«Carrera Capital Finance Limited (incorporated with limited liability in Jersey) and Carrera Capital Finance LLC (organized with limited liability in ...»
For purposes of the Eligibility Criteria the term "Excluded Debt Security" means any Debt Security that (i) is or is convertible into a direct investment in real property, (ii) is equity or commodity-linked investment other than a convertible bond together with an Eligible Derivative that eliminates the equity risks relating to such convertible bond, (iii) is debt issued by another structured investment vehicle, (iv) is a catastrophe bond, (v) is in a currency that is not an Eligible Currency, or (vi) is an investment that may produce interest from a source or sources within the United States for United States federal income tax purposes and is subject to U.S. withholding tax.
The Issuer may invest in Eligible Investments either directly or indirectly through one or more purchasing entities (in whatever legal form is appropriate) funded by the Issuer. The Manager will also act as portfolio manager of each purchasing vehicle. The assets of all purchasing entities shall be included in all Portfolio Limit testing and determinations on a consolidated basis.
Eligible Derivatives A Credit Derivative shall be an "Eligible Derivative" if on the date of entry into such Credit
Derivative such Credit Derivative meets the following criteria:
(a) except as provided in sub-clause (b)
(iii) upon its Acquisition the Issuer has sufficient available capital and liquidity to maintain the then current ratings of the Senior Notes; and (b) the obligations referenced by such Credit Derivative are not Excluded Debt Securities; or (c) the Rating Agencies have provided a Rating Confirmation with respect to such Derivative being treated as an Eligible Derivative.
Eligible Repo Transactions A Repo Transaction shall be an "Eligible Repo Transaction" if, on the date of entry into such Repo
Transaction, such Repo Transaction meets the following criteria:
(a) it is entered into between the Issuer and a Repo Counterparty based on the PSA/ISMA Global Master Repurchase Agreement (1995 Version), the 2000 TBMA/ISMA Global Master Repurchase Agreement, the TBMA Master Repurchase
(b) it is entered into with a Repo Counterparty that has a Counterparty Credit Rating, at the time that the Repo Transaction is entered into, of at least A-1 by S&P and P-1 by Moody's, or the obligations of such Repo Counterparty under such Repo Transaction shall be fully, irrevocably and unconditionally guaranteed by an entity that has a Counterparty Credit Rating of at least A-1 by S&P and P-1 by Moody's at such time;
(c) the stated term of such Repo Transaction is 364 calendar days or less;
(e) if the related Repo Counterparty fails to pay, post collateral and/or adjust variation margin in respect of such Repo Transaction when required, the Issuer has the right (but not the obligation) to terminate at such time all other Repo Transactions with the same Repo Counterparty.
Following a Restricted Funding Event but prior to an Enforcement Event, cash obtained by the Issuer pursuant to Repo Transactions may not be used to Acquire additional Investments (including to finance the Issuer's entry into Reverse Repo Transactions) but only to repay then outstanding Secured Obligations in accordance with the Restricted Funding Procedure;
provided that such cash may be invested in Cash Equivalent Assets, pending the repayment of such Secured Obligations with the proceeds thereof.
Reverse Repo Transactions A Reverse Repo Transaction shall be an "Eligible Reverse Repo Transaction" if, on the date of
entry thereto such Reverse Repo Transaction meets the following criteria:
(a) it is entered into between the Issuer and a Reverse Repo Counterparty based on the PSA/ISMA Global Master Repurchase Agreement (1995 Version), the 2000 TBMA/ISMA Global Master Repurchase Agreement, the TBMA Master Repurchase Agreement (September 1996 Version) or, in each case, any replacement therefor or revision thereof;
(c) if the securities purchased from the Reverse Repo Counterparty pursuant thereto consist of "margin stock" as that term is defined under Regulation U promulgated by the United States Board of Governors of the Federal Reserve System (the "FRB") under Section 7(c) of the Exchange Act, such Reverse Repo Counterparty (i) is not a "United States person" or a "foreign person controlled by a United States person" as those terms are defined in Regulation X, promulgated by the FRB under Section 7(f) of the Exchange Act, or (ii) is an "exempted borrower" as defined in Regulation U;
(d) the stated term of such Reverse Repo Transaction is 364 calendar days or less;
(f) if the related Reverse Repo Counterparty fails to pay, post collateral and/or adjust variation margin in respect of such Reverse Repo Transaction when required, the Issuer has the right (but not the obligation) to terminate at such time all other Reverse Repo Transactions with the same Reverse Repo Counterparty.
