Contrˆ
ole Titrisation et Risque de Cr´edit
O. Toutain
29 mars 2011
1
QCM
Dans cette partie s´
electionner la r´
eponse correspondant le mieux `
a la r´
ealit´
e.
Q.1.
De quoi est principalement constitu´
e le passif d’un SPV ?
(a) De fond propre
(b) De r´
eserve
(c) De dettes
Q.2.
Que veut dire l’acronyme RMBS ?
(a) Reverse Mortgage Backed Securities
(b) Residential Mortgage Backed Securities
(c) Round Maturity Bullet Securities
Q.3.
Comment est exprim´
e le prix d’une dette `
a taux fixe ?
(a) en basis point
(b) en pourcentage
(c) en terme de volatilit´
e implicite
Q.4.
Parmi ces diff´
erents points qu’est ce qui diff´
erencie un prˆ
et d’une obligation ?
(a) La Maturit´
e
(b) Le Prˆ
eteur
(c) Le Taux d’Int´
erˆ
et
Q.5.
Parmi ces trois titrisations laquelle est une titrisation de valeur de march´
e ?
(a) Titrisation des paiements futurs d’abonnement EDF
(b) Titrisation de risque tremblement de terre au Japon
(c) Titrisation de part de fond de ”private equity”
Q.6.
A quoi sert un m´
ecanisme de capture de marge exc´
edentaire dans une titrisation ?
(a) A augmenter la protection de la part senior
(b) A augmenter le rendement de la part senior
(c) A augmenter le rendement de la part la plus junior
Q.7.
Qu’est ce qu’un ”Turbo OC” ?
(a) Un test d’OC qui d´
eclenche le repaiement d’un part Senior
(b) Un test d’OC qui d´
eclenche le repaiement d’une part Mezzanine
(c) Un test d’OC qui d´
elenche un amortissement du portefeuille
Q.8.
Qu’est ce qu’une entit´
e de r´
ef´
erence dans un CDS ?
(a) L’entit´
e payant la prime,
(b) L’entit´
e achetant la protection,
(c) L’entit´
e dont le risque de cr´
edit est transf´
er´
e.
Q.9.
Les taux de recouvrement sont-ils en g´
en´
eral :
(a) ind´
ependants des taux de d´
efaut
(b) positivement corr´
el´
es avec les taux de d´
efaut
(c) n´
egativement corr´
el´
es avec les taux de d´
efaut
Q.10.
Quelle est la relation entre intensit´
e de d´
efaut et spread dans un mod`
ele `
a intensit´
e ?
(a)
S
=
λ
∗
(1
−
R
)
(b)
S
=
λ/
2
(c)
S
=
λ
2Q.11.
Le calcul du prix d’une tranche de CDO fait intervenir :
(a) le notionnel courant de cette tranche
(b) une variable al´
eatoire repr´
esentant le d´
efaut de la tranche
(c) la prime actualis´
ee pay´
ee par la jambe fixe
Q.12.
La marge exc´
edentaire d’int´
erˆ
et dans le cadre d’une titrisation de dette est constitu´
ee par :
(a) L’´
ecart entre la r´
emun´
eration des porteurs de parts et les revenus des prˆ
ets sous-jacents
`
a la titrisation
(b) L’´
ecart possible entre taux fixe des parts et taux variable des prˆ
ets
(c) La marge revers´
ee aux investisseurs
2
Exercice - CDS sur l’Irlande
Cet exercice reprend un certain nombre d’´
el´
ements vu en cours sur le calcul de valeur d’un
CDS. Nous allons consid´
erer le CDS sur l’Irlande, le tableau ci-dessous reprend les principaux
spreads de CDS `
a deux dates : le 23 Novembre 2010 et le 22 Aout 2010.
Maturit´
e
23 Novembre 2010
22 Aout 2010
3 ans
590 bps
510 bps
5 ans
520 bps
540 bps
Table
1 – Spreads du CDS sur l’Irlande
Dans la suite nous supposerons les hypoth`
eses suivantes :
– le taux de recouvrement est connu et fix´
e `
a 40% ;
– la prime du CDS est suppos´
ee pay´
ee en temps continu et non pas tous les trimestres ;
– le taux d’int´
erˆ
et est fix´
e `
a 1%.
1. En supposant une intensit´
e de d´
efaut constante de 0 `
a 3 ans, quelle est-elle si l’on se base
uniquement sur la valeur du spread `
a 3 ans ? Et ce pour les deux dates (Novembre et Aout) ?
Donner aussi les probabilit´
es de d´
efaut risque-neutre pour ces dates et cette maturit´
e.
2. On suppose une intensit´
e de d´
efaut constante par morceaux. Donner l’intensit´
e en fonction
du temps sur la p´
eriode 0
−
5 ans. Uniquement `
a la date du 23 Novembre 2010.
3. On suppose une intensit´
e de d´
efaut lin´
eaire par morceaux et continu (telle que
λ
(0) = 0).
Donner l’intensit´
e en fonction du temps sur la p´
eriode 0
−
5 ans. Uniquement `
a la date du
23 Novembre 2010.
4. Aujourd’hui les spreads `
a 3 et 5 ans sont respectivements 650bps et 550bps. Si vous aviez
achet´
e de la protection pour 5 ans sur l’Irlande en Aout 2010 pour un notionnel unit´
e, quel
serait la valeur de votre contrat aujourd’hui :
(a) en supposant une intensit´
e constante de 0 `
a 5 ans ?
(b) en supposant une intensit´
e constante par morceaux ?
5. Vous avez prˆ
et´
e un montant de 100
,
000
,
000 Euros `
a l’Irlande pour les quatre prochaines
ann´
ees le 23 Novembre 2010. Comment pouvez vous couvrir ce risque avec les deux CDS
existant sur le march´
e ? Expliquez en supposant une intensit´
e constante par morceaux.
