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«IMPORTANT NOTICE Attached please find an electronic copy of the Offering Circular (the “Offering Circular”), dated September 22, 2006 relating to ...»

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Insolvency Considerations With Respect to Issuers of Collateral Debt Securities. Various laws enacted for the protection of creditors may apply to the Collateral Debt Securities included in the Collateral. If a court in a lawsuit brought by an unpaid creditor or representative of creditors of an issuer of any such Collateral Debt Security, such as a trustee in bankruptcy, were to find that the issuer did not receive fair consideration or reasonably equivalent value for incurring the indebtedness constituting such Collateral Debt Security and, after giving effect to such indebtedness, the issuer (i) was insolvent, (ii) was engaged in a business for which the remaining assets of such issuer constituted unreasonably small capital or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, such court could determine to invalidate, in whole or in part, such indebtedness as a fraudulent conveyance, to subordinate such indebtedness to existing or future creditors of the issuer or to recover amounts previously paid by the issuer in satisfaction of such indebtedness. The measure of insolvency for purposes of the foregoing will vary. Generally, an issuer would be considered insolvent at a particular time if the sum of its debts were greater than all of its property at a fair valuation or if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liabilities on its existing debts as they became absolute and matured. There can be no assurance as to what standard a court would apply in order to determine whether the issuer was “insolvent” after giving effect to the incurrence of the indebtedness constituting such Collateral Debt Security or that, regardless of the method of valuation, a court would not determine that the issuer was “insolvent” upon giving effect to such incurrence. In addition, in the event of the insolvency of an issuer of a Collateral Debt Security included in the Collateral, payments made on such Collateral Debt Security could be subject to avoidance as a “preference” if made within a certain period of time (which may be as long as one year or longer) before insolvency.

In general, if payments on a Collateral Debt Security are avoidable, whether as fraudulent conveyances or preferences, such payments can be recaptured either from the initial recipient (such as the Issuer) or from subsequent transferees of such payments (such as the holders of the Notes). To the extent that any such payments are recaptured from the Issuer, the resulting loss will be borne by the Holders of (a) the Preference Shares, (b) the Class D Notes, (c) the Class C Notes, (d) the Class B-2 Notes, (e) the Class B-1 Notes, (f) the Class A-2 Notes and (g) the Class A-1 Notes, in that order.

However, a court in a bankruptcy or insolvency proceeding would be able to enforce an order directing the recapture of any such payment from a holder of Notes only to the extent that such court can effectively exercise jurisdiction over such holder or its assets.

In addition, if an issuer of a Collateral Debt Security included in the Collateral is the subject of a bankruptcy proceeding, payments to the Issuer with respect to such Collateral Debt Security may be delayed or diminished as a result of the exercise of various powers of the bankruptcy court including the following: (i) an “automatic stay”, under which the Issuer will not be able to institute proceedings or otherwise enforce its rights against the issuer or obligor with respect to such Collateral Debt Security without permission from the court, (ii) conversion by the bankruptcy court of such Collateral Debt Security into more junior debt or into equity of the issuer thereof or obligor thereon, (iii) modification of the terms of the Collateral Debt Security by the bankruptcy court, including reduction or delay of the interest or principal payments thereon and (iv) grant of a priority lien to a new money lender to the issuer of, or obligor on, the Collateral Debt Security.

Certain matters with respect to German investors. With effect as of January 1, 2004, the German Investment Tax Act, Investmentsteuergesetz (the “InvStG”) has come into force and replaced the German Foreign Investment Act. Adverse tax consequences will arise for investors subject to tax in Germany if the InvStG is applied to the Offered Securities. However, pursuant to a Circular released by the German Federal Ministry of Finance on the InvStG, dated June 2, 2005, the InvStG does not apply to CDO vehicles that allow no more than 20% of the assets of the issuer to be traded annually on a discretionary basis, in addition to the mere replacement of debt instruments for the purpose of maintaining the volume, the maturity and the risk structure of the CDO. The Issuer is not permitted to trade Collateral Debt Securities on a discretionary basis and accordingly assuming that the sale of Defaulted Securities, Credit Risk Securities, Equity Securities and other Collateral Debt Securities as permitted by the Indenture are considered the mere replacement of debt instruments for the purpose of maintaining the volume, the maturity and the risk structure of the CDO, the Offered Securities should not be subject to the InvStG.

