«IMPORTANT NOTICE Attached please find an electronic copy of the Offering Circular (the “Offering Circular”), dated September 22, 2006 relating to ...»
The Collateral Servicer and its Affiliates may enter into, for their own account, or for other accounts for which they have investment discretion, credit swap agreements relating to entities that are issuers of Collateral Debt Securities. The Collateral Servicer and its Affiliates and clients may also have equity and other investments in and may be lenders to, and may have other ongoing relationships with such entities. As a result, officers or Affiliates of the Collateral Servicer may possess information relating to the Collateral Debt Securities that is not known to the individuals at the Collateral Servicer responsible for monitoring the Collateral Debt Securities and performing other obligations under the Collateral Servicing Agreement. In addition, the Collateral Servicer, its Affiliates and their respective clients may invest in securities (or make loans) that are included among, rank pari passu with or senior to Collateral Debt Securities, or have interests different from or adverse to those of the Issuer.
The Collateral Servicer or its Affiliates may serve as a general partner and/or manager of additional special purpose entities organized to issue collateralized debt obligations secured by debt obligations. The Collateral Servicer and its Affiliates may make investment decisions for their own account or for the accounts of others, including other special purpose entities organized to issue collateralized debt obligations, that may be different from those made by the Collateral Servicer on behalf of the Issuer. The Collateral Servicer or its Affiliates may at certain times simultaneously seek to acquire (or dispose of) investments for the account of the Issuer and dispose of (or acquire) the same investment for other clients, including other collateralized debt obligation vehicles for which it may serve as manager currently or in the future, or for its Affiliates or their clients. In the course of managing the Collateral Debt Securities held by the Issuer, the Collateral Servicer may consider its relationships with its other clients, its Affiliates and the clients of its Affiliates (including companies the securities of which are pledged to secure the Notes). The Collateral Servicer may decline to make a particular investment for the Issuer in view of such relationships. The effects of some of the conflicts of interest described in this section may have an adverse impact on the market from which the Collateral Servicer seeks to acquire, or to which the Collateral Servicer seeks to dispose of, securities on behalf of the Issuer. The Collateral Servicer may also at certain times simultaneously seek to acquire investments for the Issuer and/or other clients, including other collateralized debt obligation vehicles for which it may serve as manager currently or in the future, or for its Affiliates or their clients. Such ownership and such other relationships may result in securities laws restrictions on transactions in such securities by the Issuer.
Vanderbilt Capital Advisors, LLC (“VCA” or “Collateral Servicer”), its Affiliates and their respective clients, including accounts for which the Collateral Servicer or its Affiliates act as investment advisor, may at times own Offered Securities. On or about the Closing Date, VCA or an Affiliate thereof, is expected to purchase 100% of the Preference Shares. The Collateral Servicer, its Affiliates and their respective clients are not required to own or hold any Offered Securities and may sell any Offered Securities held by them (including any Preference Shares purchased by them on or about the Closing Date) at any time.
The Collateral Servicer may pledge or otherwise assign all or a portion of its right to receive payment of collateral servicing fees and dividends and other distributions on Preference Shares owned by it for the purpose of, among other things, financing its acquisition of Preference Shares. Although the Collateral Servicer or one of its Affiliates may at times be a holder of Offered Securities, its interests and incentives will not necessarily be completely aligned with those of the other holders of the Offered Securities (or of the holders of any particular Class of the Notes or of the Preference Shares). The Collateral Servicer shall not direct the Trustee to acquire any securities for inclusion in the Collateral (i) from any account or portfolio for which the Collateral Servicer, or any of its Affiliates, acts as investment adviser; or (ii) that is issued by any person for which the Collateral Servicer or any of its Affiliates acts as financial advisor or underwriter, except in the case of (ii), in a manner that satisfies the criteria as set forth in “Security for the Notes—Asset Acquisition Guidelines” below. The Issuer may not acquire any Collateral Debt Security unless such acquisition is made (a) on an “arm’s-length basis” for fair market value or (b) pursuant to the Warehouse Agreement or the Forward Sale Agreement.
The Collateral Servicing Agreement provides that Notes and Preference Shares owned by the Collateral Servicer or its Affiliates or any client or account for which the Collateral Servicer or any of its Affiliates has discretionary authority will be disregarded and deemed not outstanding on any vote determining the votes needed for removal of the Collateral Servicer for cause; provided that voting rights with respect to any Preference Shares held by an Affiliate of VCA may be voted with respect to the removal of the Collateral Servicer by a majority of the independent directors of such Affiliate, determined in accordance with governance documents of such Affiliate. (VCA will be required pursuant to the Collateral Servicing Agreement to provide to the Trustee information relating to such directors, necessary for the Trustee to make any such determination). The Indenture and the Collateral Servicing Agreement do not otherwise restrict the ability of the Collateral Servicer and its Affiliates to vote the Offered Securities held by them or by clients or accounts for which they have discretionary authority. The Indenture requires the written consent of the Collateral Servicer to any amendment of the Indenture that reduces the rights or increases the obligations of the Collateral Servicer. For purposes hereof, “Affiliate” means, with respect to the Collateral Servicer, (i) any other person who, directly or indirectly, is in control of, or controlled by, or is under common control with, the Collateral Servicer or (ii) any other person who is a director, managing member, officer, employee or general partner of (a) the Collateral Servicer or (b) any such other person described in clause (i) above provided that no other special purpose company to which the Collateral Servicer serves as investment advisor shall be an Affiliate of the Collateral Servicer. For the purposes of the foregoing definition, control of a person shall mean the power, direct or indirect, (x) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (y) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. The ownership of Preference Shares by the Collateral Servicer or its Affiliates, if any, may give the Collateral Servicer an incentive to take actions that vary from the interests of the holders of the Notes.
