to terminate automatically in full on the Redemption
Date of the Notes;
any modification of the Priorities of Payment without the prior written consent of the
relevant Asset Swap Counterparty which is materially prejudicial to any Asset Swap
Counterparty with respect to its position in the Priorities of Payment (as reasonably
determined by the relevant Asset Swap Counterparty, as applicable), following which
the relevant Asset Swap Counterparty or the Issuer may terminate such Asset Swap
Agreement; and
failure by Asset Swap Counterparty to comply with the requirements regarding
action to be taken upon a downgrade of its ratings and, as a result, the occurrence of
an Additional Termination Event, as set out in paragraph 4 (Counterparty Rating
Downgrade Requirements) above, following which the relevant Asset Swap
Counterparty or the Issuer may terminate such Asset Swap Agreement.
144

DESCRIPTION OF THE REPORTS
Nothing below shall oblige the Issuer, the Collateral Administrator or the Collateral Manager to disclose,
whether directly or indirectly, any information held under an obligation of confidentiality.
1. Monthly Reports
The Collateral Administrator shall not later than the eighth Business Day after the last day of each month,
except for a month in which a Note Valuation Report is produced, commencing on the last day of June 2007, on
behalf of the Issuer, compile and provide to the Trustee, the Collateral Manager, the Issuer, any Asset Swap
Counterparty, the Manager and the Rating Agencies and, upon written request therefor in the form set out in the
Agency Agreement certifying that it is a holder of a beneficial interest in any Note, to such holder, a monthly
report (the “Monthly Report”), which shall contain the following information with respect to the Portfolio
Collateral, determined by the Collateral Administrator, in consultation with the Collateral Manager, as of the
last Business Day of the month. In order for the Issuer (a) to satisfy its obligation to submit certain reports to the
Dutch Central Bank pursuant to the Dutch External Financial Relations Act of 25 March 1994 to file any value
added tax with the Dutch Tax Authorities and to arrange for an audit of the financial statements of the Issuer,
and (b) to prepare a supplemental report for the purposes of compliance with the minimum reporting
requirements of the German Investment Tax Act (Investmentsteuergesetz), the Collateral Administrator will use
its reasonable endeavours to make available to the Issuer (in conjunction with the issuance of the Monthly
Reports and the Note Valuation Reports) such other information relating to the Portfolio as the Issuer may
reasonably request (following prior consultation with the Collateral Administrator) to the extent that such
information is already in the possession of the Collateral Administrator by virtue of its acting as Collateral
Administrator hereunder, and to the extent that the Collateral Administrator is legally permitted to provide such
information to the Issuer. Such data shall be in such format, (after consultation with the Issuer) as the systems of
the Collateral Administrator is capable of producing.
Portfolio
(a)
(b)
(c)
(d)
(e)
the Aggregate Principal Balances of the Portfolio Collateral, and with respect to each item of Portfolio
Collateral, respectively, subject to any confidentiality obligations binding on the Issuer, the Principal
Balance, the annual interest rate, the currency in which it is denominated, the foreign exchange rate (if
applicable), the relevant spread index, stated maturity, expected average life, issuer, industry and rating
(if applicable) (but not any confidential credit estimate or deemed Rating) of, each item of Portfolio
Collateral;
subject to any confidentiality obligations binding on the Issuer, the identity of, respectively, any items
of Portfolio Collateral that were released for sale or other disposition or that were acquired since the
date of determination of the last Monthly Report or Note Valuation Report, as applicable;
subject to any confidentiality obligations binding on the Issuer, the purchase or sale price of each item
of Portfolio Collateral acquired and/or sold since the date of determination of the last Monthly Report
or Note Valuation Report, as applicable, and the identity of the purchasers or sellers thereof, if any, that
are Affiliated with the Issuer or the Collateral Manager;
subject to any confidentiality obligations binding on the Issuer, the identity of each item of Portfolio
Collateral which has remained Defaulted Portfolio Collateral or which became Defaulted Portfolio
Collateral or Credit Risk Portfolio Collateral since the date of determination of the last Monthly Report
or Note Valuation Report, as applicable; and
each payment made or received by or on behalf of the Issuer in relation to each item of Portfolio
Collateral, the Account from or into which it was paid and the transaction type and nature of such
payment (including, without limitation, if it constitutes, sale proceeds or purchase price, since the date
of determination of the last Monthly Report or Note Valuation Report, as applicable, purchased
accrued interest, premium/discount, sold accrued interest, fees and expenses, principal amounts or
interest received).
Accounts
(a)
the nature, source and amount of funds standing to the credit of the Accounts; and
145