3
Exercice - Une autre copule
Nous consid´
erons ici un portefeuille de prˆ
ets. Nous souhaitons d´
eterminer la distribution de
perte de ce portefeuille de risque de cr´
edit dans le cadre d’un mod`
ele diff´
erent de la copule
gaus-sienne (le mod`
ele `
a copule gaussienne correspond `
a la mod´
elisation de Vasicek). Nous prendrons
les hypoth`
eses suivantes pour l’analyse d’un tel portefeuille :
– le nombre d’entit´
es de r´
ef´
erence est de
n
,
n
´
etant tr`
es grand, avec une mˆ
eme taille pour
chacune d’entre elles et une mˆ
eme hypoth`
ese de recouvrement `
a 0%, toutes les maturit´
es des
prˆ
ets sont ´
egales, nous supposerons le notionnel du portefeuille ´
egale `
a l’unit´
e ;
– le taux de d´
efaut moyen du portefeuille est de
p
, et la qualit´
e de cr´
edit des expositions est
tr`
es homog`
ene ;
– la d´
ependance entre d´
efaut sera prise en compte par un mod`
ele unifactorielle o`
u l’on introduit
une variable al´
eatoire
Z
, commune `
a toutes les expositions, t.q. :
– la probabilit´
e de d´
efaut conditionnelle `
a cette variable
Z
soit
P
(
I
{Entit´e i en d´efaut}= 1
|
Z
) =
1
−
e
−λZ;
–
Z
suit une loi exponentielle de param`
etre
α
.
La variable al´
eatoire repr´
esentant la proportion de perte sera not´
ee
L
=
Pn
i=1I{Entit´e i en d´efaut}
n
.
Q1
En utilisant la loi des grands nombres (de mani`
ere similaire `
a l’approximation de Vasicek),
donner une approximation de la distribution de
L
.
Q2
Quelle relation lie les param´
etres
p
,
λ
et
α
?
Q3
Si nous consid´
erons une tranche sur ce portefeuille de risque de cr´
edit de point d’attachement
a
et de point de d´
etachement
d
, quelle est l’esp´
erance de perte de cette tranche ?
Q4
Comparer ce mod`
ele `
a la copule gaussienne, et notamment :
– Redonner le distribution de
L
dans le cadre de l’approximation de Vasicek.
– Quelle est la corr´
elation de d´
efaut entre deux entit´
es ? La corr´
elation de d´
efaut peut se
d´
efinir comme la corr´
elation entre les variables de Bernouilli
I
{Entit´e i en d´efaut}et
I
{Entit´e j en d´efaut}.
– Quels sont les avantages et les inconv´
enients d’un tel mod`
ele par rapport `
a la copule
gaussienne ?
4
Exemple de transaction
Le document joint `
a l’examen est un descriptif succinct de titrisation.
Questions
Q1
De quel type de titrisation s’agit-il ? Donner les types d’actifs.
Q2
D´
ecrire les flux au lancement de l’op´
eration, puis en cours de transaction.
Q3
A quoi sert le ”Servicer” ?
Q4
Nous allons essayer de comprendre ici comment la classe la plus prioritaire est prot´
eg´
ee.
– Quels sont les m´
ecanismes qui permettent de repayer la classe ”Senior” mˆ
eme en cas de
d´
efaut sur le portefeuille ?
– Y-a-t-il un ”Turbo Trigger” ? Le d´
ecrire si il y a lieu.
– D´
ecrire de mani`
ere synth´
etique les priorit´
es de paiements.
Q5
Donner la liste des risques pour le porteur de part ”Senior”.
Q6
Donner le rendement de la part subordonn´
ee dans les sc´
enarios suivants (nous supposerons
une maturit´
e moyenne de 10 ans des actifs et un rendement de EURIBOR + 400bps) :
– En supposant aucun d´
efaut sur la dur´
ee de la transaction, quel est le rendement de la
”Subordinated Class” ?
– En supposant des d´
efauts pour un montant de EUR 120 millions `
a la fin de la troisi`
eme
ann´
ee (et un recouvrement une ann´
ee apr`
es de l’ordre de 40%), quel est le rendement de
la ”Subordinated Class” ?
Mod´
elisation
Nous allons essayer ici de construire une analyse quantitative du risque bas´
e sur une mod´
elisation
du risque des actifs de type ”LHP”. Nous introduisons les notations suivantes :
–
t
: le num´
ero de la p´
eriode (mensuelle) que nous consid´
erons, de 1 `
a
T
;
–
A
t: le notionnel des actifs sains du v´
ehicule d’´
emission `
a la fin de la p´
eriode
t
;
–
r
: le taux d’int´
erˆ
et suppos´
e constant sur les actifs sains ;
–
f
: les frais fixes du v´
ehicule ;
–
N
t: le notionnel de la clase ”Senior” ;
–
M
t: le notionnel de la clase ”Mezzanine” ;
–
i
Set
i
Mles taux d’int´
erˆ
ets pay´
es par les classes ”Senior” et ”Mezzanine”.
Q1
Donner la relation existante entre
N
t+1et
N
t.
Q2
Donner plusieurs m´
ethodes de d´
eterminer la probabilit´
e de d´
efaut de la classe ”Senior” et les
avantages/inconv´
enients de chacune.
Termsheet – Foxtrot Funding I Ltd Class Expected Rating Balance € mm Legal Final Coupon Senior A2 € 1 470 2040 3m EUR + 70bps Mezzanine NA € 50 2040 3m EUR + 300bps Subordinated NA € 74 2040 NA
I. General Description
The Issuer: Foxtrot Funding I Limited, a private company with limited liability incorporated under the laws of Ireland
Servicer, Collateral Administrator and Account Bank:
HSH Nordbank AG.
Trustee: BNY Corporate Trustee Services Ltd.
Arranger: HSH Investment Management S.A.
Use of Proceeds: The estimated net proceeds of the issue of the Notes (after payment of legal fees, and certain other fees and expenses payable on or shortly after the Closing Date) are expected to be approximately €1,592,970,132.68. The net proceeds will be used in payment of all amounts due and payable under the Collateral Acquisition Agreements entered into on the Closing Date.
Priorities of Payment: Interest Proceeds and Principal Proceeds will be applied in the payment of interest and principal payable on the Notes and amounts payable to the other creditors of the Issuer in accordance with the Priorities of Payment specified in Section 3 (Priorities of Payment).
Interest Payments: Interest in respect of the Notes of each Class will be payable quarterly in arrear on 25 January, 25 April, 25 July and 25 October of each year, commencing 27 July 2009, at maturity and upon any redemption of the Notes (each a “Payment Date”) and with respect of the Notes of each Class, save for the Subordinated Notes, at the rates determined for each Class. In respect of the Subordinated Notes, interest is payable on an available funds basis out of Interest Proceeds remaining following prior payment in accordance with the Priorities of Payment of certain fees and expenses and interest payable in respect of the Senior Notes and the Mezzanine Notes.