None of the Issuer, the Co-Issuer, the Collateral Servicer or the Initial Purchaser makes any representation, warranty or other undertaking whatsoever that the Offered Securities are not qualified as unit certificates in a foreign investment fund pursuant to Section 1(1) no. 2 of the InvStG. The Co-Issuers will not comply with any calculation and information requirements set forth in Section 5 of the InvStG.





Prospective German investors in the Offered Securities are urged to seek independent tax advice and to consult their professional advisors as to the legal and tax consequences that may arise from the application of the InvStG to the Offered Securities, and none of the Issuer, the Co-Issuer, the Collateral Servicer nor the Initial Purchaser accepts any responsibility in respect of the tax treatment of the Offered Securities under German law.

DESCRIPTION OF THE NOTES

The Notes will be issued pursuant to the Indenture. The following summary describes certain provisions of the Notes and the Indenture. Copies of the Indenture may be obtained by prospective investors upon request to the Trustee at 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group – Montrose Harbor CDO I, Ltd. or, if and for so long as any Notes are listed on the Irish Stock Exchange, to the Irish Paying Agent at RSM Robson Rhodes, Fitzwilton House, Wilton Place, Dublin 2, Ireland.

Status and Security The Notes will be limited recourse debt obligations of the Co-Issuers (in the case of the Class A-1 Notes, Class A-2 Notes, Class B-1 Notes, the Class B-2 Notes and Class C Notes) and the Issuer (in the case of the Class D Notes). All of the Class A-1 Notes are entitled to receive payments pari passu among themselves, all of the Class A-2 Notes are entitled to receive payments pari passu among themselves, all of the Class B-1 Notes are entitled to receive payments pari passu among themselves, all of the Class B-2 Notes are entitled to receive payments pari passu among themselves, all of the Class C Notes are entitled to receive payments pari passu among themselves and all of the Class D Notes are entitled to receive payments pari passu among themselves. Except as otherwise described in the Priority of Payments, the relative order of seniority of payment of each Class of Notes on each Quarterly Distribution Date is as follows: first, Class A-1 Notes, second, Class A-2 Notes, third, Class B-1 Notes, fourth, Class B-2 Notes, fifth, Class C Notes and sixth, Class D Notes, with (a) each Class of Notes (other than the Class D Notes) in such list being “Senior” to each other Class of Notes that follows such Class of Notes in such list and (b) each Class of Notes (other than the Class A-1 Notes) in such list being “Subordinate” to each other Class of Notes that precedes such Class of Notes in such list. No payment of interest on any Class of Notes will be made until all accrued and unpaid interest on the Notes of each Class that is Senior to such Class and that remain outstanding has been paid in full. Except as otherwise described herein on any Quarterly Distribution Date and subject to the Priority of Payments with respect to Interest Proceeds, no payment of principal of any Class of Notes will be made until all principal of, and all accrued and unpaid interest on the Notes of each Class that is Senior to such Class and that remain outstanding have been paid in full. See “Description of the Notes—Priority of Payments”.

Under the terms of the Indenture, the Issuer will grant to the Trustee for the benefit of the Secured Parties a first priority security interest in the Collateral described herein to secure the Issuer’s obligations under the Indenture and the Notes, subject in the case of any Credit Default Swap Counterparty Account to the security interest of the related Credit Default Swap Counterparty in such Account.

Payments of principal of and interest on the Notes will be made solely from the proceeds of the Collateral, in accordance with the priorities described under “—Priority of Payments” herein. If the amounts received in respect of the Collateral (net of certain expenses) are insufficient to make payments on the Notes, no other assets will be available for payment of the deficiency and, following liquidation of all the Collateral, the obligations of the Co-Issuers (or, in the case of a Class D Note, the Issuer) to pay any such deficiency will be extinguished.