(b)
the amount of interest accrued on the Accounts since the date of determination of the last Monthly
Report or Note Valuation Report, as applicable.
Coverage Tests, Additional Coverage Test, Collateral Quality Tests and Portfolio Profile Tests
(a)
(b)
(c)
(d)
the Interest Coverage Ratio and a statement as to whether the Interest Coverage Test is satisfied;
the Class C Overcollateralisation Ratio, the Class D Overcollateralisation Ratio, the Class E
Overcollateralisation Ratio, the Class F Overcollateralisation Ratio and the Additional Coverage Test
and a statement as to whether the Class C Coverage Test, the Class D Coverage Test, the Class E
Coverage Test, the Class F Coverage Test and the Additional Coverage Test is satisfied or met;
details of the results of each Collateral Quality Test and a statement as to whether such test is satisfied;
and
details of the composition of the Portfolio broken down by reference to each Portfolio Profile Test and
by reference to each type of obligation, characteristic or requirement specified therein.
Asset Swap Transactions
(a)
(b)
the outstanding notional amount of each Asset Swap Transaction; and
the amount(s) scheduled to be received by the Issuer pursuant to all Asset Swap Transactions on the
next Payment Date.
Discretionary Sale
The Aggregate Principal Balance of all Portfolio Collateral sold as a discretionary sale since the last anniversary
of the Effective Date or the Effective Date, as applicable, as a percentage of the Aggregate Collateral Balance
on such anniversary or Effective Date, as applicable.
2. Note Valuation Report
The Collateral Administrator, on behalf of the Issuer and in consultation with the Collateral Manager, shall
render an accounting report (the “Note Valuation Report”), prepared and determined as of each Determination
Date, and delivered to the Collateral Manager, the Issuer, the Trustee, each Asset Swap Counterparty, the
Manager, any holder of a beneficial interest in any Note, (upon written request therefor in the form set out in the
Agency Agreement certifying that it is such a holder) and the Rating Agencies not later than the second
Business Day preceding 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 of the Notes of each Class Outstanding and the Rated Balance after giving effect to
the principal payments, if any, on the next Payment Date. The Note Valuation Report shall contain the
information required to be included in each Monthly Report (as set out in paragraph 1 above) together with the
following additional information:
Notes
(a)
(b)
the Rated Balance and the Aggregate Principal 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 at the beginning of the Payment 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);
146

Payment Date Payment
(a)
(b)
(c)
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;
the Trustee Fees and Expenses and Administrative Expenses payable on the related Payment Date on
an itemised basis;
any Scheduled Periodic Asset Swap Counterparty Payments and any Asset Swap Counterparty
Principal Exchange Amounts payable by any Asset Swap Counterparty on or immediately prior to the
related Payment Date;
Accounts
(a)
(b)
the amount standing to the credit of the Interest Collection Account and Principal Collection Account
immediately after all payments and deposits to be made on the next Payment Date have been made;
the amount standing to the credit of the Expense Reimbursement Account, the Unused Proceeds
Account, the Issuer Dutch Account, the Semi Annual Interest Smoothing Account and the Payment
Account at the end of the related Payment Period;
Senior Notes and Subordinated Notes
(a)
(b)
EURIBOR for the related Interest Accrual Period and the Floating Rates of Interest during the related
Payment Period; and
the Interest Amount payable in respect of the Subordinated Notes on the next Payment Date.
3. Content of the Reports
Each of the Reports 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.
147

TAX CONSIDERATIONS
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
investors 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 investor of the tax consequences of investing in the Notes.
Netherlands Taxation
The comments below are of a general nature based on taxation law and practice in The Netherlands as at the
date of this Prospectus and are subject to any changes therein. They relate only to the position of persons who
are absolute beneficial owners of the Notes. The following is a general description of certain tax considerations
relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes
and so should be treated with appropriate caution. In particular, it does not take into consideration any tax
implications that may arise on a substitution of the Issuer. Prospective investors should consult their own
professional advisers concerning the possible tax consequences of purchasing, holding and/or selling Notes and
receiving payments of interest, principal and/or other amounts under the Notes under the applicable laws of their
country of citizenship, residence or domicile.
Under the existing laws of The Netherlands:
(a)
(b)
all payments of interest and principal by the Issuer under the Notes can be made free of withholding or
deduction of any taxes of whatsoever nature imposed, levied, withheld, or assessed by The Netherlands
or any political subdivision or taxing authority thereof or therein;
a holder of a Note who derives income from a Note or who realises a gain on the disposal or
redemption of a Note will not be subject to Dutch taxation on such income or capital gain, unless:
(i)
(ii)
(iii)
the holder is, or is deemed to be, resident in The Netherlands or, where the holder is an
individual, such holder has elected to be treated as a resident of The Netherlands; or
such income or gain is attributable to an enterprise or part thereof which is either effectively
managed in The Netherlands or carried on through a permanent establishment (vaste
inrichting) or a permanent representative (vaste vertegenwoordiger) in The Netherlands; or
the holder is an individual and such income or gain qualifies as income from activities that
exceed normal active portfolio management in The Netherlands;
(c)
Dutch gift, estate or inheritance taxes will not be levied on the occasion of the transfer of a Note by
way of gift by, or on the death of, a holder unless:
(i)
(ii)
(iii)
the holder is, or is deemed to be, resident in The Netherlands for the purpose of the relevant
provisions; or
the transfer is construed as an inheritance or as a gift made by or on behalf of a person who, at
the time of the gift or death, is, or is deemed to be, resident in The Netherlands for the purpose
of the relevant provisions; or
such Note is attributable to an enterprise or part thereof which is either effectively managed in
The Netherlands or carried on through a permanent establishment or a permanent
representative in The Netherlands;
148