Diversion of Interest Proceeds: If the Senior Par Value Test is not met on any Determination Date, Interest Proceeds which would otherwise be used to pay, among other things, interest on the Mezzanine Notes and the Subordinated Notes shall, on the next Payment Date, be used to redeem the Senior Notes, in whole or in part, to the extent required to cause the Senior Par Value Test to be satisfied if recalculated immediately following such redemption, subject to payment of prior ranking amounts in accordance with the Priorities of Payment.
Consequence of Non-Payment of Interest:
To the extent that interest payments on the Senior Notes or Mezzanine Notes are not made on the relevant Payment Date in such circumstances, an amount equal to such unpaid interest will be added to the Principal Amount Outstanding of such Senior Notes or Mezzanine Notes, as applicable, and, with effect from and including such Payment Date, interest will accrue on such unpaid amount at the rate of interest applicable to such Senior Notes or Mezzanine Notes.
1. on the Maturity Date of the Notes; 2. upon breach of the Senior Par Value Test; or
3. the Issuer will, pursuant to a Special Redemption case, redeem the Senior Notes and Mezzanine Notes out of Principal Proceeds and Sale Proceeds in accordance with the Note Payment Sequence.
Servicing Fee: The fee equal to EUR 20,000 per annum will be payable to the Servicer on the first Payment Date of each calendar year and, if deferred in accordance with the Priorities of Payment, interest shall accrue at the rate of EURIBOR on such deferred amount.
Purchase of Debt Obligations: A portfolio of Debt Obligations will be purchased by the Issuer on the Closing Date pursuant to the Collateral Acquisition Agreements. It is expected that the Senior Par Value Test will be satisfied with respect to the Debt Obligations as of the Closing Date and will be measured on each Measurement Date occurring after the Closing Date.
Servicing of Collateral: The Servicer will monitor the performance and credit quality of the Debt Obligations on an ongoing basis.
Sale of Debt Obligations: Subject to the terms of the Servicing Agreement, the Servicer, on behalf of the Issuer, may sell:
• any Debt Obligation (subject to receipt of a Rating Agency Confirmation); and
• any Equity Security, including any Defaulted Equity Security and Margin Stock.
Treatment of Principal Proceeds and Sale Proceeds: Any Principal Proceeds received and any proceeds of the sale of Debt Obligations in the circumstances provided above will be applied by the Issuer in payment into the Principal Account for disbursement pursuant to a Special Redemption on the next following Payment Date following such sale.
Description of the Portfolio: Pursuant to the Servicing Agreement, the Servicer is required to act as the Issuer’s Servicer 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. Pursuant to the Servicing Agreement, the Collateral Administrator is required to perform certain calculations in relation to the Portfolio on behalf of the Issuer.
A portfolio selected by the Servicer which will consist of the Debt Obligations as listed on the spreadsheet attached hereto and made a part of this Prospectus (the “Schedule of Debt Obligations”) will be purchased by the Issuer on or prior to the Closing Date according to the Collateral Acquisition Agreement described herein. The Servicer will also have the right to purchase and dispose of Eligible Investments on behalf of the Issuer in accordance with the Servicing Agreement. The portfolio of Debt Obligations is composed of:
• loans to Commercial Banks; • loans to Mortgage Banks;
• CLO / CFO / ABS (SME-Consumer-Auto Lease) / CMBS / RMBS / Resec.
Special Redemption: If there are Principal Proceeds or Sale Proceeds (together, the “Special Redemption Amount”), the Servicer (acting on behalf of the Issuer) will
Date (a “Special Redemption Date”) following such sale, prepayment or receipt of Principal Proceeds.
Treatment of Interest Proceeds: The Interest Proceeds received will be transferred to the Interest Account and, on each Payment Date, applied subject to and in accordance with the Priorities of Payment.
Accounts: For the purposes of the Notes, the Issuer shall, prior to the Closing Date, establish with the Account Bank: the Custody Account, the Principal Account, the Interest Account, the Payment Account, the Annual Smoothing Account, the Semi-Annual Smoothing Account and the Interest Reserve Account. The Issuer shall establish the Issuer Irish Account with The Bank of New York Mellon.
II. Definitions
“ABS Obligation” means a Debt Obligation that is identified as “ABS” in the Schedule of Debt Obligations.
“Accounts” means, collectively, the Custody Account, the Issuer Irish Account, the Principal Account, the Interest Account, the Payment Account and the Interest Reserve Account.
“Administrative Expenses” means amounts due and payable:
1. to the independent accountants, agents and counsel appointed to advise the Issuer or its agents on matters specifically arising under or to the counterparties under the Transaction Documents, including amounts payable to the Agents (other than the Custodian) pursuant to the Agency Agreement (but excluding any amounts payable in respect of the Notes); 2. to the Custodian pursuant to the Agency Agreement;
3. to the Collateral Administrator pursuant to the Servicing Agreement (including indemnities provided for therein); 4. to Moody’s (i) in connection with the rating of the Senior Notes and (ii) in connection with a confidential credit estimate
to any of the Debt Obligations, for such fees and expenses (including surveillance fees) in connection with any such rating or confidential credit estimate including, in each case, the ongoing monitoring thereof or for any other services related to the issue of Notes;
5. to the Corporate Services Provider pursuant to the Corporate Services Agreement;
6. to the Servicer pursuant to the Servicing Agreement (including any indemnified amounts), but excluding the Servicing Fee;
7. to any Person in respect of any governmental fee or charge (excluding, for the avoidance of doubt, any taxes payable to any tax authority);
8. in respect of any third party portfolio management software, to providers of data and information services or for subscription services;
9. to any other Person in respect of any other fees, expenses or indemnities permitted under these Conditions, the Transaction Documents or any other documents delivered pursuant to or in connection with the Notes or the sale thereof, including, without limitation, an amount up to €15,000 per annum in respect of fees and expenses incurred by the Issuer (in its sole and absolute discretion) in assisting in the preparation, provision or validation of data for purposes of Noteholder tax jurisdictions;
10.to the Irish Stock Exchange, or such other stock exchange upon which any of the Notes are listed from time to time; and 11.to the payment of any amounts due and payable by the Issuer to any seller of a Debt Obligation pursuant to any Collateral
Acquisition Agreement after the date of entry into any such Collateral Acquisition Agreement,
in each case, together with any value added tax due and payable in respect thereof and 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, the latter being payable out of the proceeds of the issue of the Notes. “Agent” means each of the Registrar, the Transfer Agent, the Principal Paying Agent, the Irish Paying Agent, the Account Bank, and the Custodian and each of their permitted successors or assigns.