Interest

The Class A-1 Notes will bear interest at a floating rate per annum equal to LIBOR (determined as described herein) plus 0.30%. The Class A-2 Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.44%. The Class B-1 Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.49%. The Class B-2 Notes will bear interest at a floating rate per annum equal to LIBOR plus 0.59%. The Class C Notes will bear interest at a floating rate per annum equal to LIBOR plus 1.38%. The Class D Notes will bear interest at a floating rate per annum equal to LIBOR plus 3.25%.

Interest on the Notes will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant Interest Period.

Interest will accrue on the outstanding principal amount of each Class of Notes (determined as of the first day of each Interest Period and after giving effect to any redemption or other payment of principal occurring on such day) from the Closing Date. Interest accruing for any Interest Period will accrue for the period from and including the first day of such Interest Period to and including the last day of such Interest Period.

Payments of interest on the Notes will be payable in Dollars quarterly in arrears on each March 5, June 5, September 5 and December 5, commencing December 5, 2006 (each a “Quarterly Distribution Date”), provided that (i) the final Quarterly Distribution Date with respect to the Notes shall be December 5, 2051 and (ii) if any such date is not a Business Day, the relevant Quarterly Distribution Date will be the next succeeding Business Day.

For each Quarterly Distribution Date in respect of which the related Determination Date occurs on or after the Ramp-Up Completion Date, if either Class A/B Coverage Test is not satisfied on the related Determination Date, Interest Proceeds and, if necessary, Principal Proceeds will be used to pay principal of first, the Class A-1 Notes, second, the Class A-2 Notes, third, the Class B-1 Notes and fourth, to the Class B-2 Notes, to the extent necessary to cause each Class A/B Coverage Test to be satisfied. For each Quarterly Distribution Date in respect of which the related Determination Date occurs on or after the Ramp-Up Completion Date, if either Class C Coverage Test is not satisfied on the related Determination Date, Interest Proceeds and Principal Proceeds will be used to pay principal of first, the Class A-1 Notes, second, the Class A-2 Notes, third, the Class B-1 Notes, fourth, the Class B-2 Notes and fifth, to the Class C Notes (including any Class C Deferred Interest), to the extent necessary to cause each Class C Coverage Test to be satisfied. For each Quarterly Distribution Date in respect of which the related Determination Date occurs on or after the Ramp-Up Completion Date, if either Class D Coverage Test is not satisfied on the related Determination Date, Interest Proceeds and Principal Proceeds will be used to pay, in accordance with the Priority of Payments, principal of first, the Class A-1 Notes, second, the Class A-2 Notes, third, the Class B-1 Notes, fourth, the Class B-2 Notes, fifth, to the Class C Notes (including any Class C Deferred Interest) and sixth, the Class D Notes (including any Class D Deferred Interest) to the extent necessary to cause each Class D Coverage Test to be satisfied.

So long as any Class A Notes or Class B Notes are outstanding, the failure on any Quarterly Distribution Date to make a payment in respect of interest on the Class C Notes by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture. Any interest on the Class C Notes that is not paid when due by operation of the Priority of Payments will be deferred and capitalized (such interest being referred to herein as “Class C Deferred Interest”).

So long as any Class A Notes, Class B Notes or Class C Notes are outstanding, the failure on any Quarterly Distribution Date to make a payment in respect of interest on the Class D Notes by reason of the operation of the Priority of Payments will not constitute an Event of Default under the Indenture.

Any interest on the Class D Notes that is not paid when due by operation of the Priority of Payments will be deferred and capitalized (such interest being referred to herein as “Class D Deferred Interest”).

Any Class C Deferred Interest will be added to the aggregate outstanding principal amount of the Class C Notes and thereafter interest will accrue on the aggregate outstanding principal amount of the Class C Notes, as so increased. Unless otherwise specified herein, any reference to the principal amount of a Class C Note includes any Class C Deferred Interest added thereto. Upon the payment of Class C Deferred Interest previously capitalized as additional principal, the aggregate outstanding principal amount of the Class C Notes will be reduced by the amount of such payment.



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