(d)
(e)
(f)
there is no Dutch registration tax, stamp duty or any other similar tax or duty payable in The
Netherlands in respect of or in connection with the execution, delivery and/or enforcement by legal
proceedings (including any foreign judgment in the courts of The Netherlands) of the Notes or the
performance of the Issuer’s obligations under the Notes;
there is no Dutch value added tax payable in respect of payments in consideration for the issue of the
Notes or in respect of the payment of interest or principal under the Notes or the transfer of a Note,
provided that Dutch value added tax may, however, be payable in respect of fees charged for certain
services rendered to the Issuer, if for Dutch value added tax purposes such services are rendered, or are
deemed to be rendered, in The Netherlands and an exemption from Dutch value added tax does not
apply with respect to such services; and
a holder of a Note will not be treated as a resident of The Netherlands by reason only of the holding of
a Note or the execution, performance, delivery and/or enforcement of the Notes.
EU Directive on the taxation of Savings Income
Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is required to
provide to the tax authorities of another Member State details of payments of interest or other similar income
paid by a person within its jurisdiction to, or collected by such a person for, an individual resident in that other
Member State; however, for a transitional period, Austria, Belgium and Luxembourg may instead apply a
withholding tax system in relation to such payments, deducting tax at rates rising over time to 35 per cent. The
transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU
countries to the exchange of information relating to such payments.
A number of non-EU countries and certain dependent or associated territories of certain Member States have
agreed to adopt similar measures (either provision of information or transitional withholding) in relation to
payments of interest made by a person within their jurisdiction to, or collected by such a person for, an
individual resident in a Member State. In addition, the Member States have entered into reciprocal provision of
information or transitional withholding arrangements with certain of those dependent or associated territories in
relation to payments made by a person in a Member State to, or collected by such a person for, an individual
resident in one of those territories.
149

PLAN OF DISTRIBUTION
The Manager, pursuant to a Subscription Agreement dated on or around 23 March 2007, has agreed with the
Issuer, subject to the satisfaction of certain conditions, to subscribe for the Class A Notes, the Class B Notes, the
Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Subordinated Notes and the Class
S1 Combination Notes (in each case at the issue price of 100 per cent. of their respective principal amounts as
stated in the following paragraph). The Subscription Agreement entitles the Manager to terminate it in certain
circumstances prior to payment being made to the Issuer.
It is a condition to the issuance of the Notes of each Class that the Notes of each other Class be issued in the
following principal amounts: Class A Notes: €220,000,000, Class B Notes: €16,000,000, Class C Notes:
€18,000,000, Class D Notes: €22,000,000, Class E Notes: €16,000,000, Class F Notes: €5,000,000,
Subordinated Notes: €12,200,000 and Class S1 Combination Notes: €5,000,000.
The Manager may sell any of the Notes to subsequent purchasers in individually negotiated transactions at
negotiated prices which may vary among different purchasers and which may be greater or less than the issue
price referred to above.
The Issuer has agreed to indemnify and/or secure the Manager, the Collateral Manager, the Collateral
Administrator, the Trustee and certain other participants against or in respect of certain liabilities and costs or to
contribute to payments they may be required to make in respect of the issue of the Notes.
Certain of the Portfolio Collateral may have been originally underwritten or placed by the Manager. In addition,
the Manager may have in the past performed and may in the future perform investment banking services or
other services for issuers of certain of the Portfolio Collateral. In addition, the Manager and its Affiliates may
from time to time as a principal or through one or more investment funds that it or they manage, make
investments in the equity securities of one or more of the issuers of certain of the Portfolio Collateral, with a
result that one or more of such issuers may be or may become controlled by the Manager or its Affiliates.
Save for the approval of this Prospectus as a prospectus in accordance with the requirements of the Prospectus
Directive and implementing measures in Ireland and the application made to the Irish Financial Services
Regulatory Authority for the Notes to be admitted to the Official List and trading on its regulated market, no
action has been or will be taken by the Issuer or the Manager that would permit a public offering of the Notes or
possession or distribution of this document or any other offering material in relation to the Notes in any
jurisdiction where action for the purpose is required. No offers, sales or deliveries of any Notes, or distribution
of this document or any other offering material relating to the Notes may be made in or from any jurisdiction
except in circumstances which will result in compliance with any applicable laws and regulations and will not
impose any obligations on the Issuer or the Manager.
This Prospectus has been prepared by the Issuer for use in connection with the offer and sale of the Notes and
for the listing of the Notes of each Class on the Irish Stock Exchange. The Issuer and the Manager 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. Distribution of this Prospectus to any such U.S. Person or to any person within the United
States is unauthorised and any disclosure of any of its contents, without the prior written consent of the Issuer, is
prohibited.
Selling Restrictions
United Kingdom
The Manager has represented and agreed that:
(a)
(b)
it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of
Section 21 of 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
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.
150

United States
The Notes have not been and will not be registered under the Securities Act, and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions
exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the
meanings given to them by Regulation S under the Securities Act.
The Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or
deliver the Notes, (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the
commencement of the offering or the Closing Date, within the United States or to, or for the account or benefit
of, U.S. persons, and it will have sent to each dealer to which it sells Notes during the distribution compliance
period, as defined in Regulation S under the Securities Act, a confirmation or other notice setting forth the
restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S.
persons.
General
The Manager has acknowledged and agreed that:
(a)
(b)
(c)
(d)
save for the approval of this Prospectus as a prospectus in accordance with the requirements of the
Prospectus Directive and implementing measures in Ireland and the application made to the Irish
Financial Services Regulatory Authority for the Notes to be admitted to the Official List and trading on
its regulated market, no action has been or will be taken in any jurisdiction by it that would permit a
public offering of the Notes, or public distribution of this Prospectus or any other offering or publicity
material relating to the Notes, in any country or jurisdiction where action for that purpose is required;
it will comply, to the best of its knowledge and belief, with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers the Notes or has in its possession or distributes
this Prospectus or any such other material, in all cases at its own expense;
it will have any permission required by it for the acquisition, offer, sale or delivery by it of the Notes
under the laws and regulations in force in any jurisdiction to which it is subject or in or from which it
makes any acquisition, offer, sale or delivery; and
it is authorised to make any representation or use any information in connection with the issue,
subscription and sale of the Notes as contained in this Prospectus.
151