“Aggregate Principal Balance” means the aggregate of the Principal Balances of all Debt Obligations and, when used with respect to specific Debt Obligations, means the aggregate of the Principal Balances of such Debt Obligations, in each case, as at the date of determination.
“Arranger” means HSH Investment Management S.A.
“Asset-Backed Security” means any of the following: (a) ABS Obligation, (b) RMBS, (c) MBS, (d) CLO, (e) CDO, (f) CFO, (g) SME CLO and (h) Resecuritisation.
“Available Interest Proceeds” means the aggregate Interest Proceeds available. “Available Principal Proceeds” means the aggregate Principal Proceeds available.
“Balance” means on any date, with respect to any Account, cash and Eligible Investments, the aggregate of:
1. the current balance of any cash, demand deposits, time deposits, federal funds and commercial bank money market accounts;
2. the principal amount outstanding of any interest-bearing corporate and government securities, money market accounts and repurchase obligations;
3. the purchase price, up to an amount not exceeding the face amount thereof, of any non-interest-bearing government and corporate securities, commercial paper and certificates of deposit; and
4. the purchase price, up to an amount not exceeding the net asset value thereof, of any funds investing in the money markets,
provided that in the event that a default as to payment of principal and/or interest has occurred (disregarding any applicable grace period under the terms thereof) and is continuing in respect of any Eligible Investment or any obligation of the obligor thereunder which is senior or equal in right of payment to such Eligible Investment, such Eligible Investment shall have the value of zero for the purpose of calculating the Balance standing to the credit of any account.
“Bank Loan” means a Debt Obligation identified as a “Loan” or “Schuldscheindarlehen” in the Schedule of Debt Obligations. “Bond” means a Debt Obligation identified as “Corporate” or “Financial” in the Schedule of Debt Obligations.
“Business Day” means a day:
1. on which commercial banks and foreign exchange markets settle payments in London, Luxembourg, Hamburg, Copenhagen and Kiel (other than a Saturday or a Sunday); or
2. for the purposes of the definition of Presentation Date, in relation to any place, on which commercial banks and foreign exchange markets settle payments in that place.
“Caa/CCC Excess” means on any date of determination, the excess, if any, of (x) the Aggregate Principal Balance of all CCC Obligations over (y) an amount equal to 7.5% of the Debt Obligations Principal Balance.
“CCC Market Value” means, in respect of any CCC Obligation, an amount in euro, which is the lower of: 1. its Market Value; and
2. (i) 100 per cent. plus its Moody’s Recovery Rate, (ii) divided by two, and (iii) multiplied by the outstanding principal balance of such CCC Obligation.
“CCC Obligation” means a Debt Obligation (other than a Defaulted Obligation) which has a Moody’s Rating of “Caa1” or less. “CDO” means a Debt Obligation identified as a “CDO” in the Schedule of Debt Obligations.
“CFO” means a Debt Obligation identified as a “CFO” or a “Collateralised Fund Obligation” in the Schedule of Debt Obligations. “Class of Notes” means the Senior Notes, the Mezzanine Notes and the Subordinated Notes, and “Class” and “Class of Noteholders” shall be construed accordingly.
“CLO” means a Debt Obligation identified as a “CLO” in the Schedule of Debt Obligations.
“Closing Date” means 4 February 2009 (or such other date as may shortly follow such date as may be agreed between the Issuer, the Arranger and the Servicer).
“Collateral” means the property, assets, rights and benefits of the Issuer which are charged and/or assigned and/or pledged and/or otherwise secured to the Trustee from time to time for the benefit of the Secured Parties pursuant to the Trust Deed, the Luxembourg Pledge Agreement or any other charging document.
“Conditions” means these terms and conditions, being the terms and conditions of the Notes.
“Consumer Finance ABS” means a Debt Obligation identified as a “Consumer Finance ABS” in the Schedule of Debt Obligations.
“Controlling Class” means the Senior Notes then Outstanding or, if no Senior Notes remain Outstanding, the Mezzanine Notes then Outstanding, or, if no Mezzanine Notes remain Outstanding, the Subordinated Notes then Outstanding.
“Corporate Services Agreement” means, the corporate services agreement relating to the Issuer dated on or about the Closing Date between the Issuer, the Corporate Services Provider and the Directors.
“Corporate Services Provider” means BNY Financial Services p.l.c., together with its permitted successors and assigns. “Credit Risk Obligation” means any Debt Obligation which, in the Servicer’s judgement, has declined in credit quality or price or has a risk of declining in credit quality and, with a lapse of time, becoming a Defaulted Obligation or which has otherwise been so designated by the Servicer.
“Custody Account” means the custody account in the Issuer’s name established on the books of the Custodian and held by the Account Bank and administered outside Ireland in accordance with the provisions of the Agency Agreement, which term shall include the cash account relating to such custody account (if any).
“Debt Obligation” means any debt obligation or debt security purchased by or on behalf of the Issuer pursuant to a Collateral Acquisition Agreement. References to Debt Obligations shall not include Eligible Investments or Equity Securities.
“Debt Obligations Principal Balance” means, as at any Measurement Date, the amount equal to the aggregate of the following amounts, as at such Measurement Date:
1. the Aggregate Principal Balance of all Debt Obligations, save that:
a. for the purpose of calculating the Aggregate Principal Balance for the purposes of the Senior Par Value Test, the Principal Balance of a Defaulted Obligation will be the lower of (x) the Market Value of such Defaulted Obligation and (y) the Moody’s Recovery Rate of such Defaulted Obligation;
b. for the purpose of calculating the Aggregate Principal Balance for the purpose of calculating the Senior Par Value Test, the Principal Balance of a Discount Obligation will be the Principal Balance of such Discount Obligation multiplied by its purchase price; and
c. for all purposes other than as set forth in paragraph (i) and (ii) above (other than in respect of the calculation of the Servicing Fee), for the purpose of calculating the Aggregate Principal Balance, the Principal Balance of each Defaulted Obligation shall be Moody’s Collateral Value;
2. the Balances standing to the credit of the Principal Account.