Money Market Funds A Money Market Fund shall be an "Eligible Money Market Fund" if on the date of an investment
in such Money Market Fund :
(a) it is rated at least AAAm-G or AAAm by S&P and at least Aaa or MR1+ by Moody's; and (b) the manager of such Money Market Fund is not permitted to postpone any redemption request by the Issuer.
Funding of the Portfolio Funding Objectives The Manager, to the extent of its powers and discretions (and subject to its obligations) under the
Management Agreement, will help the Issuer achieve the following Funding Objectives:
(a) diversifying its funding and liquidity providers, subject to paragraphs (c) through (h);
(b) minimising the Issuer's cost of borrowing, subject to paragraph (a) and paragraphs (c) through (h);
(c) managing the interest rate and currency risks associated with the conduct of the Issuer's business;
(d) managing the liquidity risks associated with the conduct of the Issuer's business;
(e) managing the capital of the Issuer;
(f) staying within funding limits determined by the Manager to be necessary to maintain the ratings of those Securities that are rated;
(g) issuing Securities (including, in the case of Securities issued in the United States, in conjunction with the Co-Issuer) that may be approved by the Issuer's Board of Directors; and (h) redeeming Securities (including Capital Notes) and making payments of interest due and payable in respect of Securities in accordance with the terms and conditions of the Securities Documents relating thereto, subject to paragraphs (c) through (g) and, where applicable, to the Restricted Investment Procedures, the Restricted Funding Procedures and the Enforcement Procedures.
Issuance of Securities
Pursuant to the Programme, the Issuer and the Co-Issuer, as applicable, will issue Senior Term Notes, Senior Subordinated Notes and Capital Notes from time to time, subject to certain restrictions (including the Restricted Investment Procedures, the Restricted Funding Procedures and the Enforcement Procedures). In addition to the Programme, the Issuer will issue ECP Notes from time to time and, with the Co-Issuer, will issue USCP Notes from time to time.
Subject to certain restrictions, the Manager is authorised to enter into Repo Transactions and Reverse Repo Transactions on behalf of the Issuer, provided that each such Repo Transaction is an "Eligible Repo Transaction" and each such Reverse Repo Transaction is an "Eligible Reverse Repo Transaction".
The Manager shall use the Manager Standard to permit the Issuer and Co-Issuer to meet their respective payment obligations under the Transaction Documents on a timely basis and to assist the Issuer in complying with the requirements set out in Schedule 5 (NCO Limit) of the Management
Agreement, and is authorised to, for such purpose:
(b) to acquire, maintain and, as necessary, liquidate investments in Eligible Money Market Funds and Liquidity Eligible Assets on behalf of the Issuer; and
"Manager Standard" means, in relation to the Manager, its use of such endeavours in the performance of its responsibilities and duties under the Transaction Documents, as would be exercised by a prudent professional adviser in connection with the performance of duties similar to the duties of the Manager under the Transaction Documents and, in any event, with no less care than the Manager would exercise if the Manager were performing its duties for its own benefit; provided that this standard shall not imply or require the Manager to take any action that it in its reasonable judgement determines is, in light of the circumstances then existing and having regard to cost and the degree of difficulty, not commercially practicable or is otherwise unreasonable or imprudent.
Testing, reporting and compliance Portfolio Limits On each Business Day, the Manager is required to determine whether the Issuer is in compliance with the Portfolio Limits described under "Acquisition and Management of the Portfolio" above, both with respect to each Specified Portfolio and with respect to the Portfolio as a whole.