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.
Each purchaser of Notes will be deemed to have represented, warranted, acknowledged and agreed as follows:
(1) In connection with the purchase of the Notes: (i) none of the Issuer, the Collateral Manager or any of
their respective Affiliates is acting as a fiduciary or financial or investment adviser for such beneficial
owner; (ii) such beneficial owner is not relying (for purpose of making any investment decision or
otherwise) upon any advice, counsel or representations (whether written or oral) of the Issuer, the
Collateral Manager or any of their respective Affiliates other than in a current offering circular for such
Notes; (iii) such beneficial owner 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 judgement and upon any advice from such advisers as it has
deemed necessary and not upon any view expressed by the Issuer, the Collateral Manager or any of
their respective Affiliates; (iv) such beneficial owner is purchasing the Notes with a full understanding
of all of the terms, conditions and risks thereof (economic and otherwise), and it is capable of assuming
and willing to assume (financially and otherwise) those risks; and (v) such beneficial owner is a
sophisticated investor.
(2) In addition, each purchaser of the Notes will be required to undertake that it will notify any person (a
“transferee”) to whom it offers, delivers, pledges or otherwise transfers any Note held by it (or any
beneficial interest or participation therein) of the transfer restrictions with respect to the Notes and
further that it will obtain from such transferee a written agreement containing representations and
undertakings substantially in the form of those given by the applicable transferor prior to any such
transfer.
(3) It understands that unless the Issuer determines otherwise in compliance with applicable law, such
Notes will each bear a legend set forth below:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE
SECURITIES LAWS IN THE UNITED STATES OR THE SECURITIES LAWS OF ANY OTHER
JURISDICTION, THIS NOTE AND ANY INTEREST HEREIN MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE SECURITIES ACT AND ALL APPLICABLE LAWS OF ANY
OTHER JURISDICTION. ANY UNITED STATES PERSON (AS DEFINED IN THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) WHO HOLDS
THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES
INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTION 165(J) AND
1287(A) OF THE CODE. EACH PURCHASER OF THIS NOTE OR ANY INTEREST HEREIN
AGREES THAT IT WILL DELIVER TO EACH PURCHASER OF THIS NOTE OR ANY
INTEREST HEREIN A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
152

GENERAL INFORMATION
1. Clearing Systems
The Notes of each Class have been accepted for clearance through Euroclear and Clearstream, Luxembourg.
The Common Code and the International Securities Identification Number (“ISIN”) for each of the Notes of
each Class is:
ISIN
Common code
Class A Notes XS0287257280 028725728
Class B Notes XS0287266356 028726635
Class C Notes XS0287267677 028726767
Class D Notes XS0287268642 028726864
Class E Notes XS0287271604 028727160
Class F Notes XS0287272164 028727216
Subordinated Notes XS0287273303 028727330
Class S1 Combination Notes XS0289328394 028932839
2. Listing
Application has been made to list the Notes on the Irish Stock Exchange by the Issuer, through the Listing
Agent. Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in
connection with the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock
Exchange or to trading on the Irish Stock Exchange for the purposes of the Prospectus Directive.
3. Consents and Authorisations
The Issuer has obtained all necessary consents, approvals and authorisations in The Netherlands (if any) in
connection with the issue and performance of the Notes. The issue of the Notes was authorised by a resolution
of the board of Managing Directors of the Issuer passed on or about the date of this Prospectus.
4. No Significant or Material Change
There has been no significant change in the financial or trading position or prospects of the Issuer since its
incorporation on 15 January 2007 and there has been no material adverse change in the financial position or
prospects of the Issuer since its incorporation on 15 January 2007.
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
The Issuer will produce audited annual financial statements. The first audited financial statements of the Issuer
will be in respect of the period of incorporation to 31 December 2008. Any financial statements that are
produced will be available free of charge at the specified office of the Irish Paying Agent in Ireland.
153

7 Documents Available for Inspection
Physical copies of the following documents bearing the date thereof may be inspected (and, in the case of (j) and
(k) below, will be available free of charge) at the offices of the Principal Paying Agent and the Irish Paying
Agent during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for the
term of the Notes.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
the Articles of Association of the Issuer;
the Subscription Agreement;
the Trust Deed (which includes the form of each Note of each Class);
the Agency Agreement;
the Collateral Management Agreement;
the Collateral Administration Agreement;
the Management Agreement;
the Collateral Acquisition Agreements;
each Asset Swap Agreement;
(j) each Monthly Report (the first Monthly Report will be published in July 2007);
(k)
(l)
each Note Valuation Report (the first Note Valuation Report will be published in October 2007); and
the Pledge Agreement.
8. Enforceability of Judgments
The Issuer is a company incorporated under the laws of The Netherlands. None of the Managing 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 judgments
obtained in United States courts, including judgments predicated upon civil liability provisions of the securities
laws of the United States or any State or territory within the United States.
154

