Junior notes holder

Payments of interest on the Jnnior Notes are subordinate to the payment of interest on the Senior Notes and therefore the holders of the Junior Notes are only entitled to the funds that are available for distribution after having made the payment under the Senior Notes. In this transaction, the Class C-1 Noteholders requested their Notes to be amortizing and so wanted their interest amount to be divided into a fixed interest portion. This will need some tax planning as described in the section Tax Issues below in order to prevent increasing the tax liability of the Issuer. 

The Senior Notes shall be redeemed (in whole but not in part) by the Issuer at the direction of the holders of more than 50% of the aggregate principal amount outstanding as at the Final Closing Date of the Junior Notes. Any such redemption is subject to the following conditions (a) no such redemption may occur on any date other than an Interest Payment Date (b) other than as a result of the occurrence of certain tax events, no such redemption may occur prior to the end of the Reinvestment Period and (c) no optional redemption of the Senior Notes may occur unless there are sufficient proceeds to repay all the Senior Notes and any accrued and unpaid fees and expenses. 

On any Interest Payment Date on or after payment in full of the Senior Notes and any accrued fees and expenses, the Junior Notes shall be redeemed (in whole but not in part) by the Issuer at the direction of holders more than 50% of the aggregate principal amount outstanding as at the Final Closing Date of the Junior Notes. 

Also, care should be taken on the drafting of the distributions to the Income noteholders the Luxembourg income tax (LIR) provides for the non-deductibility of the distribution of taxable income (i.e., the annual profits) or the liquidation proceeds of the SPV. Documentation should clearly state that the holders of the Junior Notes will receive the residual amount of the interest received by the SPV under the Collateral Debt Securities and not a residual amount of the overall profits of the SPV. 

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