“Defaulted Equity Security” means any Equity Security or non-debt security delivered to the Issuer upon acceptance of an Offer in respect of a Defaulted Obligations.
“Defaulted Obligation” means a Debt Obligation in respect of which the Servicer has actual knowledge that:
1. in respect of which, there has occurred and is continuing a default with respect to the payment of interest or principal (i) in the case of Debt Obligations in respect of which the Servicer has notified the Issuer and the Trustee in writing that, to the reasonable belief of the Servicer, such default has resulted from non credit related causes, for at least the lesser of three Business Days and any grace period applicable thereto and (ii) in the case of all other Debt Obligations, disregarding any grace periods applicable thereto in each case, which entitles the holders thereof, with notice or passage of time or both, to accelerate the maturity of all or a portion of the principal amount of such obligation, until such default has been cured or waived;
2. any administration, bankruptcy, insolvency or receivership proceeding has been initiated in connection with the Obligor of such Debt Obligation and, except in the case of voluntary proceedings, such proceeding remains unstayed and undismissed for at least 30 days;
3. if the Issuer thereof makes a binding offer to holders of such Debt Obligation of a new security or package of securities that amount to a diminished financial obligation (such as preferred or common stock, or debt with a lower coupon or par amount) of the Issuer and in the reasonable business judgement of the Servicer, such offer has the apparent purpose of helping the Issuer avoid default; provided, however, that a Debt Obligation shall not constitute a Defaulted Obligation under this paragraph (c) if it has been acquired in a distressed exchange and meets the definition of “Debt Obligation”; 4. in respect of which, the Servicer becomes aware (based upon publicly available information) that the Obligor thereunder
is in default as to payment of principal and/or interest on another obligation (and such default has not been cured), save for obligations constituting trade debts which the applicable Obligor is disputing in good faith, but only if one of the following conditions is satisfied:
a. both such other obligation and the Debt Obligation are full recourse, unsecured obligations and the other obligation is senior to, or pari passu with, the Debt Obligation in right of payment; or
b. if the following conditions are satisfied:
i. both such other obligation and the Debt Obligation are full recourse, secured obligations secured by identical collateral;
ii. the security interest securing the other obligation is senior to or pari passu with the security interest securing the Debt Obligation; and
iii. the other obligation is senior to or pari passu with the Debt Obligation in right of payment; 5. for so long as any Senior Notes rated by Moody’s are Outstanding, has a public rating of “Ca” or less by Moody’s; or 6. it is a PIK Security under which cash payment of interest thereon has been deferred in accordance with the terms thereof
for (a) if rated at least “Baa3” by Moody’s, a continuous period of more than two payment periods within a 12-month period with respect to such PIK Security, and (b) if rated “Ba1” or lower by Moody’s, a continuous period of more than one payment period within a 6-month period with respect to such PIK Security, which deferral is, in each case, continuing,
provided that, notwithstanding the foregoing, the Servicer may declare any Debt Obligation to be a Defaulted Obligation if, in the Servicer’s reasonable business judgment, the credit quality of the issuer or obligor of such Debt Obligation has significantly deteriorated such that the Servicer has a reasonable expectation of payment default as of the next scheduled payment date with respect to such Debt Obligation.
“Determination Date” means the last Business Day of each Due Period, or in the event of any redemption of the Notes, following the occurrence of an Event of Default, the applicable Redemption Date.
“Discount Obligation” means any Debt Obligation, after consultation with the Servicer and Moody’s, that has been designated as a “Discount Obligation” on the Schedule of Debt Obligations.
“Distribution” means any payment of principal or interest or any dividend or premium or other amount or asset paid or delivered on or in respect of any Debt Obligation, any Equity Security or any Eligible Investment.
“Due Date” means each date on which a Distribution is due and payable on, or in respect of, a Debt Obligation.
“Due Period” means, with respect to any Payment Date, the period commencing on the day immediately following the 10th Business Day prior to the preceding Payment Date (or on the Closing Date, in the case of the Due Period relating to the first Payment Date) and ending on the 10th Business Day prior to such Payment Date (or, in the case of the Due Period applicable to the Payment Date which is the Maturity Date of any Note, ending on the day preceding such Payment Date).
“Eligible Investments” means any (a) cash investment denominated in euro or (b) euro-denominated demand and time deposits in, certificates of deposit of and bankers’ acceptances issued by any depository institution or trust company (including the Account Bank) incorporated under the laws of a Qualifying Country which is subject to supervision and examination by governmental
holding company) at the time of such investment or contractual commitment providing for such investment have, for so long as there are Senior Notes which are Outstanding:
1. a long term debt credit rating of at least Aa2 from Moody’s (the “EI Minimum Long Term Rating”); or 2. a short term debt rating of P-1 from Moody’s (the “EI Minimum Short Term Rating”).
“Eligible Trading Gains” means with respect to any Payment Date, an amount (as calculated by the Servicer), if positive, equal to the following: (a) the aggregate net (after costs) Sale Proceeds realised (exclusive of proceeds relating to accrued and unpaid interest) from all Debt Obligations sold by the Issuer during the related Due Period and all prior Due Periods minus (b) the sum of: 1. the greater of (A) the Aggregate Principal Balance of such Debt Obligations and (B) the aggregate net price (exclusive of
any accrued and unpaid interest) paid by the Issuer to acquire such Debt Obligations; and
2. the aggregate Eligible Trading Gains Distribution Amount distributed as Interest Proceeds on all prior Payment Dates. “Eligible Trading Gains Distribution Amount” means with respect to any Payment Date occurring on or after the one year anniversary of the Closing Date, an amount of Eligible Trading Gains, designated as Interest Proceeds by the Servicer in its sole discretion, that does not exceed 100% of the Eligible Trading Gains relating to such Payment Date, provided, however, the Servicer may not designate any Eligible Trading Gains as Interest Proceeds unless as of the related Determination Date (i) the Senior Par Value Test is satisfied and (ii) the Caa/CCC Excess is zero.
“Equity Security” is an equity security and which is delivered to the Issuer upon acceptance of an Offer in respect of a Defaulted Obligation or received by the Issuer as a result of restructuring of the terms of the relevant Debt Obligation.
“Fixed Rate Debt Obligation” means a Debt Obligation, the interest or coupon payable in respect of which is calculated by reference to a fixed rate.