Interest Rate Sensitivity Limits
On every Business Day and for every currency represented in the Portfolio, the sensitivities of cashflows from all Investments, Securities and Associated Derivatives settled (limited in each case to actual and expected redemption amounts (e.g. par), floating rate payments excluding any spread component to the respective index, fixed payments from time to time adjusted by any credit spread;
excluding any Administrative Expenses of the Issuer) to each of (a) a 1 basis point increase in interest rates and (b) a 100 basis point increase in interest rates, in each case at the Selected Tenors and across the relevant yield curves, both individually and in aggregate, shall be calculated. All non-U.S. dollar sensitivities shall be converted into U.S. dollars at the applicable exchange rate at the date of determination and aggregated (without regard to sign). The changes in present value to all the cashflows set out above for each tenor individually and across all tenors in aggregate resulting from the 1 basis point increase in interest rates shall not exceed 0.2 basis points (in the case of a 1 basis point increase in interest rates) and 20 basis points (in the case of a 100 basis point increase in interest rates) times the Portfolio Capital Value (the "Interest Rate Sensitivity Limit").
"Selected Tenors" mean 1, 2, 3, 6 and 12 months and 2, 3, 5, 7 and 10 years (where applicable), provided that all rate changes shall be applied to the zero coupon curve (as opposed to the par curve) and linear interpolation shall be used to calculate points in between tenors.
Currency Sensitivity Limit On each Business Day and for each currency represented in the Portfolio, the aggregate sensitivities of all cashflows from all Investments, Securities and Associated Derivatives settled (limited in each case to actual and expected redemption amounts (e.g. par), floating rate payments excluding any spread component to the respective index, fixed payments from time to time adjusted by any credit spread; excluding any Administrative Expenses of the Issuer) to a 1% and 10% increase in the rate of exchange of such currency against the U.S. dollar, both individually and in aggregate, shall be calculated. All non-U.S. dollar sensitivities shall be converted into U.S. dollars at the then applicable exchange rate and aggregated (without regard to sign). The changes in value set out above resulting from the 1% or respectively 10% increase in exchange rates shall not exceed 2.0 basis points or respectively 20 basis points times the Portfolio Capital Value (the "Currency Sensitivity Limit").
Net Cumulative Outflow Limit ("NCO Limit")
On each Business Day (a) the 5 Day NCO shall not exceed the aggregate amount of Committed Liquidity available to the Issuer on that day (or such other limit as may be agreed with the Rating Agencies from time to time), (b) the 10 Day NCO shall not exceed the aggregate amount of Committed Liquidity available to the Issuer plus the Haircut Market Value of Liquidity Eligible Assets, and (c) the 15 Day NCO shall not exceed the aggregate amount of Committed Liquidity available to the Issuer in place and the Haircut Market Value of Liquidity Eligible Assets and Additional Liquid Assets held by the Issuer on that day.
Capital Adequacy Test ("Capital Adequacy Test") and Leverage Compliance Test ("Leveraged Compliance Test") On each Business Day the Manager will perform Capital Adequacy Tests and Leverage Compliance Tests on a regular basis to monitor the Issuer's capital position, all as provided in the Operating Manual. Generally, the amount of required capital will increase for, among other factors, lower rated investments and hedge counterparties, reduced portfolio diversification, and longer asset tenors. The Manager will provide the Rating Agencies with the results of such calculations on a weekly basis.
Effect of Limit Breaches
Breaches of any of the limits or Eligibility Criteria set out above shall be reported to the Rating Agencies by the Manager (on behalf of the Issuer). In the case of breaches of the NCO Limit, the Interest Rate Sensitivity Limits, the Currency Sensitivity Limits, the Capital Adequacy Test or the Leverage Compliance Test, such breaches shall be reported to the Rating Agencies as soon as the Manager is practically able to do so. Rating downgrades and upgrades of Reverse Repo Counterparties shall be reported by the Manager to the Rating Agencies as soon as the Manager is practically able to do so. All other breaches shall be reported by the Manager to the Rating Agencies in the next weekly Rating Agency report following such breaches.
The breach of any of the above limits or Eligibility Criteria may adversely affect the ratings ascribed to the Senior Notes by either of the Rating Agencies.