GLOSSARY OF DEFINED TERMS
A
ABS ....................................................................................................................................................................110
ABS Commercial Lease Securities ..................................................................................................................134
ABS Commercial Securities.............................................................................................................................134
ABS Equipment Leasing Securities.................................................................................................................134
ABS Miscellaneous Securities..........................................................................................................................134
Account................................................................................................................................................................37
Account Bank................................................................................................................................................ 36, 37
Accounts ..............................................................................................................................................................37
Accruing PIK Security .......................................................................................................................................37
Additional Coverage Test...................................................................................................................................37
Additional Portfolio Collateral.............................................................................................................. 3, 37, 120
Additional Reinvestment Criteria ...................................................................................................................133
Administrative Expenses.............................................................................................................................. 37, 38
Affiliate ................................................................................................................................................................38
Affiliated..............................................................................................................................................................38
Agency Agreement..........................................................................................................................................2, 36
Agent Bank................................................................................................................................................ 2, 36, 38
Agents ..................................................................................................................................................................38
Aggregate Collateral Balance ............................................................................................................................38
Aggregate Principal Amount.............................................................................................................................38
Aggregate Principal Balance .............................................................................................................................39
Appreciated Portfolio Collateral .......................................................................................................................39
Asset Backed Security ........................................................................................................................................39
Asset Swap Agreement.......................................................................................................................................39
Asset Swap Counterparty ..............................................................................................................................2, 39
Asset Swap Counterparty Principal Exchange Amount .................................................................................39
Asset Swap Counterparty Termination Payment............................................................................................39
Asset Swap Issuer Principal Exchange Amount ..............................................................................................39
Asset Swap Issuer Termination Payment.........................................................................................................39
Asset Swap Obligation........................................................................................................................................39
Asset Swap Replacement Payment....................................................................................................................39
Asset Swap Replacement Receipt......................................................................................................................39
Asset Swap Transaction .....................................................................................................................................39
Asset Swap Transaction Exchange Rate...........................................................................................................39
Available Funds Cap ........................................................................................................................................127
Average Collateral Balance ...............................................................................................................................40
B
B Grade Portfolio Collateral..............................................................................................................................40
Balance.................................................................................................................................................................40
BB Grade Portfolio Collateral...........................................................................................................................40
Beneficial Owner...............................................................................................................................................104
Book-Entry Interest..........................................................................................................................................103
Break-even Default Rate ..................................................................................................................................123
Business Day........................................................................................................................................................40
C
CDO Securities..................................................................................................................................................134
Class..................................................................................................................................................................i, 40
Class A Floating Rate of Interest............................................................................................................. 4, 40, 80
Class A Margin ............................................................................................................................................. 40, 81
Class A Noteholders............................................................................................................................................40
Class A Notes................................................................................................................................................i, 1, 36
Class A/B Recovery Rate..................................................................................................................................125
155

Class B Floating Rate of Interest............................................................................................................. 4, 40, 80
Class B Margin ............................................................................................................................................. 40, 81
Class B Noteholders............................................................................................................................................40
Class B Notes................................................................................................................................................i, 1, 36
Class C Coverage Test....................................................................................................................................8, 40
Class C Floating Rate of Interest............................................................................................................. 4, 40, 80
Class C Margin ...................................................................................................................................................81
Class C Note ...........................................................................................................................................................i
Class C Noteholders............................................................................................................................................40
Class C Notes...................................................................................................................................................1, 36
Class C Overcollateralisation Ratio ..................................................................................................................41
Class C Recovery Rate .....................................................................................................................................125
Class D Coverage Test....................................................................................................................................8, 41
Class D Deferred Interest......................................................................................................................... 5, 41, 79
Class D Floating Rate of Interest............................................................................................................. 4, 41, 80
Class D Margin ............................................................................................................................................. 41, 81
Class D Noteholders............................................................................................................................................41
Class D Notes....................................................................................................................................i, 1, 36, 79, 80
Class D Overcollateralisation Ratio ..................................................................................................................41
Class D Recovery Rate .....................................................................................................................................125
Class E Coverage Test....................................................................................................................................8, 41
Class E Deferred Interest......................................................................................................................... 6, 41, 79
Class E Floating Rate of Interest............................................................................................................. 4, 41, 80
Class E Margin ............................................................................................................................................. 41, 81
Class E Noteholders............................................................................................................................................41
Class E Notes................................................................................................................................................i, 1, 36
Class E Overcollateralisation Ratio ..................................................................................................................41
Class F Coverage Test ....................................................................................................................................8, 41
Class F Deferred Interest ......................................................................................................................... 6, 41, 79
Class F Floating Rate of Interest............................................................................................................. 4, 41, 80
Class F Margin.............................................................................................................................................. 41, 81
Class F Noteholders ............................................................................................................................................41
Class F Notes ................................................................................................................................................i, 1, 36
Class F Overcollateralisation Ratio...................................................................................................................41
Class of Noteholders ...........................................................................................................................................40
Class of Notes ......................................................................................................................................................40
Class S1 Combination Notes.................................................................................................................i, 1, 36, 41
Class S1 Noteholders ..........................................................................................................................................42
Class S1/D Component..........................................................................................................................i, 1, 36, 42
Class S1/Subordinated Component......................................................................................................i, 1, 36, 42
Classes of Noteholders........................................................................................................................................40
Classes of Notes...................................................................................................................................................40
Clearing Systems.................................................................................................................................................42
Clearstream, Luxembourg.............................................................................................................................3, 42
CLO Securities..................................................................................................................................................134
Closing Date ...............................................................................................................................................i, 36, 42
CMBS ................................................................................................................................................................135
Code ...................................................................................................................................................................152
Collateral....................................................................................................................................................... 11, 42
Collateral Acquisition Agreement.....................................................................................................................37
Collateral Acquisition Agreements ...................................................................................................................37
Collateral Administration Agreement ..............................................................................................................37
Collateral Administrator.......................................................................................................................... 2, 37, 42
Collateral Management Agreement ..............................................................................................................2, 36
Collateral Management Fee......................................................................................................................... 18, 42
Collateral Manager................................................................................................................................i, 2, 36, 42
Collateral Manager Termination Amount .......................................................................................................42
Collateral Quality Tests .....................................................................................................................................42
Collateral Tax Event ..........................................................................................................................................43
Combination Note.............................................................................................................................................116
156