“German Debt Obligations” means (together) all rights, title, interest and benefit in and to the bank loans identified as being governed by German law as set out in the Schedule of Debt Obligations.
“Interest Account” means the Issuer’s account established with the Account Bank into which Interest Proceeds are to be credited. “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 the amount of interest payable by the Issuer in respect of each Class of Notes.
“Interest Proceeds” means all amounts paid, or payable, into the Interest Account from time to time (including any funds transferred to the Interest Account from the Interest Reserve Account) and, with respect to any Payment Date, means all such amounts actually received or receivable by or on behalf of the Issuer during the related Due Period and any other amounts to be disbursed out of the Payment Account as Interest Proceeds on such Payment Date.
“Interest Proceeds Priority of Payments” means the priority of payments in respect of Interest Proceeds set out in Section 3. “Interest Reserve Account” means the interest bearing account of the Issuer established at the Account Bank into which the Interest Reserve Amount will be deposited from time to time, the Balance of which may be transferred to the Principal Account or the Interest Account at the discretion of the Servicer at any time on or prior to the Payment Date falling on 25 October 2040. “Interest Reserve Amount” means the amount, as determined by the Servicer, to be deposited in accordance with the Priorities of Payment into the Interest Reserve Account.
“Issuer Irish Account” means an account in the name of the Issuer established with The Bank of New York Mellon. “Margin Stock” is as defined under Regulation U issued by The Board of Governors of the Federal Reserve System.
“Market Value” means in respect of any Debt Obligation or Eligible Investment on any date of determination, (i) the price obtained from an independent pricing service selected by the Servicer in a commercially reasonable manner; (ii) if (i) above is not available, then the average of the bid side market prices offered by three nationally recognised independent brokers (or, in the case of Debt Obligations in respect of which the Obligor is resident outside of the United Kingdom, three internationally recognised independent brokers) which, in each case, have significant experience in trading such Debt Obligations, selected by the Servicer (for the avoidance of doubt, any broker selected pursuant to this definition shall be independent of the Servicer and its affiliates); (iii) if the determination of only two such independent brokers is available, then the average of the bid side prices of such independent brokers, (iv) if the determination of only one such independent broker is available, then the bid side price of such independent broker and (v) if none of (i) to (iv) apply, then such Debt Obligation shall be deemed to have a Market Value equal to the product obtained by multiplying the Principal Balance of such Debt Obligation by the estimate by the Servicer, based on its reasonable commercial judgement, in line with market practice, of the price likely to be obtained in the market in an arm’s length transaction.
“Maturity Date” means, in respect of each Class of Notes, 25 October 2040, or in the event that such day is not a Business Day, the next following Business Day.
“MBS” means a Debt Obligation identified as a “MBS” in the Schedule of Debt Obligations.
“Measurement Date” means (a) each Determination Date and (b) with reasonable (but not less than 5 Business Days’) notice, any Business Day requested by Moody’s.
“Mezzanine Noteholders” means the registered holders of the Mezzanine Notes from time to time. “Minimum Denomination” means in respect of the Notes of each Class, €100,000.
“Moody’s” means Moody’s Investors Service Limited.
provided that if the Market Value cannot be reasonably determined, the Market Value shall be deemed to be for this purpose the relevant Moody’s Recovery Rate multiplied by its outstanding principal amount.
“Moody’s Rating” is as defined in the Servicing Agreement.
“Moody’s Recovery Rate” means in respect of each Debt Obligation, the recovery rate determined in accordance with the Servicing Agreement or as so advised by Moody’s.
“Non-Performing RMBS” means a Debt Obligation identified as a “Non-Performing RMBS” in the Schedule of Debt Obligations.
“Note Payment Sequence” means, with respect to the application of Interest Proceeds in accordance with the Interest Proceeds Priority of Payments or the application of Principal Proceeds in accordance with the Principal Proceeds Priority of Payments, payments made in the following order:
1. to the redemption of the Senior Notes (on a pro rata basis) at the applicable Redemption Price in whole or in part until the Senior Notes have been fully redeemed;
2. to the redemption of the Mezzanine Notes (on a pro rata basis) at the applicable Redemption Price in whole or in part until the Mezzanine Notes have been fully redeemed;
3. to the redemption of the Subordinated Notes (on a pro rata basis) at the applicable Redemption Price in whole or in part until the Subordinated Notes have been fully redeemed,
provided that, for the purposes of any redemption of the Notes in accordance with the Note Payment Sequence following a breach of the Senior Par Value Test, the Note Payment Sequence shall terminate immediately after the payment of each Class of Notes as is required to be made in accordance with the paragraph above.
“Noteholders” means the Senior Noteholders, the Mezzanine Noteholders and the Subordinated Noteholders.
“Obligor” means, in respect of a Debt Obligation, the borrower thereunder or issuer thereof or, in either case, the guarantor thereof.
“Offer” means with respect to any Debt Obligation (a) any offer by the obligor under such obligation or by any other Person made to all of the creditors of such 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 issuer of such obligation or any other Person to amend, modify or waive any provision of such obligation or any related Underlying Instrument.
“Outstanding” means in relation to the Notes of a Class as of any date of determination, all of the Notes of such Class issued (including, without duplication, the Components representing such Class) as further defined in the Trust Deed.
“Par Value Test Excess Adjustment Amount” means, on any date of determination, (A) if the Aggregate Principal Balance of the CCC Obligations exceeds 5 per cent. of the Aggregate Principal Balance of the Portfolio, with respect to the portion of CCC Obligations representing the excess over 5 per cent. of the Aggregate Principal Balance of the Portfolio (starting with the CCC Obligations with the lowest Market Value first and ascending price thereafter), the amount equal to the sum of the excess of the Principal Balance of each such CCC Obligation over the lower of (x) an amount equal to its Market Value and (y) (1) an amount equal to 100 per cent. plus the applicable Moody’s Recovery Rate, then divided by two, and (2) multiplied by the Principal Balance of such CCC Obligation; and (B) otherwise, the amount shall be zero.
“Payment Account” means the account of the Issuer into which amounts shall be transferred by the Trustee on the Business Day prior to each Payment Date from (to the extent applicable) the other Accounts and out of which the amounts required to be paid on each Payment Date shall be paid as provided in the Priorities of Payment.
“Payment Date” means 25 January, 25 April, 25 July and 25 October in each year commencing on 27 July 2009, the Maturity Date 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.