No provision in the Collateral Servicing Agreement prevents the Collateral Servicer or any of its Affiliates from rendering services of any kind to any person or entity, including the issuer of any obligation included in the Collateral or any of such issuer’s affiliates, the Trustee, the holders of the Offered Securities, any Credit Default Swap Counterparty or any Hedge Counterparty. Without limiting the generality of the foregoing, the Collateral Servicer, its Affiliates and their respective directors, officers, employees and agents may, among other things: (a) serve as directors, partners, officers, employees, agents, nominees or signatories for any issuer of any obligation included in the Collateral; (b) receive fees for services to be rendered to the issuer of any obligation included in the Collateral or any affiliate thereof;
(c) be retained to provide services unrelated to the Collateral Servicing Agreement to the Issuer or its Affiliates and be paid therefor; (d) be a secured or unsecured creditor of, or hold an equity interest in, any issuer of any obligation included in the Collateral; or (e) serve as a member of any “creditors board” with respect to any obligation included in the Collateral which has become or may become a Defaulted Security or a Deferred Interest PIK Bond. Services of this kind may lead to conflicts of interest with the Collateral Servicer, and may lead individual officers or employees of the Collateral Servicer to act in a manner adverse to the Issuer.
In the selection of brokers and dealers, the Collateral Servicer shall seek to obtain the best prices and execution for all orders placed with respect to the Collateral, considering all circumstances that are relevant in its reasonable determination. Subject to the objective of obtaining the best prices and execution, the Collateral Servicer may take into consideration research and other brokerage services furnished to the Collateral Servicer or its Affiliates by brokers and dealers that are not Affiliates of the Collateral Servicer. Such services may be used by the Collateral Servicer or its Affiliates in connection with its other advisory activities or investment operations. The Collateral Servicer may aggregate dispositions and purchase orders of securities placed with respect to the Collateral with similar orders being made simultaneously for other accounts managed by the Collateral Servicer or with accounts of the affiliates of the Collateral Servicer if in the Collateral Servicer’s judgment such aggregation shall result in an overall economic benefit to the Issuer, taking into consideration the advantageous selling or purchase price, brokerage commission and other expenses. If a disposition or acquisition of a Collateral Debt Security, Eligible Investment, U.S. Agency Security or Equity Security (in accordance with the terms of the Indenture) occurs as part of any aggregate disposition or purchase order, the objective of the Collateral Servicer (and any of its Affiliates involved in such transactions) shall be to allocate the executions among the relevant accounts in an equitable manner (taking into account constraints imposed by the Eligibility Criteria).
Collateral Servicer Affiliates Reliance on Rule 3a-7; Potential Indenture Amendments. VCA or an Affiliate thereof, is expected to purchase all of the Preference Shares on or about the Closing Date. The Issuer intends to rely on the exemption from registration under the Investment Company Act by reason of Rule 3a-7 thereunder. If it were determined that the Issuer cannot rely on Rule 3a-7, the Collateral Servicer may cause the Issuer to amend the Indenture without the consent of the Holders of the Notes (unless they would be materially and adversely affected thereby) and without the consent of the Holders of the Preference Shares (whether or not they would be adversely affected thereby) to enable the Issuer to rely on Rule 3a-7 as described herein. These amendments could require additional limitations and prohibitions on the circumstances in which the Issuer may dispose of Collateral Debt Securities or other assets, on the type of Collateral Debt Securities or other assets that the Issuer may acquire using the proceeds of Collateral Debt Securities or other assets that mature, are refinanced or otherwise sold, on the period during which such transactions may occur, on the level of transactions that may occur or on other provisions of the Indenture and could adversely affect the earnings of the Issuer and its ability to make payments on the Notes and distributions to the Preference Shares.
Acquisition of Collateral Debt Securities. All of the Collateral Debt Securities acquired by the Issuer on the Closing Date will be acquired from a portfolio of Collateral Debt Securities selected by the Collateral Servicer and held by Credit Suisse, pursuant to the Warehouse Agreement. Some of the Collateral Debt Securities subject to the Warehouse Agreement may have been originally acquired by Credit Suisse from the Collateral Servicer or one of its Affiliates or clients and some of the Collateral Debt Securities subject to the Warehouse Agreement may include securities issued by a fund or other entity owned or managed by the Collateral Servicer or Credit Suisse (or one of its Affiliates). The Issuer will acquire Collateral Debt Securities included in such warehouse portfolio pursuant to the Forward Sale Agreement only to the extent that the Collateral Servicer determines such acquisitions are consistent with the investment guidelines of the Issuer, the restrictions contained in the Indenture and the Collateral Servicing Agreement and applicable law. The purchase price payable by the Issuer for such Collateral Debt Securities pursuant to such Forward Sale Agreement will be based on the purchase price paid when such Collateral Debt Securities were acquired under the Warehouse Agreement, accrued and unpaid interest on such Collateral Debt Securities as of the Closing Date and gains or losses incurred in connection with hedging arrangements entered into with respect to such Collateral Debt Securities.
Accordingly, the Issuer will bear the risk of market changes subsequent to the acquisition of such Collateral Debt Securities and related hedging arrangements as if it had acquired such Collateral Debt Securities directly at the time of acquisition by Credit Suisse of such Collateral Debt Securities and not the Closing Date.
If Credit Suisse were to become the subject of a case or proceeding under the United States Bankruptcy Code or another applicable insolvency law, the trustee in bankruptcy or other liquidator could assert that such Collateral Debt Securities are property of the insolvency estate of Credit Suisse.