Commercial Mortgage Backed Securities ......................................................................................................135
Component ..........................................................................................................................................................43
Components..................................................................................................................................................i, 1, 43
Condition...............................................................................................................................................................1
Conditions ....................................................................................................................................................i, 1, 43
Conditions of the Notes .........................................................................................................................................i
Controlling Class ................................................................................................................................................43
Counterparty Downgrade Collateral................................................................................................................43
Counterparty Downgrade Collateral Account.................................................................................................43
Coverage Tests ................................................................................................................................................7, 43
Credit Risk Portfolio Collateral ........................................................................................................................43
Current Portfolio ..............................................................................................................................................124
Custodian....................................................................................................................................................... 36, 43
Custody Account.................................................................................................................................................43
D
Default Differential...........................................................................................................................................123
Defaulted Amount...............................................................................................................................................43
Defaulted Asset Swap Termination Payment...................................................................................................43
Defaulted Portfolio Collateral ..................................................................................................................... 43, 44
Deferred Interest.................................................................................................................................................44
Definitive Notes.....................................................................................................................................................3
Determination Date ............................................................................................................................................45
Direct Participants............................................................................................................................................103
Discount Obligation............................................................................................................................................45
Discounted Amount ............................................................................................................................................45
Dutch Ineligible Securities .................................................................................................................................45
E
Effective Date.......................................................................................................................................... 3, 45, 114
Effective Date Rating Event...............................................................................................................................45
Effective Date Requirements .............................................................................................................................45
Eligibility Criteria....................................................................................................................................... 45, 115
Eligible Investments ...........................................................................................................................................46
Eligible Types....................................................................................................................................................134
Emerging Market .............................................................................................................................................117
EURIBOR ...........................................................................................................................................................46
euro .......................................................................................................................................................................iv
Euro ................................................................................................................................................................iv, 46
Euroclear.........................................................................................................................................................3, 46
Euro-zone ............................................................................................................................................................46
Event of Default ..................................................................................................................................................46
Excess Accruing PIK Security Portfolio Collateral.........................................................................................46
Excess B Grade Amount ....................................................................................................................................46
Excess B Grade Portfolio Collateral .................................................................................................................46
Excess BB Grade Amount..................................................................................................................................46
Excess BB Grade Portfolio Collateral...............................................................................................................46
Exchange Class ...................................................................................................................................................58
Expense Reimbursement Account.................................................................................................................3, 46
Extraordinary Resolution ..................................................................................................................................47
F
Fitch .....................................................................................................................................................................47
Fitch Class A/B Recovery Rate........................................................................................................................122
Fitch Class A/B Weighted Average Recovery Rate .......................................................................................122
Fitch Rating.......................................................................................................................................................117
Fitch Rating Factor ..........................................................................................................................................121
Fitch Test Matrix..............................................................................................................................................122
Fitch Weighted Average Rating Factor..........................................................................................................121
Fitch Weighted Average Rating Factor Test..................................................................................................121
157

Fitch Weighted Average Recovery Rate Test.................................................................................................122
Fixed Rate Portfolio Collateral.................................................................................................................. 47, 117
Floating Rate of Interest .............................................................................................................................. 47, 81
Floating Rate Portfolio Collateral...................................................................................................................117
Form-Approved Asset Swap..............................................................................................................................47
Foundation .................................................................................................................................................. 47, 108
FSMA...................................................................................................................................................................47
G
Global Note............................................................................................................................................................3
Global Notes ..........................................................................................................................................................3
H
Hedge Counterparty Termination Payments...................................................................................................47
Hedge Issuer Termination Payments................................................................................................................47
Hedge Replacement Payments...........................................................................................................................47
Hedge Replacement Receipts.............................................................................................................................47
Hedge Termination Account..............................................................................................................................47
I
Indirect Participants.........................................................................................................................................103
Initial Portfolio Collateral..............................................................................................................................3, 47
Initial Ratings......................................................................................................................................................47
Insolvency Law ...................................................................................................................................................91
Insolvency Regulations.......................................................................................................................................76
Interest Accrual Period ......................................................................................................................................47
Interest Amount..................................................................................................................................................47
Interest Collection Account ...............................................................................................................................48
Interest Coverage Ratio .....................................................................................................................................48
Interest Coverage Test ...................................................................................................................................8, 48
Interest Determination Date ........................................................................................................................ 48, 80
Interest Proceeds.................................................................................................................................................48
Interest Proceeds Priorities of Payment ..................................................................................................... 10, 60
Investec ..............................................................................................................................................................110
Investment Company Act....................................................................................................................................iii
Investment Gains ................................................................................................................................................49
Investment Gains Ratio......................................................................................................................................49
IPF......................................................................................................................................................................110
Irish Paying Agent..........................................................................................................................................2, 36
Irish Stock Exchange..........................................................................................................................................49
ISIN....................................................................................................................................................................153
Issuer.............................................................................................................................................................i, 1, 49
Issuer Dutch Account .........................................................................................................................................49
K
Key Person ..........................................................................................................................................................49
Key Persons.........................................................................................................................................................49
L
Letter of Undertaking ......................................................................................................................................108
Listing Agent.........................................................................................................................................................2
Low Grade Amount............................................................................................................................................49
Low Grade Portfolio Collateral.........................................................................................................................49
M
Management Agreement...................................................................................................................... 37, 49, 109
Manager......................................................................................................................................................i, 37, 49
Managing Directors.............................................................................................................................. 37, 49, 109
Margin ........................................................................................................................................................... 49, 81
Market Value ......................................................................................................................................................49
158