“PIK Security” means any Debt Obligation which is a security, the terms of which permit the deferral of the payment of interest in cash thereon through additions to the principal amount thereof for a specified period in the future or for the remainder of its life or by capitalizing interest due on such security as principal.
“Portfolio” means the Debt Obligations, Equity Securities and Eligible Investments held by or on behalf of the Issuer from time to time.
“Presentation Date” means a day which is a Business Day in the jurisdiction in which the account specified by the payee is open and in which the Note is presented for payment.
“Principal Account” means the Issuer’s account established with the Account Bank into which principal proceeds and designated interest proceeds in respect of all Debt Obligations shall be credited.
“Principal Amount Outstanding” of a Note of any Class on any date shall be: a) the initial principal amount thereof on such date, plus
b) in the case of the Mezzanine Notes, any Deferred Interest which has been capitalized, less
c) the aggregate of all principal payments or redemption payments which in the case of the Mezzanine Notes and the Subordinated Notes shall, for the avoidance of doubt, include those principal payments or redemption payments allocated to the repayment of any of the Deferred Interest referred to in paragraph (b) above.
“Principal Balance” means, with respect to any Debt Obligation, Eligible Investment or Equity Security as of any date of determination, the principal amount outstanding thereof (excluding any interest capitalised pursuant to the terms of such Debt Obligation, Eligible Investment or Equity Security), provided however that:
a) the Principal Balance of any Equity Security shall be deemed to be zero;
b) the Principal Balance of any cash shall be the amount of such cash;
c) the Principal Balance of any Revolving Obligation as of any date of determination shall be the outstanding principal amount of such Revolving Obligation, plus any undrawn commitments that have not been irrevocably reduced with respect to such Revolving Obligation; and
d) the Principal Balance of any Debt Obligation which is a PIK Security shall be deemed to exclude capitalised interest accrued after the date of acquisition thereof by the Issuer.
“Principal Proceeds” means (a) all amounts paid or payable into the Principal Account from time to time (including any funds transferred to the Principal Account from the Interest Reserve Account) and (b) with respect to any Payment Date, all amounts received by or on behalf of the Issuer during the related Due Period and (without double counting) any other amounts to be disbursed out of the Payment Account as Principal Proceeds on such Payment Date pursuant to the Application of Principal Proceeds.
“Principal Proceeds Priority of Payments” means the priority of payments in respect of Principal Proceeds set out in Section 3. “Priorities of Payment” means in the case of Interest Proceeds, the priorities of payment set out in Section 3 (Application of Interest Proceeds) or, in the case of Principal Proceeds, the priorities of payment set out in Section 3 (Application of Principal Proceeds).
“pro rata basis” means an allocation of amounts payable:
a) in the case of amounts of interest payable among different Classes of Notes, by reference to the respective amounts of interest payable on such Classes of Notes;
b) in the case of amounts of principal payable among different Classes of Notes, by reference to the respective Principal Amount Outstanding of such Classes of Notes;
c) in the case of a single Class, by reference to the respective Principal Amount Outstanding of each Note of such Class; and d) in the case of any other amounts, by reference to the respective amounts payable.
“Qualifying Country” means any of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom (including the Channel Islands) and the United States, in each case for so long as such country has a country ceiling for foreign currency bonds or bank deposits of at least “Aa2” or above by Moody’s (and such other country or countries as may be agreed to from time to time by the Issuer and the Servicer, and in respect of which Rating Agency Confirmation has been obtained).
“Rating Agency Confirmation” means with respect to any specified action or determination, receipt by the Issuer of written confirmation by Moody’s, for so long as the Senior Notes are Outstanding and rated by Moody’s, that such specified action or determination will not result in the reduction or withdrawal of its then-current ratings on such Senior Notes.
“Redemption Date” means each date specified for a redemption of the Notes of a Class, or if such day is not a Business Day the next following Business Day.
“Relevant Date” means whichever is the later of (a) the date on which any payment first becomes due and (b) if the full amount payable has not been received by the Paying Agent or the Trustee (as applicable) on or prior to such due date, the date on which the full amount having been so received, notice to that effect shall have been given to the Noteholders.
“Required Ratings” means: (a) in the case of the Account Bank and the Principal Paying Agent, long-term and short-term senior unsecured debt ratings of at least “A1” and “P-1”, respectively, from Moody’s; and (b) in the case of the Custodian, short-term senior unsecured debt rating of not lower than “P-1” from Moody’s.
“Resecuritisation” means a Debt Obligation identified as a “RESEC” in the Schedule of Debt Obligations. “RMBS” means a Debt Obligation identified as a “RMBS” in the Schedule of Debt Obligations.
“Sale Proceeds” means in the case of any Debt Obligation or Equity Security all proceeds received upon the sale thereof (excluding accrued interest designated as Interest Proceeds by the Servicer but including any fees).
“Schedule of Debt Obligations” means the schedule of Debt Obligations attached to the Trust Deed.
“Secured Party” means each of the Noteholders, the Corporate Services Provider, the Servicer, the Collateral Administrator, the Trustee, the Arranger, the Placement Agent and the Agents.
“Security” means the charges, mortgages, assignments, pledges and any other security interests created by the Trust Deed and the Luxembourg Pledge Agreement.
“Senior Fee Cap” means €700,000 per annum.
“Senior Noteholders” means the registered holders of the Senior Notes from time to time.
“Senior Par Value Ratio” means the ratio (expressed as a percentage) obtained by dividing the amount of the Debt Obligations Principal Balance (less the Par Value Test Excess Adjustment Amount) by the aggregate Principal Amount Outstanding of the Senior Notes.
“Senior Par Value Test” means the test which will be satisfied if as at any Measurement Date, the Senior Par Value Ratio is at least equal to 104%.
“Servicing Fee” means the fee equal to €20,000 per annum payable to the Servicer on the first Payment Date of each calendar year and, if deferred in accordance with the Priorities of Payment, interest shall accrue at the rate of EURIBOR on such deferred amount.
“SME CLO” means a Debt Obligation identified as a “SME” in the Schedule of Debt Obligations. “Special Redemption” has the meaning given to it in the General Description section.
“Special Redemption Amount” has the meaning given to it in the General Description section. “Special Redemption Date” has the meaning given to it in the General Description section.
“Stated Maturity” means, with respect to any Debt Obligation 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.
