MMCapS XVII Final Offering Circular - Irish Stock Exchange

surplus adequacy guidelines (which could permit the redemption of some or all of the Collateral Debt Securities or
provide an incentive for the voluntary prepayment thereof), and whether permission of the Applicable Regulator is
required, directly or indirectly, for prepayment of any Collateral Debt Securities and, if so, whether the Applicable
Regulator grants such permission.
Coverage Prepayments will be made on certain Notes if the Coverage Tests are not met as of any
Calculation Date, which may occur, for example, if an Affiliated Depository Institution or Affiliated Insurance
Institution exercises its right to defer interest payments on its Corresponding Debentures, if a default occurs with
respect to the Collateral Debt Securities or Corresponding Debentures or if the Insurance Surplus Note Issuer fails to
make a payment under its Insurance Surplus Note as a result of a Payment Restriction.
The Holders of the Notes will have control over the timing or amount of any redemptions of the Collateral
Debt Securities. Redemptions of Collateral Debt Securities may result in the remaining portfolio of Collateral Debt
Securities having a greater concentration of risk due to the smaller number of issuers of Collateral Debt Securities
represented in the portfolio causing a possible decrease in diversity or a lower overall credit quality, which could
have a material adverse effect on the Notes.
As of the Closing Date, the total principal amount of the Notes will be U.S.$312,450,000 and the total
principal amount of the Collateral Debt Securities will be U.S.$300,000,000. The Income Notes will rely on
distributions of excess Interest Collections on the Collateral Debt Securities for their ultimate return. If early
prepayments are made as a result of an optional redemption or Special Event redemption of the Collateral Debt
Securities or if the Income Notes are redeemed pursuant to an Optional Notes Redemption or a Clean Up Call, or if
additional payments are made on the Class A Notes, Class B Notes or Class C Notes on or after the Turbo Date
pursuant to clause (a)(xiii) of the Priority of Payments, Holders of the Income Notes could recover less than their
initial investment. If the Income Notes are redeemed pursuant to a Mandatory Auction Call, Holders of the Income
Notes will receive the amount of their initial investment but may receive no return on that investment. See “—
Undercollateralization of the Income Notes; Variability of Cash Flows on the Income Notes.”
13. Interest Rate Mismatch Risk; Dependence on each Hedge Counterparty. The Class A-1 Notes, Class A-2
Notes, Class B Notes and Class C-1 Notes will bear interest at a floating rate based on LIBOR. Each Collateral
Debt Security will bear interest at a fixed rate, a floating rate based on LIBOR or a combination of a fixed rate for a
period of time followed by a floating rate based on LIBOR thereafter. Although the Issuer will enter into the Hedge
Agreements, which will be used to exchange fixed rate payments received on certain Collateral Debt Securities for a
LIBOR-based floating rate payment to provide a source of funding for the floating rate interest payments on the
Class A Notes, Class B Notes and Class C-1 Notes, there will be an interest rate mismatch between (x) the floating
rate at which interest accrues on the Class A Notes, Class B Notes and Class C-1 Notes and the fixed rate at which
interest accrues on the Class C-2 Notes on the one hand and (y) the fixed and floating rates at which interest accrues
on the Collateral Debt Securities on the other. In addition, neither the Swap Notional Amount nor the Cap Notional
Amount will match the aggregate Principal Balance of the Collateral Debt Securities. Also, a mismatch between
interest received by the Co-Issuers from the Collateral Debt Securities and the interest payable by the Issuer on the
Notes may occur as a result of, among other things, differences in the determination of LIBOR, redemptions,
defaults or deferrals in respect of Collateral Debt Securities, differences in the number of days in the accrual period
for the Hedge Agreements, differences in the number of days in the related accrual periods for the Notes and
differences in the timing of payments required to be made on the Collateral Debt Securities and the timing of
payments required to be made on the Notes. Such mismatches and the decline in the value of the Fixed Rate
Collateral Debt Securities as a result of a rising interest rate environment may adversely affect the Co-Issuers’
ability to pay amounts due in respect of the Notes. Although the Hedge Agreements will be entered into in order to
provide a hedge against mismatches in interest rates and changing interest rates, no assurance can be provided as to
whether the Hedge Agreements will in fact provide an adequate hedge under all circumstances. See “Description of
the Hedge Agreements.”
The ability of the Issuer to meet its obligation to pay interest on the Notes will be partially dependent on the
performance by each Hedge Counterparty of its payment obligations under the related Hedge Agreement. If a
Hedge Counterparty were to fail to pay its obligations under a Hedge Agreement or if, for any reason, a Hedge
Agreement were to be terminated, shortfalls could occur and the Noteholders could suffer a loss. If a Hedge
Agreement is terminated for any reason (including an event of default or termination event) prior to its contractual
28