Maturity Date................................................................................................................................................ 10, 50
Measurement Date..............................................................................................................................................50
Monthly Report........................................................................................................................................... 50, 145
N
Net Portfolio Collateral Balance........................................................................................................................50
Non-Call Period ............................................................................................................................................ 13, 51
Non-Euro Currency Account.............................................................................................................................51
Non-Euro Portfolio Collateral...........................................................................................................................51
Non-Investment Grade Portfolio Collateral.....................................................................................................51
Non-U.S. Person..................................................................................................................................................51
Note Valuation Report ............................................................................................................................... 51, 146
Noteholders .........................................................................................................................................................51
Notes .......................................................................................................................................................................i
NPL Securities ..................................................................................................................................................135
O
Offer.....................................................................................................................................................................51
Offering ................................................................................................................................................................iv
Ordinary Resolution...........................................................................................................................................51
Original Portfolio Collateral.................................................................................................................. 3, 51, 120
Outstanding.........................................................................................................................................................51
P
Participants .......................................................................................................................................................103
Paying Agents......................................................................................................................................................51
Payment Account................................................................................................................................................51
Payment Date ...................................................................................................................................................i, 52
Payment Default .................................................................................................................................................52
Payment Period...................................................................................................................................................52
Permanent Global Note........................................................................................................................................3
Permanent Global Notes ......................................................................................................................................3
Person ..................................................................................................................................................................52
PIK Security........................................................................................................................................................52
Pledge Agreement ...............................................................................................................................................52
Portfolio...............................................................................................................................................................52
Portfolio Collateral.........................................................................................................................................3, 52
Portfolio Profile Tests................................................................................................................................. 52, 128
Post-Enforcement Priorities of Payment ..........................................................................................................93
Potential Event of Default..................................................................................................................................52
Principal Amount Outstanding .........................................................................................................................52
Principal Balance................................................................................................................................................52
Principal Collection Account.............................................................................................................................52
Principal Paying Agent ............................................................................................................................ 2, 36, 53
Principal Proceeds ..............................................................................................................................................53
Principal Proceeds Priorities of Payment................................................................................................... 10, 62
Priorities of Payment..........................................................................................................................................53
Proceedings .........................................................................................................................................................99
Proposed Portfolio ............................................................................................................................................125
Prospectus Directive ..............................................................................................................................................i
Purchased Accrued Interest...............................................................................................................................53
R
Ramp-Up Period.................................................................................................................................................53
Rated Balance .....................................................................................................................................................53
Rating Agencies................................................................................................................................................i, 53
Rating Agency.....................................................................................................................................................53
Rating Agency Confirmation.............................................................................................................................53
Rating Confirmation Plan..................................................................................................................................53
Receiver ...............................................................................................................................................................91
159