“Subordinated Noteholders” means the registered holders of the Subordinated Notes from time to time.
“Transaction Creditors” means each of the Secured Parties, the Directors and any other Person to whom the Issuer owes any obligations from time to time.
“Transaction Documents” means the Trust Deed, the Agency Agreement, the Private Placement Agreement, the Servicing Agreement, the Collateral Acquisition Agreements, the Corporate Services Agreement, the Luxembourg Pledge Agreement and any documents supplemental or ancillary thereto.
“Trustee Fees and Expenses” means the fees and expenses and any other amounts payable to the Trustee pursuant to the Trust Deed from time to time and any Person appointed as agent, delegate nominee or receiver thereunder.
“Underlying Instruments” means a trust deed or other agreement or instrument pursuant to which a Debt Obligation has been issued or created and each other agreement that governs the terms of, or secures the obligations represented by, such Debt Obligation or under which the holders or creditors under such Debt Obligation are the beneficiaries.
“Underlying Obligor” means: (i) in respect of any Asset-Backed Security, the issuer and/or guarantor(s) of such Asset-Backed Security; and (ii) in respect of any Bank Loan, the borrower(s), guarantor(s) and/or other providers of security in respect of such Bank Loan.
“Unscheduled Principal Proceeds” means, with respect to any Debt Obligation, principal repayments prior to the Stated Maturity thereof received as a result of optional redemptions, prepayments (including any acceleration) or Offers (excluding any premia or make whole amounts in excess of the principal amount of such Debt Obligation), and any other unscheduled principal payments with respect to Debt Obligations (to the extent not included in Sale Proceeds).
III. Priorities of Payment
The Collateral Administrator shall, on behalf of the Issuer disburse Available Interest Proceeds transferred to the Payment Account on any Payment Date by reference to the amount of each item in accordance with the Priorities of Payment (Application of Interest Proceeds) below. The Account Bank shall, on behalf of the Issuer, on each Payment Date disburse Interest Proceeds and Principal Proceeds in accordance with the following Priorities of Payment:
1) Application of Interest Proceeds: Subject to paragraph (iii) (Determination of Amounts) below, Interest Proceeds shall be applied in the following order of priority:
a. first to the payment of taxes owing by the Issuer accrued in respect of the related Due Period (other than Irish corporate income tax in relation to the amounts equal to the minimum profit referred to below) as certified by an Authorised Officer of the Issuer to the Trustee, if any; and second to the payment of amounts equal to the minimum profit required to be retained by the Issuer for Irish tax purposes, for deposit into the Issuer Irish Account from time to time;
b. to the payment of accrued and unpaid Trustee Fees and Expenses pursuant to the Trust Deed in respect of the related Due Period, including any applicable value added tax thereon, up to an amount equal to the Senior Fee Cap;
c. to the payment on a pro rata and pari passu basis of Administrative Expenses and (if any) to the payment of any value added tax due and payable in respect thereof up to an amount equal to the Senior Fee Cap less the amounts paid pursuant to paragraph (B) above;
d. to the payment on a pro rata basis to the Servicer (or as the Servicer may otherwise direct) of the Servicing Fee due and payable on such Payment Date and any value added tax in respect thereof (whether payable by the Servicer or directly to the relevant taxing authority by the Issuer) and, thereafter, to the payment of any Servicing Fee due and payable but not paid pursuant to this paragraph (d) on any prior Payment Date (together with accrued interest at the rate of EURIBOR) and to the payment of any value added tax in respect thereof (whether payable by the Servicer or directly by the Issuer to the relevant taxing authority);
e. to the payment on a pro rata basis of all Interest Amounts due and payable on the Senior Notes, in respect of the Interest Accrual Period ending on such Payment Date;
f. to the payment on a pro rata basis of any Deferred Interest on the Senior Notes (including any interest on Deferred Interest) which is due and payable;
g. in the event that the Senior Par Value Test is not satisfied on the related Determination Date, to the payment of the principal amount on the Senior Notes to the extent necessary to cause the Senior Par Value Test to be met if recalculated immediately following such redemption;
h. to the payment on a pro rata basis of the Interest Amounts due and payable on the Mezzanine Notes in respect of the Interest Accrual Period ending on such Payment Date;
i. to the payment on a pro rata basis of any Deferred Interest on the Mezzanine Notes (including any interest on Deferred Interest) which is due and payable;
j. to the payment of Trustee Fees and Expenses (if any) not paid by reason of the Senior Fee Cap;
k. to the payment on a pro rata and pari passu basis of Administrative Expenses plus any applicable value added tax not paid by reason of the Senior Fee Cap, in relation to each item thereof;
l. at the discretion of the Servicer acting on behalf of the Issuer, other than on the Payment Date on which the Subordinated Notes are to be redeemed and paid in full, to the payment into the Interest Reserve Account of up to a maximum aggregate amount of €2,500,000;
m. thereafter, the balance, if any, to the payment of interest on the Subordinated Notes on a pro rata basis. The Collateral Administrator shall, on behalf of the Issuer disburse Available Principal Proceeds transferred to the Payment Account on any Payment Date by reference to the amount of each item in accordance with the Priorities of Payment (Application of Principal Proceeds) below.
2) Application of Principal Proceeds: Principal Proceeds shall be applied in the following order of priority:
a. to the payment on a sequential basis of the amounts referred to in paragraphs (a) through (g) of the Interest Proceeds Priority of Payments, but only to the extent not paid in full thereunder;
b. in an amount equal to or lower than the Special Redemption Amount (if any) applicable to such Payment Date if it is a Special Redemption Date to the redemption of the Senior Notes (on a pro rata basis) at par in whole or in part until the Senior Notes have been fully redeemed;
e. in an amount equal to or lower than the Special Redemption Amount (if any) applicable to such Payment Date if it is a Special Redemption Date to the redemption of the Mezzanine Notes (on a pro rata basis) at par in whole or in part until the Mezzanine Notes have been fully redeemed;
f. in the event of the redemption of the Mezzanine Notes, to the payment of principal on the Mezzanine Notes; g. to the payment on a sequential basis of the amounts referred to in paragraphs (j) through (k) (inclusive) of the
Interest Proceeds Priority of Payments, but only to the extent not paid in full thereunder;
h. thereafter, on a pari passu basis, the balance, if any, to the payment of principal on the Subordinated Notes on a pro rata basis.