Record Date.........................................................................................................................................................53
Redemption Date ................................................................................................................................................53
Redemption Determination Date................................................................................................................. 53, 84
Redemption Notice .............................................................................................................................................54
Redemption Price ...............................................................................................................................................54
Redemption Threshold Amount.................................................................................................................. 54, 84
Reference Banks .................................................................................................................................................81
Reference Entity .................................................................................................................................................54
Reference Obligation..........................................................................................................................................54
Regulation S .....................................................................................................................................................i, 54
Reinvestment Criteria ................................................................................................................................ 54, 132
Reinvestment Period..................................................................................................................................... 14, 54
Reinvestment Redemption Amount ............................................................................................................ 54, 86
Relevant Persons..................................................................................................................................................iii
Relevant Screen...................................................................................................................................................98
Replacement Asset Swap Agreement................................................................................................................54
Replacement Asset Swap Transaction ..............................................................................................................54
Report ..................................................................................................................................................................54
Required Portfolio Collateral Balance..........................................................................................................3, 55
Required Ratings ................................................................................................................................................55
Residential Mortgage Backed Securities ........................................................................................................135
Risk Factors ...........................................................................................................................................................i
S
S&P ...................................................................................................................................................................i, 55
S&P CDO Evaluator ........................................................................................................................................125
S&P CDO Rating Test ............................................................................................................................. 106, 123
S&P Class A/B Weighted Average Recovery Rate ........................................................................................125
S&P Class C Weighted Average Recovery Rate............................................................................................125
S&P Class D Weighted Average Recovery Rate............................................................................................125
S&P Notched Rating ........................................................................................................................................117
S&P Rating........................................................................................................................................................119
S&P Test Matrix...............................................................................................................................................125
S&P Weighted Average Recovery Rate Test..................................................................................................125
S1 Stated Coupon................................................................................................................................................98
Sale Proceeds.......................................................................................................................................................55
SARB .................................................................................................................................................................110
Scenario Default Rate.......................................................................................................................................123
Scheduled Periodic Asset Swap Counterparty Payment.................................................................................55
Scheduled Periodic Asset Swap Issuer Payment..............................................................................................55
Scheduled Principal Proceeds............................................................................................................................55
Screen Rate..........................................................................................................................................................80
Secured Parties ...................................................................................................................................................56
Secured Party......................................................................................................................................................56
Securities Act ...................................................................................................................................i, 56, 102, 152
Semi Annual Interest Received.................................................................................................................... 56, 71
Semi Annual Interest Smoothing Account .......................................................................................................56
Semi Annual Percentage .............................................................................................................................. 56, 72
Semi Annual Portfolio Collateral ................................................................................................................ 56, 72
Semi Annual Proportion .............................................................................................................................. 56, 72
Semi Annual Proportion Threshold Excess................................................................................................ 56, 72
Senior Notes ...........................................................................................................................................i, 1, 36, 56
shortfall................................................................................................................................................................75
SME Securities..................................................................................................................................................135
Stated Maturity...................................................................................................................................................56
Stated Principal Balance ....................................................................................................................................56
Sterling............................................................................................................................................................iv, 56
Structured Finance CDO Securities................................................................................................................135
Sub-Custodian.....................................................................................................................................................33
Subordinated Deferred Interest .............................................................................................................. 6, 56, 79
160

Subordinated Fixed Rate of Interest....................................................................................................... 4, 56, 78
Subordinated Interest Amount.................................................................................................................... 56, 78
Subordinated Noteholders .................................................................................................................................56
Subordinated Notes .........................................................................................................................i, 1, 36, 79, 80
Subordinated Residual Interest......................................................................................................... 4, 56, 62, 82
Sub-Prime Residential Mortgage Securities...................................................................................................135
Subscription Agreement.....................................................................................................................................37
Substitute Portfolio Collateral............................................................................................................... 3, 56, 120
Synthetic Security .............................................................................................................................................119
Synthetic Security Counterparty.......................................................................................................................57
T
TAGS .................................................................................................................................................................111
Tax/Government Receivable Securities ..........................................................................................................136
Temporary Global Note .......................................................................................................................................3
Temporary Global Notes......................................................................................................................................3
Transaction Creditors ........................................................................................................................................57
Transaction Documents .....................................................................................................................................57
transferee...........................................................................................................................................................152
Trust Deed..............................................................................................................................................................i
Trustee..............................................................................................................................................................i, 36
Trustee Fees and Expenses ................................................................................................................................57
U
U.S........................................................................................................................................................................57
U.S. Dollars.....................................................................................................................................................iv, 57
U.S. Person ..........................................................................................................................................................57
U.S.A. ...................................................................................................................................................................57
Underlying Instrument.......................................................................................................................................57
Underlying Obligor.............................................................................................................................................57
Unscheduled Principal Proceeds .......................................................................................................................57
Unused Proceeds Account..............................................................................................................................3, 58
W
WBS ...................................................................................................................................................................136
Weighted Average Life.....................................................................................................................................127
Weighted Average Life Test ............................................................................................................................127
Weighted Average Spread ...............................................................................................................................126
Weighted Average Spread Test .......................................................................................................................126
161

REGISTERED OFFICE OF THE ISSUER
PANGAEA ABS 2007-1 B.V.
Locatellikade 1
1076 AZ Amsterdam
The Netherlands
COLLATERAL MANAGER
Investec Principal Finance, a
business unit division of Investec
Bank (UK) Ltd
2 Gresham Street
London EC2V 7QP
COLLATERAL ADMINISTRATOR
Law Debenture Asset Backed Solutions Limited
Fifth Floor
100 Wood Street
London EC2V 7EX
TRUSTEE
The Law Debenture Trust Corporation p.l.c.
Fifth Floor
100 Wood Street
London EC2V 7EX
ACCOUNT BANK, AGENT
BANK, COMMON
DEPOSITARY AND
CUSTODIAN
HSBC Bank plc
8 Canada Square
London E14 5HQ
PRINCIPAL PAYING AGENT
HSBC Bank plc
8 Canada Square
London E14 5HQ
LEGAL ADVISERS
IRISH PAYING AGENT
HSBC Institutional Trust
Services (Ireland) Limited
HSBC House
Harcourt Centre
Harcourt Street
Dublin 2, Ireland
To the Manager and the Collateral Manager
as to Dutch Law
Clifford Chance LLP
Droogbak 1A
1013 GE Amsterdam
To the Manager and the Trustee
as to English Law
Cadwalader, Wickersham & Taft LLP
265 Strand
London WC2R 1BH
To the Collateral Manager
as to English Law
Weil, Gotshal & Manges
One South Place
London EC2M 2WG
IRISH LISTING AGENT
Arthur Cox Listing Service Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2, Ireland
162